LEFT BEHIND GAMES INC. - FORM 10-Q/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

X . QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended December 31, 2009

. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _____to_____

COMMISSION FILE NUMBER 000-50603

LEFT BEHIND GAMES INC.

----------------------

(Exact name of registrant as specified in its charter)


WASHINGTON		91-0745418
-------------------------------		----------------------
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

25060 HANCOCK AVENUE, SUITE 103 BOX 110, MURRIETA, CA 92562

---------------------------------------------------------

(Address of principal executive offices) (Zip Code)

(951) 894-6597

---------------

(Registrant's telephone number, including area code)

With copies to:

Virginia K. Sourlis, Esq.

The Sourlis Law Firm

214 Broad Street

Red Bank, New Jersey 07701

Tel: (732) 530-9007

Fax: (732) 530-9008

www.SourlisLaw.com

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X . NO .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes . No .

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting Company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	.	Accelerated filer	.
Non accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES . NO X .

As of February 2, 2010, the Registrant had 1,867,695,843* shares of common stock, par value $0.001 per share, issued and outstanding.

*The number of shares outstanding reflects a 2 to 3 forward split of the registrant’s common stock, effectuated on November 9, 2009. Figures referring to shares of the registrant’s common stock in this Form 10-Q for the reporting period ending December 31, 2009 are provided on a post-forward split basis.


PART I.	FINANCIAL INFORMATION

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4

	CONDENSED CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2009 AND MARCH 31, 2009	4

	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2009 AND 2008	5

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008	6

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	16

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26

ITEM 4.	CONTROLS AND PROCEDURES	26

PART II.	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	27

ITEM 1A.	RISK FACTORS	27

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	28

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	28

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	28

ITEM 5.	OTHER INFORMATION	28

ITEM 6.	EXHIBITS	29

EXPLANATORY NOTE

The Registrant is amending its Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, previously filed on February 22, 2010, to correct certain general and administrative expenses related to a consulting arrangement and to record corrections to accrued liabilities for items that were overstated during the three and nine month periods ended December 31, 2009. Except for the foregoing matters, no other information included in our original Form 10-Q for the three and nine month periods ended December 31, 2009, is amended by this Form 10-Q/A.

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

LEFT BEHIND GAMES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


		December 31,		March 31,
		2009		2009
		(Unaudited)		(Audited)
ASSETS		Restated
Current assets
Cash	$	225,230	$	7,778
Accounts receivable		36,595		--
Inventories, net		162,524		180,997
Note receivable		39,589		--
Prepaid royalties		30,426		9,179
Prepaid expenses and other current assets		--		3,636
Total current assets		494,364		201,590

Property and equipment, net		73,637		98,004
Intellectual property, net		103,125		--
Other assets		15,132		5,927

Total assets	$	686,258	$	305,521

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	2,105,461	$	2,525,095
Payroll liabilities payable		99,786		303,318
Convertible debt		210,000		--
Notes payable, net of discounts		31,201		703,689
Notes payable in default		177,338		312,488
Advances from related parties		2,089		--
Deferred revenue		1,453		117

Total current liabilities		2,627,328		3,844,707

Commitments and Contingencies

Stockholders' Deficit
Series A preferred stock, $0.001 par value; 3,586,245 shares
authorized, issued and outstanding as of December 31, 2009 and March 31, 2009;
liquidation preference of $188,500		3,586		3,586
Series B preferred stock, $0.001 par value; 16,413,755 shares
authorized; 11,080,929 shares issued and outstanding
as of December 31, 2009 and March 31, 2009		11,081		11,081
Series C preferred stock, $0.001 par value,10,000 and zero shares authorized,		--		--
issued and outstanding as of December 31, 2009 and March 31, 2009
Series D convertible preferred stock, 1,000 shares authorized, 9 and zero shares		--		--
issued and outstanding as of December 31, 2009 and March 31, 2009
Common stock, par value $0.001 per share; 3,000,000,000 shares
authorized; 3,000,000,000; 1,441,989,845 issued and outstanding
and 516,538,488 shares issued and outstanding as of
Dec 31, 2009 and March 31, 2009, respectively		1,441,990		344,359
Treasury stock		24,500		--
Additional paid-in capital		52,188,798		40,203,449
Deferred stock-based compensation		--		(100,025)
Accumulated deficit		(55,611,025)		(44,001,636)
		(1,941,070)		(3,539,186)
Total liabilities and stockholders' deficit	$	686,258	$	305,521

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

LEFT BEHIND GAMES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ending

December 31, 2009 and 2008

(Unaudited)


		Three Months		Three Months		Nine Months		Nine Months
		Ended		Ended		Ended		Ended
		December 31,		December 31,		December 31,		December 31,
		2009		2008		2009		2008
		Restated				Restated
Net revenues	$	52,868	$	33,232	$	95,264	$	151,974

Costs and expenses:
Cost of sales – product costs		11,372		2,967		38,279		36,454
Cost of sales – intellectual property costs		9,418		3,220		16,609		6,934
Stock based compensation – directors and employees		3,597,100		-		3,657,100		52,900
Stock based compensation – consultants		180,773		7,098		580,828		213,919
General and administrative		3,793,338		269,974		6,808,633		1,302,868
Product development		26,977		364		76,928		52,342

Total costs and expenses		7,618,978		283,623		11,178,377		1,665,417

Operating loss		(7,566,110)		(250,391)		(11,083,113)		(1,513,443)

Other expense:
Interest and other debt expenses		27,499		196,855		525,971		571,408
Other expense		--		45,530		305		50,643

Total other expense		27,499		242,385		526,276		622,051

Other income:
Gain from extraordinary events		--		--		--		468,837
Debt forgiveness income		--		--		--		250,000

Total other income		--		--		--		718,837

Net profit (loss)		(7,593,609)		(492,776)		(11,609,389)		(1,416,657)

Basic and diluted profit (loss) per common share	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.01)

Weighted average number of common shares outstanding		1,545,754,982		262,516,026		905,605,400		150,782,563

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

LEFT BEHIND GAMES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)


		Nine Months		Nine Months
		Ended		Ended
		December 31,		December 31,
		2009		2008
		Restated
Cash flows from operating activities:

Net loss	$	(11,609,389)	$	(1,416,657)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		22,806		51,493
Interest paid in common stock		--		23,500
Loss on disposal of assets		--		50,643
Recognition of deferred stock compensation		100,025		--
Gain on license amendment		--		(250,000)
Beneficial conversion feature on conversions of notes payable		131,251		--
Stock based compensation - consultants		480,603		213,919
Stock based compensation - employees and directors for services		3,657,100		52,900
Convertible debt issued for services		5,446,000		--
Change in fair value of warrant		2,023		--
Amortization of debt discount		336,499		421,077
Changes in operating assets and liabilities:
Accounts receivable		(36,595)		830,374
Inventories		18,473		(118,424)
Note receivable		(39,589)		--
Prepaid expenses		3,636		71,129
Other assets and prepaid royalties		3,923		(61,406)
Accounts payable and accrued expenses		96,169		85,933
Deferred income – product sales		1,336		(470,708)
Deferred rent		--		(1,427)

Net cash used in operating activities		(1,385,730)		(517,654)

Cash flows from investing activities:

Purchases of property and equipment		(2,457)		--
Payments for trademarks and prepaid royalties		--		--

Net cash used in investing activities		(2,457)		--

Cash flows from financing activities:

Proceeds from the issuance of notes payable		25,000		562,425
Principal repayments of notes payable		--		(28,958)
Borrowings from related parties		2,089		--
Proceeds from the issuance of common stock		1,578,550		--

Net cash provided by financing activities		1,605,639		533,467

Net increase in cash		217,452		15,813

Cash at beginning of period		7,778		2,695

Cash at end of period	$	225,230	$	18,508

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

LEFT BEHIND GAMES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)


		Nine Months		Nine Months
		Ended		Ended
		December 31,		December 31,
		2009		2008
		Restated
Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest	$	--	$	--

Income taxes	$	--	$	--

Supplemental disclosures of non-cash and investing and financing information:

Issuance of common stock in exchange for note receivable	$	--	$	(70,000)

Issuance of common stock under license agreement	$	137,500	$	--

Exchange of equipment for settlement of accounts payable	$	503	$	--

Discount on convertible notes payable	$	--	$	604,672

Conversion of notes payable into common stock	$	1,198,175	$	8,500

Issuance of common stock to pay accounts payable & accrued	$	556,278	$	78,000

Conversion of accrued expenses to convertible debt	$		$	34,919

Return of common stock as treasury shares	$	24,500	$	--

The accompanying notes to condensed consolidated financial statements.

LEFT BEHIND GAMES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION

In January 2006, Left Behind Games Inc. (collectively, “we,” “our,” the “Company” or “LBG”) entered into an Agreement and Plan of Merger (the “Agreement”) with Bonanza Gold, Inc., a Washington corporation (“Bonanza”), wherein Bonanza acquired LBG through the purchase of our outstanding common stock on a “1 for 1” exchange basis. Prior to the execution of the Agreement, on January 25, 2006, we effected a 2.988538 for 5 reverse stock split of LBG’s common stock and preferred stock outstanding, resulting in 12,456,538 and 3,586,246 shares of common and preferred stock, respectively. Also prior to the execution of the Agreement, Bonanza effected a 1 for 4 reverse stock split, resulting in 1,882,204 shares of common stock outstanding.

We were incorporated on August 27, 2002 under the laws of the State of Delaware for the purpose of engaging in the business of producing, distributing and selling video games and associated products. We completed the development of a video game based upon the popular LEFT BEHIND series of novels published by Tyndale House Publishers (“Tyndale”) and as of November 2006 began commercially selling the video game to retail outlets nationwide.

We hold an exclusive worldwide license (the “License”) from Tyndale to develop, manufacture and distribute video games and related products based on the LEFT BEHIND series of novels published by Tyndale.

BASIS OF PRESENTATION

We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Such rules and regulations allow us to condense and omit certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted in the United States of America. We believe these unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of our consolidated financial position and consolidated results of operations for the periods presented. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K/A for the year ended March 31, 2009. The interim unaudited consolidated financial information contained in this filing is not necessarily indicative of the results to be expected for any other interim period or for the full year ending March 31, 2010.

RESTATEMENT

We have restated our financial statements for the three and nine month periods ended December 31, 2009, previously filed on February 22, 2010, to correct certain general and administrative expenses related to a consulting arrangement during the three and nine month periods ended December 31, 2009 (see Note 13). Except for the foregoing matters, no other information included in our original Form 10-Q for the quarter ended December 31, 2009, is amended by this Form 10-Q/A.

The following table shows the impact of this restatement on our consolidated statement of operations and consolidated balance sheet:

CONSOLIDATED STATEMENT OF OPERATIONS

Three Months Ended December 31, 2009

(Unaudited)


			Previously
			Reported		Adjustments		Restated

Revenues		$	52,868	$	-	$	52,868

Costs and expenses:
Cost of sales – product costs			11,372		-		11,372
Cost of sales – intellectual property costs			9,418		-		9,418
Stock based compensation – employees and directors			3,597,100		-		3,597,100
Stock based compensation - consultants			180,773		-		180,773
General and administrative			763,338		3,030,000	(1)	3,793,338
Product development			26,977		-		26,977
	Operating loss		(4,536,110)		3,030,000		(7,566,110)

Other income (expense):			(27,499)		-		(27,499)
Net loss		$	(4,563,609)	$	(3,030,000)	$	(7,593,609)

Basic and diluted loss per share:
	Loss per share	$	(0.00)	$	(0.00)	$	(0.00)
	Weighted average common shares		1,545,754,982				1,545,754,982

(1) To correct general and administrative expenses to properly reflect the costs of consulting arrangements

CONSOLIDATED STATEMENT OF OPERATIONS

Nine Months Ended December 31, 2009

(Unaudited)


			Previously
			Reported		Adjustments		Restated

Revenues		$	95,264	$	-	$	95,264

Costs and expenses:
Cost of sales – product costs			38,279		-		38,279
Cost of sales – intellectual property costs			16,609		-		16,609
Stock based compensation – employees and directors			3,657,100		-		3,657,100
Stock based compensation - consultants			580,828		-		580,828
General and administrative			1,485,385		5,323,248	(1)	6,808,633
Product development			76,928		-		76,928
	Operating loss		(5,759,865)		(5,423,73)		(11,083,113)

Other income (expense)			(526,276)		-		(526,276)
Net loss		$	(6,286,141)	$	$ (5,423,473)	$	(11,609,389)

Basic and diluted loss per share:
	Loss per share	$	(0.00)	$	(0.01)	$	(0.01)
	Weighted average common shares		623,030,609		-		623,030,609

(1) To correct general and administrative expenses to properly reflect the costs of consulting arrangements and to record corrections to accrued liabilities for items that were overstated previously

CONSOLIDATED BALANCE SHEET

December 31, 2009

(Unaudited)


		Previously
		Reported		Adjustments			Restated
ASSETS:
Total assets	$	686,258	$	-	$		686,258

LIABILITIES & STOCKHOLDERS’ DEFICIT:
Accounts payable and accrued expenses	$	2,388,213	$	(282,752)	(2)	$	2,105,461
Convertible debt issued for services		-		210,000	(1)		210,000
All other liabilities		311,867		-			311,867
Total liabilities		2,700,080		(72,752)			2,627,328

Stockholders’ deficit:
Series A preferred stock		3,586		-			3,586
Series B preferred stock		11,081		-			11,081
Common stock		1,441,990		-			1,441,990
Treasury stock		24,500		-			24,500
Additional paid-in capital		46,792,798		5,396,000	(1)		52,188,798
Accumulated deficit		(50,287,777)		(5,323,248)	(1), (2)		(55,611,025)
Stockholders’ deficit		(2,013,822)		72,752			(1,941,070)
Total liabilities and stockholders’ deficit	$	686,258	$	-	$		686,258

(1) To correct general and administrative expenses to properly reflect the costs of consulting arrangements.

(2) To correct wage and salary expense that was understated previously and to record corrections to accrued liabilities for items that were overstated previously.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2009, the FASB issued a new accounting standard related to subsequent events, which provides guidance on events that occur after the balance sheet date but prior to the issuance of the financial statements. The new accounting standard distinguishes events requiring recognition in the financial statements and those that may require disclosure in the financial statements. Furthermore, the new accounting standard requires disclosure of the date through which subsequent events were evaluated. The new accounting standard is effective for interim and annual periods after June 15, 2009. We adopted the new accounting standard for the quarter ended June 30, 2009, and have evaluated subsequent events through February 19, 2010.

In June 2009, the FASB issued a new accounting standard which provides guidance related to the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of a previously issued standard. The new accounting standard stipulates the FASB Accounting Standards Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. The new accounting standard is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The implementation of this standard during the quarter ended September 30, 2009 did not have a material impact on our statements of operations or financial position.

In May 2008, the FASB issued a new accounting standard which provides guidance relating to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). This new standard requires recognition of both the liability and equity components of convertible debt instruments with cash settlement features. The debt component is required to be recognized at the fair value of a similar instrument that does not have an associated equity component. The equity component is recognized as the difference between the proceeds from the issuance of the note and the fair value of the liability. The standard also requires an accretion of the resulting debt discount over the expected life of the debt. Retrospective application to all periods presented is required and a cumulative-effect adjustment is recognized as of the beginning of the first period presented. This standard was effective for us in the first quarter of fiscal year 2010. The adoption of this standard did not have a material impact on our financial statements.

In June 2008, the FASB issued a new accounting standard which provides guidance relating to determining whether an instrument (or embedded feature) is indexed to an entity's own stock and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. This standard specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to our own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. The standard provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the standard's scope exception.

We adopted this new standard effective April 1, 2009. The adoption of the standard's requirements can affect the accounting for warrants or convertible debt that contain provisions that protect holders from a decline in the stock price (or "down-round" protection). For example, warrants with such provisions will no longer be recorded in equity. Down-round protection provisions reduce the exercise price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise price of those instruments or issues new warrants or convertible instruments that have a lower exercise price.

In April 2009, the FASB issued an amendment to an existing standard which provides guidance relating to interim disclosures about fair value of financial instruments. This new standard requires the disclosure of the carrying amount and the fair value of all financial instruments for interim reporting periods and annual financial statements of publicly traded companies (even if the financial instrument is not recognized in the balance sheet), including the methods and significant assumptions used to estimate the fair values and any changes in such methods and assumptions. This new standard is effective for interim reporting periods ending after June 15, 2009. We adopted this pronouncement during the quarter ended June 30, 2009 without material impact to our financial statements.

The Sarbanes-Oxley Act of 2002 ("the Act") introduced new requirements regarding corporate governance and financial reporting. Among the many requirements of the Act is for management to annually assess and report on the effectiveness of its internal control over financial reporting under Section 404(a) and for its registered public accountant to attest to this report under Section 404(b). The SEC has modified the effective date and adoption requirements of Section 404(a) and Section 404(b) implementation for non-accelerated filers multiple times, such that we were required to issue our management report on internal control over financial reporting in our annual report on Form 10-K for the fiscal year ended March 31, 2009. Based on current SEC requirements, we will be required to have our independent registered public accounting firm attest to the effectiveness of internal controls over financial reporting for our fiscal year ending March 31, 2011.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

Customer Concentrations

During the three month period ended December 31, 2009, our primary distributor accounted for 71% of our revenues. During the three month period ended December 31, 2008, our largest retail customer accounted for 27% of our revenue.

NOTE 3 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of LBG as a going concern. We have started generating revenue but have incurred net losses of $11,609,389 during the nine months ending December 31, 2009 and had an accumulated deficit of $55,611,025 at December 31, 2009. In addition, we used cash in our operations of $1,385,730 during the nine months ended December 31, 2009. However, from April 1, 2009 to December 31, 2009, approximately 86% of the aggregate value of the Company’s notes payable was converted to common stock.

We plan to continue to control and reduce costs where necessary while continuing our pursuit to find one or more merger/acquisition candidates, to expand our business. Management plans to continue to raise additional capital in 2010 to fund ongoing business operations and potential business combinations.

Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and to repay the liabilities arising from normal business operations when they come due. We plan to continue to provide for our capital requirements by issuing additional equity securities. No assurance can be given that additional capital will be available when required or on terms acceptable to us. We also cannot give assurance that we will achieve significant revenues in the future. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, we will have sufficient funds to execute our business plan or generate positive operating results.

These matters, among others, raise substantial doubt about the ability of LBG to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

NOTE 4 - INVENTORIES

Inventories consisted of the following at December 31, 2009 and March 31, 2009:


	December 31, 2009			March 31, 2009
Raw Materials	$	97,939	$	101,812
Finished Goods		64,585		79,185
Total Inventories	$	162,524	$	180,997

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2009 and March 31, 2009:


		December 31,		March 31,
	2009		2009
Office furniture and equipment	$	2,765	$	4,322
Leasehold improvements		500		--
Computer equipment		136,881		137,384
		140,146		141,706
Less accumulated depreciation		(66,509)		(43,702)
	$	73,637	$	98,004

Depreciation expense for the nine month periods ended December 31, 2009 and 2008 was $22,806 and $50,275, respectively.

NOTE 6 - INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, 2009 and March 31, 2009:


	December 31, 2009		March 31, 2009
License	$	137,500	$	-
Less accumulated amortization		(34,375)		-
	$	103,125	$	-

On July 5, 2007, we obtained an exclusive license to sell three (3) PC games featuring Charlie Church Mouse to the Christian Booksellers Association (CBA) market from Lifeline Studios, Inc., the developer and original publisher. On June 30, 2009, we expanded our license agreement for Charlie Church Mouse PC Games to include all distribution channels worldwide. We are amortizing the license entered into on June 30, 2009 over its two year term.

NOTE 7 - RELATED PARTY TRANSACTIONS

As LB Games Ukraine was providing software development services only to us and due to our history of providing on-going financial support to that entity, through consolidation we have elected to forego all net losses of this variable interest entity in excess of our ownership interest and the actual capital we have invested in this entity. During the nine months ending December 31, 2009, we did not make any payments to LB Games Ukraine.

NOTE 8 - STOCKHOLDERS’ EQUITY

Common Stock

We are authorized to issue 3,000,000,000 shares of common stock, $0.001 par value per share. The holders of our common stock are entitled to one vote per share of common stock held and have equal rights to receive dividends when, and if, declared by our Board of Directors, out of funds legally available therefore, subject to the preference of any holders of preferred stock. In the event of liquidation, holders of common stock are entitled to share ratably in the net assets available for distribution to stockholders, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights.

The number of shares outstanding reflects a 2 to 3 forward split of the registrant’s common stock, effectuated on November 9, 2009. Figures referring to shares of the registrant’s common stock in this Form 10-Q for the reporting period ending December 31, 2009 are provided on a post-forward split basis.

During the nine months ending December 31, 2009 and 2008, we issued to independent third parties 143,308,384 and 29,878,923 shares of common stock for services provided, valued at $480,603 and $213,919, respectfully. We also issued 6,000,000 and 2,512,500 shares of common stock, valued at $60,000 and $52,900 , respectfully, to certain employees as additional compensation.

Also, during the nine month period ended December 31, 2009, certain of our investors and creditors converted notes payable, accrued interest and accounts payable, to 506,805,540 shares of our common stock at various conversion prices, reducing our debt by $1,724,453. We also raised $1,575,550 through the sale of 520,687,374 shares of common stock, sold at various prices.

During the nine months ended December 31, 2008, we issued 843,750 warrants to purchase shares of common stock all with an exercise price of $0.075 (see Note 10). We estimated the value of these warrants to be approximately $11,000 using the binomial lattice method.

During the nine month period ending December 31, 2008, we also issued 3,375,000 shares for interest, valued at $23,500, respectfully.

During the nine months ended December 31, 2008, we issued 15,000,000 shares of common stock as a legal settlement, valued at $78,000.

Preferred Stock

We are authorized to issue sixty million (60,000,000) shares of $0.001 par value preferred stock of which 3,586,245 are designated as preferred A shares, 11,080,929 preferred B shares, 10,000 are designated as preferred C shares and 1,000 are designated as convertible preferred D shares The authorized but unissued shares of preferred stock may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors. The Directors in their sole discretion shall have the power to determine the relative powers, preferences, and rights of each series of preferred stock.

Series A Preferred Stock

The holders of series A preferred stock have a liquidation preference equal to the sum of the converted principal, accrued interest and value of converted common stock, aggregating $188,500 at December 31, 2009.

We did not issue any Series A Preferred shares in the nine months ending December 31, 2009.

Series B Preferred Stock

Each share of series B preferred stock has voting power equal to 200 shares of common stock for a twelve month period. Subsequently, each series B preferred share has voting power equal to one vote of common stock. In the event of liquidation, holders of preferred stock are entitled to share ratably in the net assets available for distribution to stockholders. Due to its liquidation preference, the series A preferred stock will have priority over series B preferred stock in the event of a liquidation.

We did not issue any Series B Preferred shares in the nine months ending December 31, 2009.

Series C Preferred Stock

On September 28, 2009, the Company filed a Certificate of Designations for a Series C Preferred Stock. The authorized number of Series C Preferred Stock is 10,000. The holders of the Series C Preferred Stock shall be entitled to vote on all matters to be voted upon by the holders of the Company’s common stock and each share shall have the voting equivalent of one million (1,000,000) shares of common stock. The voting rights of the Company’s common stockholders may be limited by the issuance of Series C Preferred Stock.

In the nine months ending December 31, 2009, we issued 10,000 Series C Preferred shares to our Chairman and CEO, Troy Lyndon.

Series D Preferred Stock

On September 28, 2009, the Company filed a Certificate of Designations for a Series D Convertible Preferred Stock. The authorized number of Series D Convertible Preferred Stock is 1,000. The holders of the Series D Convertible Preferred Stock have no voting power whatsoever, except as otherwise provided by the Washington Business Corporation Act and for provisions protection of the Series D Convertible Preferred Stock Certificate of Designations. In each instance, each share of Series D Convertible Preferred Stock shall be entitled to one vote. Each holder of Series D Convertible Preferred Stock shall have the right, at such holder’s option, at any time or from time to time from and after the day immediately following the date the Series D Convertible Preferred Stock is first issued, to convert each share of Series D Convertible Preferred Stock into one million five hundred thousand (1,500,000) fully-paid and non-assessable shares of the Company’s common stock. The voting rights of the Company’s common stockholders may be limited by the issuance and/or conversion of Series D Convertible Preferred Stock.

In the first week of the quarter ending December 31, 2009, we issued 10 series D Preferred shares to our Director, Richard Knox, Jr. of which he converted 1 share into one million five hundred thousand (1,500,000) shares of the Company’s common stock. Also, in the quarter ending December 31, 2009, we issued 100 series D Preferred shares to our CEO, Troy Lyndon. Mr Lyndon then elected to convert 100 series D Preferred shares into one hundred fifty million (150,000,000) shares of our common stock.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Guarantees and Indemnities

We have made certain indemnities and guarantees, under which we may be required to make payments to a guaranteed or indemnified party in relation to certain actions or transactions. We indemnify our directors, officers, employees and agents, as permitted under the laws of the State of Delaware. We have also indemnified our consultants, investment bankers, sublicensor and distributors against any liability arising from the performance of their services or license commitment, pursuant to their agreements. In connection with our facility leases, we have indemnified our lessors for certain claims arising from the use of the facility. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments we could be obligated to make. Historically, we have not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.

Anti-dilution Rights to Common Stock

In 2004, we entered into an agreement with Charter Financial Holdings, LLC in connection with consulting services. The compensation section of the agreement requires that we issue shares of our common stock to Charter sufficient to ensure that its ownership in us, does not fall below one percent (1%) of our outstanding common stock. The result is that for each time we issue or sell stock, we must issue shares equal to one percent of such issuance to Charter Financial Holdings, LLC to maintain their ownership percentage. Charter Financial Holdings, LLC is not required to pay additional consideration for those shares.

Employment Agreements

We have entered into no new employment agreements with key employees.

Leases

We operate in a 4,300 square foot sales and distribution facility in Temecula, California under a sublease agreement through October 2010 with an option to extend such lease for up to four 12 month periods. Its cost is $2,850 per month.

Previously, our corporate offices consisted of a 3,500 square foot facility on 29995 Technology Drive in Murrieta, California under a lease agreement through May 2010. Its cost is $7,545 per month, with annual increases of four percent (4%). We abandoned that facility in March 2008 and are seeking a resolution with the landlord. We have recorded as exit costs approximately $60,000 for the potential liabilities associated with abandoning those facilities.

Independent Sales Representatives

In order to help us secure retail distribution of our initial product, we entered into consulting arrangements with several independent representatives. The payment arrangements to these independent representatives are based upon the ultimate amount paid to us by each customer. The commission rates for these independent representatives typically vary from three percent to five percent to thirty percent of the net amount we collect from customers with stock-based bonus incentives.

Left Behind License

On October 11, 2002, the publisher of the Left Behind book series granted us an exclusive worldwide license to use the copyrights and trademarks relating to the storyline and content of the books in the Left Behind series of novels for the manufacture and distribution of video game products for personal computers, CD-ROM, DVD, game consoles, and the Internet.

The license requires us to pay royalties based on the gross receipts on all non-electronic products and for electronic products produced for use on personal computer systems, and a smaller percentage of the gross receipts on other console game platform systems. According to the license agreement, we are required to guarantee a minimum royalty during the initial four-year term of the license, of which we have already paid a portion. This advance will be set off as a credit against all monies owed subsequently under the license. We were behind in our payments to the licensor. If these are not paid, in the event the licensor makes a demand, it could result in the termination of the license agreement. In such case, we shall continue to have the rights to sell all games in the marketplace along with all inventory already purchased. On September 28, 2008, the Company and licensor modified terms of the agreement to eliminate minimum royalty guarantees. Instead, within 30 days from the end of each month, Company shall provide royalties to licensor based upon its agreement for the preceding month. Additionally, the license term of 3 years automatically renews to additional terms in perpetuity.

Content License

In July 2007, and subsequently in June, 2009, we entered into a Software Publishing Agreements to publish three pc video games under the Charlie Church Mouse (“CCM”) brand. That license agreement requires us to pay royalties to the licensor at a rate of twenty percent of the gross margin on the cash receipts from sales of CCM branded games net of any amounts received as or for any sales, use, customs or other taxes, or postage, shipping, handling, freight, delivery, insurance, maintenance service, sales programs and commissions, interest or finance charges. We paid an original license fee of $25,000 and a renewal fee of another $25,000 in connection with the signing of the Software Publishing Agreements and have a prepaid license fee amount of $30,426 under prepaid expenses and other current assets on our December, 31, 2009 balance sheet.

Litigation

We are subject to litigation from time to time in the ordinary course of our business.

On July 25, 2009, Xerox Corporation filed suit against us for approximately $67,237, representing full payment of two three year operating leases we have on two Xerox WorkCentre systems. A stipulation of judgment was entered into to resolve a dispute with Xerox Corporation in the amount of approximately $67,237. The settlement called for the Company to pay $1,448.77 per month until satisfaction in full, which the Company has been doing for several months.

We have recently become aware of a claim from our former President, Jeffrey Frichner, which we received from the California State Labor Board in an amount exceeding $100,000. The Company will protect its rights in accordance with the settlement agreement it executed with its former President, in which he agreed not to bring any claim against company and waived his rights, accordingly.

We are currently not involved in any other litigation or any pending legal proceedings that we believe could have a material adverse effect on our financial position or results of operations.

NOTE 10 - NOTES PAYABLE

In September 2009, we borrowed $25,000 from an investor on a short term basis (“September 2009 individual loan”).


Notes payable consist of the following at December 31, 2009:

		Face Amount of				Notes Payable,
		Notes Payable		Note Discounts		Net of Discounts
Zero coupon notes	$	--	$	--	$	--
Meyers bridge notes		--		-		--
Individual loans (in default)		95,738		-		95,738
September 2009 individual loan		25,000				25,000
1 year convertible notes (in default)		81,601		--		81,601
3 year convertible notes		6,200		-		6,200
Total notes payable	$	208,539	$	--	$	208,539

At both December 31, 2009 and March 31, 2009, the individual loans were in default.


Notes payable consist of the following at March 31, 2009:

		Face Amount of				Notes Payable,
		Notes Payable		Note Discounts		Net of Discounts
Zero coupon notes	$	247,187	$	(156,150)	$	91,037
Meyers bridge notes (in default)		150,000		-		150,000
Individual loans (in default)		162,488		-		162,488
1 year convertible notes		700,325		(101,666)		598,659
3 year convertible notes		92,675		(78,682)		13,993
Total notes payable	$	1,352,675	$	(336,498)	$	1,016,177

In the three months ended December 31, 2009, one holder of the two remaining zero coupon notes converted all $7,812 of his principal into our common stock and the other holder converted his $35,000 zero coupon note into a 1 year convertible note and as of December 31, 2009, all of the zero coupon notes had been converted to common stock.

In the three months ended December 31, 2009, the remaining holder of the Meyers bridge notes converted $30,000 of his principal into our common stock and as of December 31, 2009, all of the Meyers bridge notes had been converted to common stock or been repaid.

In the three months ended December 31, 2009, holders of the 3 year convertible notes did not convert any of their principal into our common stock.

In the three months ended December 31, 2009, three holders of the 1 year convertible notes converted $191,706 of their principal into common stock and the remaining holder of the zero coupon notes converted his $35,000 principal balance into a 1 year convertible note.

NOTE 11 – NOTE RECEIVABLE

In December 2009, we provided a no-interest short-term loan of $50,000 to another Christian videogame developer, Digital Praise, Inc., a California corporation (“DP”), to assist them with their working capital requirements. As of December 31, 2009, DP had repaid $10,411 of the loan and they owed us $39,589.

NOTE 12 - DEFERRED REVENUES

At December 31, 2009, we had $1,453 of deferred revenue related to our on-line store sales. As we allow a one-month period for our on-line store customers to return our games, we record the revenue from the last month of each quarter as deferred revenue and then recognize that revenue once the one-month period has elapsed.

NOTE 13 – CONVERTIBLE DEBT ISSUED FOR SERVICES

On September 2, 2008, the Company entered into a one-year consulting agreement (the “2008 Consulting Agreement”) with a consultant (the “Consultant”) pursuant to which, in exchange for services rendered by the Consultant to the Company, the Consultant received an aggregate of 8,500,000 shares of common stock of the Company. In April of 2009, the Company added an addendum to 2008 Consulting Agreement (the “First Addendum”) whereby the Consultant also earned $10,000 per month for the services rendered and received an additional 20,000,000 shares of the Company’s common stock. The First Addendum also provided that Consultant had the right to convert the monies owed under the amended consulting agreement into shares of common stock of the Company at a rate of $0.005 no later than March 31, 2010. In April of 2009, the Company added a second addendum to the 2008 Consulting Agreement (the “Second Addendum”) whereby the conversion rate was reduced to $0.001 per share. All other terms remained the same. In April of 2009, the parties entered into the third addendum to the 2008 Consulting Agreement (the “Third Addendum”) whereby the Consultant agreed that in the event the Consultant sold common stock of the Company at a rate exceeding 10,000,000 shares per 30 calendar day period, the Consultant would pay the Company an early-sell fee for each period of $100,000 or an amount equally agreed upon by the Company and Consultant.

During the three months ended December 31, 2009, the Company received $527,669 in fees from the consultant under this provision. The Company recorded these fees against additional paid-in capital.

On July 23, 2009, the Company replaced the 2008 Consulting Arrangement with a new automatically renewable six month consulting agreement (the “2009 Consulting Agreement”) whereby the Consultant earned a sales commission but not less than $40,000 per month in exchange for services rendered. The 2009 Consulting Agreement also stated that if during the term of such agreement, the Company does not pay the Consultant as scheduled, the Consultant shall have the choice to accept such monies owed at a later date or to convert such amounts owed into common stock of the Company at a rate of $0.001 per share, in the Consultant’s sole discretion.

In determining the fair value of the convertible debt issued for services, the Company followed guidance in ASC 470-20-30 “Convertible Instruments Issued to Nonemployees for Goods and Services.” Under ASC 470-20-30, convertible instruments issued for services are to be valued using the measurement date as determined under ASC 505-50 “Equity-Based Payments to Non-Employees.” In addition, ASC 470-20-30 provides guidance on determining fair value of convertible instruments issued for services as follows: (1) Fair value of services if determinable (2) Cash received for similar convertible instruments sold to unrelated parties or (3) At a minimum, the value of the equity that could be received if the instrument were converted. The Company determined that the fair value of the common stock that could be received if the debt were converted was the best measure of fair value in the above transactions. Accordingly the value of the underlying common stock on the measurement date, as determined by ASC 505-50, was used to determine the fair value of the convertible debt.

The Company estimated the fair value of the convertible notes issued to the consultant for services during the nine months ended December 31, 2009 to be $5,446,000 and recorded this amount as consulting expense. During the nine months ended December 31, 2009, $30,000 of the convertible debt was converted into 45,000,000 shares of common stock and the consultant had an outstanding convertible debt balance of $210,000.

NOTE 14 – SUBSEQUENT EVENTS

In January 2010, we issued 61,000,000 shares of common stock to consultants for legal and operational consulting services.

In January 2010, we issued 4,545,455 shares to investors in exchange for net proceeds of $25,000.

In January 2010, we loaned an additional $50,000 to Digital Praise under identical terms as the note for the same amount in December 2009 (see Note 11 above).

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by the condensed consolidated financial statements and notes thereto, included in Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.

FORWARD LOOKING STATEMENTS

This document contains statements that are considered forward-looking statements. Forward-looking statements give our current expectations, plans, objectives, assumptions or forecasts of future events. All statements other than statements of current or historical fact contained in this annual report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward -looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” and similar expressions. These statements are based on our current plans and are subject to risks and uncertainties, and as such our actual future activities and results of operations may be materially different from those set forth in the forward looking statements. Any or all of the forward-looking statements in this quarterly report may turn out to be inaccurate and as such, you should not place undue reliance on these forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions due to a number of factors, including:

continued development of our technology;

consumer acceptance of our current and future products

dependence on key personnel;

competitive factors;

the operation of our business; and

general economic conditions.

These forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this quarterly report.

THE COMPANY

Left Behind Games, a Washington corporation, conducts all of its operations through its wholly owned subsidiary, Left Behind Games Inc. d/b/a Inspired Media Entertainment (herein referred to as the “Company,” “LFBG,” “we,” “us,” “our” or similar terms). LFBG was founded on December 31, 2001 and incorporated in the state of Delaware on August 22, 2002. The Company is engaged in the development, production and sale of Christian inspirational PC video games based upon the popular Left Behind series of novels, published by Tyndale House Publishers. The mission of the Company is to become the world’s leading independent developer and publisher of quality interactive entertainment products that perpetuate positive values and appeal to mainstream and faith-based audiences. As of the date of this Annual Report, we produce and sell inspirational video games.

Our common stock is quoted on the OTC Bulletin Board under the ticker symbol “LFBG.”

On that December 31, 2001, we signed a license agreement with Tyndale House Publishers for the exclusive world-wide rights to the Left Behind brand for the purpose of electronic games. According to Tyndale House Publishers, the Left Behind’s book series has sold more than sixty three (63) million copies and as a result, the ten initial books, followed by children’s books, comic books, music and three movies with the Left Behind brand name have generated hundreds of millions of dollars at retail. According to a Barna Research study, Left Behind has also become a recognized brand name by more than one-third (1/3) of Americans.

Left Behind Games, Inc., a Washington corporation, became a public company on February 7, 2006. On that date, through a reverse merger acquisition, we acquired the public entity Bonanza Gold, Inc., a Washington corporation which had been in operation since 1961. As a result of the share exchange agreement, LFBG shareholders and management controlled the new public company and as part of the transaction, we changed the name of Bonanza Gold, Inc. to Left Behind Games, Inc. We are currently doing business under the name “Inspired Media Entertainment.”

Due to the high impact of the brand name “Left Behind Games” recognized within the marketplace, we have retained this name although other products have been added to our line. As time goes on, and we continue to add new products, we anticipate changing our name to Inspired Media Entertainment.

Our Company became one of the first to develop, publish, and distribute products game for the multi-billion dollar inspirational marketplace when in November of 2006, we released our first product, “LEFT BEHIND: Eternal Forces,” a PC real-time strategy game. We successfully gained entry into more than ten thousand (10,000) retail locations, including Target, Best Buy, Amazon.com, GameStop, EB Games, select Wal-Marts, Circuit City, Comp USA and numerous others.

On May 20, 2008, we acquired the publishing and distribution rights to the PC game, “Keys of the Kingdom.” This game features brain-teasing dynamics and inspirational scriptures. We agreed to pay the author a royalty of fifteen percent (15%) of gross profits.

To date, we have financed our operations primarily through the sale of shares of our common stock. During the nine months ended December 31, 2009, we raised $1,575,550 through the sale of common stock to certain “accredited investors” under several different formats. We continue to generate operating losses and have only just begun to generate revenues.

Furthermore, the report by our Independent Registered Public Accounting Firm on our financial statements includes a paragraph describing substantial doubt about our ability to continue as a “going concern” as of and for the year ended March 31, 2009.

Series C Preferred Stock

On September 28, 2009, the Company filed a Certificate of Designations for a Series C Preferred Stock. The authorized number of Series C Preferred Stock is 10,000. The holders of the Series C Preferred Stock shall be entitled to vote on all matters to be voted upon by the holders of the Company’s common stock and each share shall have the voting equivalent of one million five hundred thousand (1,500,000) shares of common stock. The voting rights of the Company’s common stockholders may be limited by the issuance of Series C Preferred Stock. In the nine months ending December 31, 2009, the Company has issued 10,000 of such shares to its CEO, Troy Lyndon.

Series D Preferred Stock

In the first week of the quarter ending December 31, 2009, we issued 10 series D Preferred shares to one of our Directors, Richard Knox, Jr., of which he converted 1 share into one million five hundred thousand (1,500,000) shares of the Company’s common stock. Also, in the quarter ending December 31, 2009, our CEO, Troy Lyndon, converted his 100 shares of Series D Preferred Stock into one hundred fifty million (150,000,000) shares of the Company’s common stock. There are currently 9 shares of Series D Preferred Stock issued and outstanding, all of which are held by Richard Knox, Jr.

On October 13, 2009, we effectuated a 3-for-2 forward stock split of the shares of common stock issued and outstanding as of the close of business on October 9, 2009.

On November 9, 2009, we filed a Definitive Information Statement with the SEC and commenced mailing such statement to stockholders of record as of the close of business on October 29, 2009 that the following actions had been approved by the holders of a majority of voting securities:

To elect Mr. Troy A. Lyndon, Richard Knox, Sr. and Richard Knox Jr. to serve as members of the Company’s Board of Directors until the next annual stockholders’ meeting or until his respective successor is duly elected and qualify;

To amend the Company’s Certificate of Incorporation to increase the authorized common stock from 1.2 billion (1,200,000,000) to 3 billion (3,000,000,000);

To ratify the Company’s Board of Directors’ appointment of J. Crane CPA, P.C as the Company’s public accountants for the fiscal year ended March 31, 2010; and

To transact any other business that may properly come before the meeting or any adjournment or postponement of the meeting.

Pursuant to a Joint Written Consent of the Board of Directors and Majority Stockholders, on October 29, 2009, the Board of Directors and Troy A. Lyndon, our Chief Executive Officer, Chief Financial Officer and Chairman, and Richard J. Knox, Jr., one of our Directors, jointly approved of the above actions in accordance with a majority shareholder vote, the voting rights of which are described as follows. Mr. Lyndon owns an aggregate of 12,027,378 pre-forward split shares of common stock and 10,000 shares of Series C Preferred Stock. Each share of Common Stock has the right to one vote on the proposals above and each Series C Preferred Stock has the voting equivalency of 10 million shares of Common Stock; thereby giving Mr. Lyndon total voting power equal to 10,012,027,378 pre-split shares of Common Stock, approximately 91.1% of the total voting securities (10,986,135,018 pre-split shares consisting of 971,467,844 pre-split shares of Common Stock, 3,586,245 of Series A Preferred Stock, 11,080,929 shares of Series B Preferred Stock and 10,000 shares of Series C Preferred Stock having the voting equivalency of 10 billion pre-split shares of Common Stock). Mr. Richard J. Knox, Jr. who owns 3,000,000 pre-split shares of Common Stock also approved of the above proposals. Together, Mr. Lyndon and Mr. Knox own the voting equivalency of 10,015,027,378 pre-split shares of Common Stock, approximately 91.4% of the issued and outstanding voting securities. The Board of Directors considered the above proposals in September 2009 when they were in discussions regarding the Company’s forward stock split of 3-for-2. Upon the consummation of the forward stock split on October 13, 2009, the Company had 971,467,844 shares of common stock issued and outstanding, only 228,532,156 shares less than the total 1.2 billion shares then currently authorized pursuant to the Company’s Certificate of Incorporation. The Board of Directors decided to increase the Company’s authorized common stock to 3 billion shares to give the Company additional ability to issue shares in future financings or corporate transactions, if any, or for compensation for services rendered by various individuals or entities.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act and must file reports, proxy statements and other information with the SEC. The reports, information statements and other information we file with the Commission can be inspected and copied at the Commission Public Reference Room, 450 Fifth Street, N.W. Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The Commission also maintains a Web site http://www.sec.gov) that contains reports, proxy, and information statements and other information regarding registrants, like us, which file electronically with the Commission. Our mailing address is 25060 Hancock Avenue, Suite 103 Box 110, Murrieta, CA 92562. Our phone number is (951) 894-6597. Our Web site is http://www.leftbehindgames.com.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2009 and 2008

Revenues

We recorded net revenues of $52,868 for the three months ended December 31, 2009 compared to $33,232 in the three months ended December 31, 2008. This represented an increase in our revenues of $19,636, or 59%. The revenues in the three months ended December 31, 2009 were from a mix of Left Behind: Eternal Forces, Left Behind:Tribulation Forces, three Charlie Church Mouse (“CCM”) games and Keys of the Kingdom.

Approximately 71% of our revenues in the December period arose from sales through our new master distributor. The remainder of our revenue came from cash receipts from the Christian bookstore or church market or from on-line sales.

The revenues from our distributor were reduced by a number of deductions under our distribution agreement totaling $47,592, as follows:


Manufacturing costs paid by our distributor	$	32,332
Cost of presenting at vendor show		1,500
Retail program deductions		11,684
Cost of games returned to distributor		2,076
Total Deductions	$	47,592

Based upon sell through reports provided by our distributor, approximately 4,036 of our games sold through to the end consumers in the December period, almost all of which occurred in certain Wal-Mart and Target stores.

No significant amount of our revenue for the three months ended September 30, 2009 came from a large retail customer.

Cost of Sales - Product Costs

We recorded cost of sales - product costs of $11,372 for the three months ended December 31, 2009 compared to $2,967 in the three months ended December 31, 2008. This represented an increase in our cost of sales – product costs of $8,405, or 283%. The increase in cost of sales – product costs was due to the increase in revenues noted above and to a lower average selling price than in the prior period. Cost of sales - product costs consists of product costs and inventory-related operational expenses.

Cost of Sales – Intellectual Property Licenses

We recorded cost of sales – intellectual property licenses of $9,418 for the three months ended December 31, 2009 compared to $3,220 in the three months ended December 31, 2008. This represents an increase in our intellectual property costs of $6,198, or 192%, due to an increase of sales of Charlie Church Mouse games which require a larger royalty percentage.

Stock Based Compensation

Stock based compensation to consultants, directors and employees totaled $3,777,783 for the three months ended December 31, 2009, compared to $7,098 for the three months ended December 31, 2008, an increase of $3,770,075. The increase was primarily due to a charge of $3,597,100 in stock-based compensation related to the issuance to our CEO and outside director of an aggregate of 110 shares of Series D convertible preferred stock, which was convertible in 165,000,000 shares of our common stock. We measured the value of that issuance based upon the closing market price on the issuance date of the Series D convertible Preferred Stock.

General and Administrative Expenses

General and administrative expenses were $3,793,338 for the three months ended December 31, 2009, compared to $269,974 for the three months ended December 31, 2008, an increase of $3,523,364. The increase was primarily due to a $3,030,000 charge that recorded the fair value of convertible debt issued to a consultant for services. Additional factors included an increase in professional fees of $376,634, an increase in marketing costs of $120,472, an increase in sales commissions of $33,039, an increase in postage expense of $28,753 and an increase in wages of $19,886.

Product Development Expenses

Product development expenses were $26,967 for the three months ended December 31, 2009, compared to $364 for the three months ended December 31, 2008, an increase of $26,603. This increase was the result of investments in new game and software infrastructure development in the 2009 period largely with outside contractors.

Interest Expense

We recorded interest expense of $27,499 for the three months ended December 31, 2009, compared to $196,855 in the three months ended December 31, 2008, a decrease of $169,356, or 86%. Our interest expense is comprised of interest incurred on outstanding debts and the, accretion of the debt discounts related to zero coupon notes and, in the 2008 period, amortization of debt issuance costs. The accretion of debt discount was $18,868 in the December 2009 period compared to accretion of debt discount and amortization of debt issuance costs of $353,949 in the 2008 period. This expense was significantly reduced as the majority of the debt discounts and all of the debt issuance costs had been amortized away in prior periods and were completely amortized in the 2009 period.

Net Loss

As a result of the above factors, we reported a net loss of $7,593,609 for the three months ended December 31, 2009, compared to a net loss of $492,776 for the three months ended December 31, 2008. In addition, our accumulated deficit at December 31, 2009 totaled $55,611,025.

Nine Months Ended December 31, 2009 and 2008

Revenues

We recorded net revenues of $95,264 for the nine months ended December 31, 2009 compared to $151,974 in the nine months ended December 31, 2008. This represented a decrease in our revenues of $56,710, or 37%. The primary driver in the decrease was reduced sales in the Christian bookstore market since we primarily focused on generating sales directly with churches and deemphasized sales to Christian bookstores to a certain extent.

The revenues in the nine months ended December 31, 2009 were from a mix of Left Behind: Eternal Forces, Left Behind: Tribulation Forces, three Charlie Church Mouse (“CCM”) games and Keys of the Kingdom.

Approximately 39% of our revenues in the December period arose from sales through our new master distributor. The remainder of our revenue came from cash receipts from the Christian bookstore or church market or from on-line sales.

The revenues from our distributor were reduced by a number of deductions under our distribution agreement totaling $47,592, as follows:


Manufacturing costs paid by our distributor	$	32,332
Cost of presenting at vendor show		1,500
Retail program deductions		11,684
Cost of games returned to distributor		2,076
Total Deductions	$	47,592

No significant amount of our revenue for the three months ended September 30, 2009 came from a large retail customer.

In the nine months ended December 31, 2008, 29% of our revenue came from our largest retail customer.

Cost of Sales - Product Costs

We recorded cost of sales - product costs of $38,279 for the nine months ended December 31, 2009 compared to $36,454 in the nine months ended December 31, 2008. This represented an increase in our cost of sales – product costs of $1,825, or 5%. The increase in cost of sales – product costs was due to a lower average selling price in the 2009 period, which decreased our average gross profit. Cost of sales - product costs consists of product costs and inventory-related operational expenses.

Cost of Sales – Intellectual Property Licenses

We recorded cost of sales – intellectual property licenses of $16,609 for the nine months ended December 31, 2009 compared to $6,934 in the nine months ended December 31, 2008. This represents an increase in our intellectual property costs of $9,675, or 140%.

Stock Based Compensation

Stock based compensation to consultants, directors and employees totaled $4,237,928 for the nine months ended December 31, 2009, compared to $266,819 for the nine months ended December 31, 2008, an increase of $3,971,109. The increase was primarily due to a charge of $3,597,100 in stock-based compensation related to the issuance to our CEO and outside director of an aggregate of 110 shares of Series D convertible preferred stock, which was convertible in 165,000,000 shares of our common stock. We measured the value of that issuance based upon the closing market price on the issuance date of the Series D convertible Preferred Stock.

General and Administrative Expenses

General and administrative expenses were $6,808,633 for the nine months ended December 31, 2009, compared to $1,302,868 for the nine months ended December 31, 2008, an increase of $5,505,765.

The increase was primarily due to $5,446,000 in charges that recorded the fair value of convertible debt issued to a consultant for services. Additional factors included a $122,752 correction to accrued liabilities for items that were overstated previously, increases in professional fees of $558,378, and in marketing costs of $234,284. Those increases were offset by reductions in payroll of $239,171, in insurance expense of $46,457 and in office expense of $44,087.

Product Development Expenses

Product development expenses were $76,928 for the nine months ended December 31, 2009, compared to $52,342 for the nine months ended December 31, 2008, an increase of $24,586, or 47%.

Interest Expense

We recorded interest expense of $525,971 for the nine months ended September 30, 2009, compared to $571,408 in the nine months ended September 30, 2008, a decrease of $45,437, or 8%. Our interest expense is comprised of interest incurred on outstanding debts, accretion of the debt discounts related to zero coupon notes and the recognition of expense due to the beneficial conversion feature resulting from the discounted conversion rate offered to the holders of notes payable who elected to accept a discounted conversion rate during the reporting period. During the nine months ended December 31, 2009, we recorded an expense of $131,251 that represented the beneficial conversion feature expense. We did not record any expense related to beneficial conversion feature expense during the nine months ended December 31, 2008. The accretion of the debt discount was $336,499 for the nine months ended December 31, 2009 as compared to $421,077 for the nine months ended December 31, 2008. The 2008 figure also included amortization of debt issuance costs.

Other Income

In the nine months ended September 30, 2008, we recorded debt forgiveness income of $250,000 from a restructuring of our Left Behind Games license and a gain from extraordinary events of $468,837 related to the termination and settlement of the distribution arrangement with our former primary distributor.

Net Loss

As a result of the above factors, we reported a net loss of $11,609,389 for the nine months ended December 31, 2009, compared to a net loss of $1,416,657 for the nine months ended December 31, 2008. In addition, our accumulated deficit at December 31, 2009 totaled $55,611,025.

CASH REQUIREMENTS, LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2009 we had $225,230 of cash compared to $7,778 of cash at March 31, 2009, an increase of $217,452 largely due to private sales of our common stock to “accredited investors.” At December 31, 2009, we had a working capital deficit of $2,132,964 compared to a working capital deficit of $3,643,117 at March 31, 2009.

Operating Activities

For the nine month periods ended December 31, 2009 and 2008, net cash used in operating activities was $1,385,730 and $517,654, respectively. The $868,076 increase in cash used in our operating activities was primarily due to the increased loss, which was partially offset by the non-cash nature of the convertible debt issued for services and of the stock-based compensation to consultants and employees. The net losses for the nine month periods ended December 31, 2009 and 2008 were $11,609,389 and $1,416,657, respectively, an increase of $10,192,732.

Investing Activities

We invested $2,457 in fixed assets during the nine month period ended December 31, 2009.

Financing Activities

For the nine month periods ended December 31, 2009 and 2008, net cash provided by financing activities was $1,605,639 and $533,467, respectively. The primary element of cash provided by financing activities in the nine month period ended December 31, 2009 was raised through the sale of common stock and in the nine month period ended December 31, 2008, through borrowings under notes payable.

Future Financing Needs

Since our inception in August 2002 through December 31, 2009, we have raised approximately $12 million through funds provided by private placement offerings and convertible notes. This was sufficient to enable us to develop our first product and expand our product line to include 6 games. Although we expect this trend of financing our business through private placement offerings to continue, we can make no guarantee that we will be adequately financed going forward. We will need to continue raising capital through privately placed offerings in order to continue our operations over the next twelve months. It is also anticipated that in the event we are able to continue raising funds at a pace that exceeds our minimum capital requirements, we may elect to spend cash to expand operations or take advantage of business and marketing opportunities for our long-term benefit. Additionally, we intend to continue to use equity whenever possible to finance marketing, public relations and development services that we may not otherwise be able to obtain without cash.

We have reduced our staff in order to preserve cash. This personnel reduction does not negatively impact our game development because of our use of outsourcing. This structure allows us to expand the size of our development team on a product-by-product basis without substantially increasing our long-term monthly burn-rate of cash.

To date, we have financed our operations primarily through the sale of shares of our common stock and through the issuance of debt instruments. During the nine months ended December 31, 2009, we raised $1,575,550 through the sale of common stock to certain accredited. We continue to generate operating losses.

Going Concern

The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. We have suffered continuing losses from operations, are in default on certain debt, have negative working capital of $2,282,964, which, among other matters, raises substantial doubt about our ability to continue as a going concern. A significant amount of additional capital will be necessary to advance the development and distribution of our products to the point at which they may generate sufficient gross profits to cover our operating expenses. We intend to fund operations through debt and/or equity financing arrangements, which management believes may be insufficient to fund our capital expenditures, working capital and other cash requirements (consisting of accounts payable, accrued liabilities, amounts due to related parties and amounts due under various notes payable) for the fiscal year ending March 31, 2010. Therefore, we will be required to seek additional funds to finance our long-term operations.

We are currently addressing our liquidity issue by continually seeking investment capital through the public markets, specifically, through private placements of common stock and debt. However, no assurance can be given that we will receive any funds in addition to the funds we have received to date.

The successful outcome of future activities cannot be determined at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operating results.

The consolidated financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, however, in the past the estimates and assumptions have been materially accurate and have not required any significant changes. Specific sensitivity of each of the estimates and assumptions to change based on other outcomes that are reasonably likely to occur and would have a material effect is identified individually in each of the discussions of the critical accounting policies described below. Should we experience significant changes in the estimates or assumptions which would cause a material change to the amounts used in the preparation of our financial statements, material quantitative information will be made available to investors as soon as it is reasonably available.

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Software Development Costs. Research and development costs, which consist of software development costs, are expensed as incurred. Software development costs primarily include payments made to independent software developers under development agreements. Accounting standards provide for the capitalization of certain software development costs incurred after technological feasibility of the software is established or for the development costs that have alternative future uses. We believe that the technological feasibility of the underlying software is not established until substantially all product development is complete, which generally includes the development of a working model. No software development costs have been capitalized to date.

Impairment of Long-Lived Assets. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows expected to be generated by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the present value of estimated future cash flows. At September 30, 2009, our management believes there is no impairment of our long-lived assets other than the lease-hold improvements of its abandoned office space and certain trademark costs both of which have been written off in the fiscal year ended March 31, 2008. There can be no assurance however; that market conditions will not change or that there will be demand for our products, which could result in impairment of long-lived assets in the future.

Stock-Based Compensation. Effective April 1, 2006, on the first day of our fiscal year 2006, we adopted the fair value recognition provisions of the accounting standards applied at that time, using the modified-prospective transition method. Under this transition method, compensation cost recognized in the fiscal year ended March 31, 2007 includes: (a) compensation cost for all share-based payments granted and not yet vested prior to April 1, 2006, based on the grant date fair value estimated in accordance with the accounting standards, and (b) compensation cost for all share-based payments granted subsequent to March 31, 2006 based on the grant-date fair value estimated in accordance with the provisions of accounting standards. Accounting standards requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. As of March 31, 2008, we had no options outstanding and therefore believe the adoption of this accounting standard had an immaterial effect on the accompanying consolidated financial statements.

We calculate stock-based compensation by estimating the fair value of each option using the Binomial Lattice option pricing model. Our determination of the fair value of share-based payment awards are made as of their respective dates of grant using the option pricing model and that determination is affected by our stock price as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behavior. The Binomial Lattice option pricing model was developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because our employee stock options have certain characteristics that are significantly different from traded options, the existing valuation models may not provide an accurate measure of the fair value of our employee stock options. Although the fair value of employee stock options is determined in accordance with accounting standards using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The calculated compensation cost, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period of the option.

Stock-based awards to non-employees are accounted for using the fair value method in accordance with accounting standards. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur. We account for stock-based awards to non-employees by using the fair value method.

In accordance with accounting standards, an asset acquired in exchange for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity on the grantor's balance sheet once the equity instrument is granted for accounting purposes. Accordingly, we have recorded the fair value of the common stock issued for certain future consulting services as prepaid expenses in its consolidated balance sheet.

Revenue Recognition. We evaluate the recognition of revenue based on the criteria set forth in accounting standards. We evaluate revenue recognition using the following basic criteria and recognize revenue when all four of the following criteria are met:

Persuasive evidence of an arrangement exists: Evidence of an agreement with the customer that reflects the terms and conditions to deliver products must be present in order to recognize revenue.

Delivery has occurred: Delivery is considered to occur when the products are shipped and risk of loss and reward have been transferred to the customer.

The seller’s price to the buyer is fixed and determinable: If an arrangement includes rights of return or rights to refunds without return, revenue is recognized at the time the amount of future returns or refunds can be reasonably estimated or at the time when the return privilege has substantially expired in accordance with SFAS No. 48, Revenue Recognition When Right of Return Exists. If an arrangement requires us to rebate or credit a portion of our sales price if the customer subsequently reduces its sales price for our product to its customers, revenue is recognized at the time the amount of future price concessions can be reasonably estimated, or at the time of customer sell-through.

Collectibility is reasonably assured: At the time of the transaction, we conduct a credit review of each customer involved in a significant transaction to determine the creditworthiness of the customer. Collection is deemed probable if we expect the customer to be able to pay amounts under the arrangement as those amounts become due. If we determine that collection is not probable, we recognize revenue when collection becomes probable (generally upon cash collection).

For sales to our large retail customers, we defer revenue recognition until the resale of the products to the end customers, or the “sell-through method.” Under sell-through revenue accounting, accounts receivable are recognized and inventory is relieved upon shipment to the channel partner or retail customer as title to the inventory is transferred upon shipment, at which point we have a legally enforceable right to collection under normal terms. The associated sales and cost of sales are deferred by recording “deferred income – product sales” (gross profit margin on these sales) as shown on the face of the consolidated balance sheet. When the related product is sold by our primary channel partner or our largest retail customer to their end customers, we recognize previously deferred income as sales and cost of sales. Our large retail customers provide us with sell-through information on a frequent basis regarding sales to end customers and in-channel inventories.

For sales to our on-line store customers, revenues are deferred until such time as the right of return privilege granted to the customers lapses, which is thirty (30) days from the date of sale for unopened games.

For sales to our Christian bookstore customers and all other customers that cannot provide us with sell-through information and for which we may accept product returns from time to time, revenues are recognized on a cash receipts basis.

In the future, we intend to continue using the sell-through methodology from customers that supply us with sell through reports. We also plan to continue recognizing sales on our on-line store after a one month lag to allow for the right that we have given our on-line customers to return unopened games for thirty (30) days.

We continue to accumulate historical product return and price concession information related to our Christian bookstore customers and all other customers. In future periods, we may elect to return to the accrual methodology of recording revenue for those customers upon shipment with estimated reserves at which time we believe we can reasonably estimate returns and price concessions to these customers based upon our historical results.

Revenue from Sales of Consignment Inventory. We have placed consignment inventory with certain customers. We receive payment from those customers only when they sell our product to the end consumers. We recognize revenue from the sale of consignment inventory only when we receive payment from those customers.

Shipping and Handling: In accordance with accounting standards, we recognize amounts billed to customers for shipping and handling as revenue. Additionally, shipping and handling costs incurred by us are included in cost of goods sold.

Historically, we promoted our products with advertising, consumer incentive and trade promotions. Such programs include, but are not limited to, cooperative advertising, promotional discounts, coupons, rebates, in-store display incentives, volume based incentives and product introductory payments (i.e. slotting fees). In accordance with accounting standards, certain payments made to customers by us, including promotional sales allowances, cooperative advertising and product introductory expenditures have been deducted from revenue. During the nine months ended December 31, 2008, we had no such types of arrangements.

During the three months ended December 31, 2009, we recorded the following deductions from our revenues:


Manufacturing costs paid by our distributor	$	32,332
Cost of presenting at vendor show		1,500
Retail program deductions		11,684
Cost of games returned to distributor		2,076
Total Deductions	$	47,592

Off-Balance Sheet Arrangements

We presently do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES.

Evaluation of Controls and Procedures.

In accordance with Securities Exchange Act Rules 13a-15 and 15d-15, our management is required to perform an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period.

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2009, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in this Report was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10-Q.

Our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures had the following deficiency:

We were unable to maintain any segregation of duties within our business operations due to our reliance on a single individual fulfilling the role of both our Principal Executive Officer and Principal Financial Officer. While this control deficiency did not result in any audit adjustments to our interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties. Accordingly we have determined that this control deficiency constitutes a material weakness.

Until such time as we retain the services of a Principal Financial Officer, the above-described deficiency will exist. We intend to hire a Principal Financial Officer in the future as our Company grows and we have sufficient capital to pay such individual.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are subject to litigation from time to time in the ordinary course of our business.

We have recently become aware of a claim from our former President, Jeffrey Frichner, which we received from the California State Labor Board in an amount exceeding $100,000. The company will protect its rights in accordance with the settlement agreement it executed with its former President, in which he agreed not to bring any claim against company and waived his rights, accordingly.

We are currently not involved in any other litigation or any pending legal proceedings that we believe could have a material adverse effect on our financial position or results of operations.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the nine months ending December 31, 2009, we issued to independent third parties, some of whom were accredited investors, 95,538,923 shares of common stock for services provided, valued at $480,603 (based on the closing price on the respective grant date). We also issued 4,000,000 shares of common stock, valued at $60,000 (based on the closing price on the respective grant date), to certain employees as additional compensation. Such shares were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that such issuances did not involve a public offering of securities.

Also, during the three months ended December 31, 2009, a holder of our zero coupon notes converted all $7,812 of his principal into our common stock, the remaining holder of the Meyers bridge notes converted $30,000 of his principal into our common stock and three holders of the 1 year convertible notes converted $191,706 of their principal into common stock. The shares were issued pursuant to the registration exemptions afforded the Company under Section 3(a)(9) promulgated under the Securities Act of 1933, as amended, due to the fact that the securities were converted for no additional consideration.

On September 28, 2009, the Board of Directors of the Company, with Mr. Richard J. Knox, Jr., recusing himself from making such determination, issued ten (10) shares of Series D Convertible Preferred Stock to Richard J. Knox, Jr., a member of the Board of Directors of the Company, in consideration for services rendered. Such shares were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that such issuances did not involve a public offering of securities.

On September 28, 2009, the Board, with Troy A. Lyndon recusing himself from making such determination, agreed to issue one hundred (100) shares of Series D Convertible Preferred Stock and ten thousand (10,000) shares of Series C Preferred Stock, to Mr. Lyndon, the Company Chief Executive Officer and Principal Executive Officer, as a reward for significant improvements to the Company’s operations and market cap increase by more than 2000% over the past year. Such shares were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that such issuances did not involve a public offering of securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

We are in default on notes payable totaling $177,338 as we were unable to repay the notes upon maturity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

To amend the Company’s Certificate of Incorporation to increase the authorized common stock from 1.2 billion (1,200,000,000) to 3 billion (3,000,000,000);

To ratify the Company’s Board of Directors’ appointment of J. Crane CPA, P.C as the Company’s public accountants for the fiscal year ended March 31, 2010; and

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

(a)

Exhibits. The following documents are filed as part of this report:


Exhibit No.:	Description:
3.1*	Articles of Amendment to the Certificate of Incorporation of Left Behind Games, Inc., dated September 28, 2009
3.2**	Certificate of Designation of Series C Preferred Stock
3.3**	Certificate of Designation of Series D Preferred Stock
31.1	Certification by Troy A. Lyndon, Principal Executive Officer and Principal Financial and Accounting Officer, of Left Behind Games, Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification by Troy A. Lyndon, Principal Executive Officer and Principal Financial and Accounting Officer, of Left Behind Games, Inc., pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

* Filed as an exhibit to Form 10-Q (File No.: 000-50603) for the quarter ended September 30, 2009 filed with the SEC on November 18, 2009 and incorporated by reference herein.

**Filed as an exhibit to Form 8-K (File No.: 000-50603) filed with the SEC on September 28, 2009 and incorporated by reference herein.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LEFT BEHIND GAMES, INC.

Date: February 22, 2011

BY: /S/ TROY A. LYNDON

TROY A. LYNDON

CHAIRMAN, PRESIDENT, CHIEF

EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

(Principal Executive Officer)

(Principal Financial and Accounting Officer)

LEFT BEHIND GAMES INC. - FORM 10-Q/A - February 22, 2011

LEFT BEHIND GAMES INC. Reports