UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-KSB







(Mark
One)




Q
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
year ended August 31, 2008




o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




Commission
File Number 333-139395




LOCATION BASED TECHNOLOGIES,
INC.


(Name of
small business issuer in its charter)




Nevada
            
            20-4854758(State
      of incorporation)
            
            (I.R.S.
      Employer Identification No.)




4989 E. La Palma Avenue,
Anaheim, California 92807


(Address
of principal executive offices)




800-615-0869


(Issuer’s
telephone number)







Securities
      registered under Section 12(b) of the Act:Title of each class
      registered:
            Name of each exchange
      on which registered:None
            NoneSecurities
      registered under Section 12(g) of the
      Act:
              None










Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 Q  No
o




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes o  No Q




State
issuer’s revenues for its most recent fiscal year:  $5,818





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. $43,365,750.




APPLICABLE
ONLY TO CORPORATE REGISTRANTS




The
number of shares outstanding of the issuer’s common equity, as of November 20,
2008 was 88,776,770.




DOCUMENTS
INCORPORATED BY REFERENCE




If the
following documents are incorporated by reference, briefly describe them and
identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which
the document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24,
1990).  None




Transitional
Small Business Disclosure Format (Check
one):    Yes o No Q









TABLE
OF CONTENTS




PagePART
      IItem 1.
            
            Description
      of Business
            
            1Item 2.
            
            Description
      of Property
            
            18Item 3.
            
            Legal
      Proceedings
            
            18Item 4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            18PART
      IIItem 5.
            
            Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            
            19Item 6.
            
            Management's
      Discussion and Analysis and Plan of Operations
            
            20Item 7.
            
            Financial
      Statements
            
            24Item 8.
            
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            
            25Item 8A(T).
            
            Controls
      and Procedures
            
            25Item 8B.
            
            Other
      Information
            
            25PART
      IIIItem 9.
            
            Directors,
      Executive Officers and Corporate Governance
            
            25Item 10.
            
            Executive
      Compensation
            
            28Item 11.
            
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            30Item 12.
            
            Certain
      Relationships and Related Transactions, and Director
      Independence
            
            31Item 13.
            
            Exhibits
            
            32Item 14.
            
            Principal
      Accounting Fees and Services
            
            34SIGNATURES
            
            35










FORWARD
LOOKING STATEMENTS




Information
in this report contains “forward looking statements” which may be identified by
the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”,
“expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”,
“continue”, or similar terms, variations of those terms or the negative of those
terms. The forward-looking statements specified in the following information
have been compiled by our management on the basis of assumptions made by
management and considered by management to be reasonable. Our future operating
results, however, are impossible to predict and no representation, guaranty, or
warranty is to be inferred from those forward-looking statements.




The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives requires the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. No assurance can be given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.




PARTI





ITEM
1. DESCRIPTION OF BUSINESS





Unless otherwise
noted, the terms "LBT ", the "Company", "we", "us", and "our" refer to the
ongoing business operations of Location Based Technologies,
Inc.





Overview
of the Business




We are a
corporation incorporated in Nevada on April 20, 2006.  We are
qualified to do business in California.  Our shares of common stock
are currently traded in the over-the-counter market and our stock price is
reported on the OTC Bulletin Board under the symbol “LBAS.”  We are
headquartered in Anaheim, California.





Location Based Technologies, Inc.
designs and develops personal locator devices and services. We are the developerof thePocketFinder® Family of Products andthe PocketFinder® Network.ThePocketFinder®Family of Products currently includes
the PocketFinder®, PetFinder® and PocketFinder® Luggage.  The
PocketFinder®is a small
location device that enables a user to locate a device, person, or pet, anytime
from almost anywhere.PocketFinder®Personal Locator devices are
completely wireless. Users can monitor the safety and location of family
members, pets, and valuables using GPS and GPRS
technologies.





We are a
company focusing on sales, marketing, and delivery of our product with our
initial focus in the UK and selected parts of Europe.  Global System
for Mobile communications (“GSM”) testing concluded in June 2008 allowing us to
begin to sell our products throughout Europe.  In September 2008, the
Company secured its first Purchase Order of $3,700,000 for its PetFinder®
product with a delivery date in January 2009.  We have also begun
sales of the Android phone (Google, T-Mobile) application that allows the
cellular phone to act as a PocketFinder® with all of the features and
functionality of our devices.  Android applications will work
world-wide as long as the phone has access to a network.  Furthermore,
as the actual PocketFinder® and PetFinder® devices enter the US market the
Android phone will be able to seamlessly add those devices to its account and
optimize the family’s ability to stay connected.  A similar
application has been completed and submitted to Apple for approval and sales
through the iTune store.  We anticipate approval and sales to begin in
November 2008.  During the first part of 2009, we intend to develop
additional Global Positioning System (“GPS”) smartphones that can interact with
our easy to use web-based interface on any telecom network (GSM or Code Division
Multiple Access (“CDMA)).




1





We are
negotiating an  agreement with a leading strategic distribution
partner in Europe, which  we anticipate will be finalizedin early
2009. The Jabil facility in Meung-sur-Loire, France, completed the initial
pilot run of product in October 2008 and is ready for high quality, mass volume
production runs beginning in December 2008 and expanding over the following five
months.  The Company has the option of opening additional
manufacturing lines at other Jabil plants as demand
requires.  PocketFinder® devices have been submitted to RFI Labs in
November 2008 and FCC and PCS Type Certification Review Board (“PTCRB”) testing
is underway.  Before beginning sales in the United States we must also
secure Carrier Network approval fromAT&T.  Carrier Network testing
will begin upon receiving FCC approvals.





We will
continue to enhance the functional capability of our products on an ongoing
basis as new vertical market opportunities are regularly being
discovered.  OEM opportunities are also an element of our strategic
direction.




The
Company is in discussion with a small number of strategic individuals/companies
with interest in providing significant cash infusion as an equity investment to
fund inventory, support sales and marketing initiatives, and for general
operational expenses. The desired outcome is to form long-term relationships
that deliver both immediate and long-term mutual benefit to all
parties.





We
continue to see evidence of the market demand for location-based services that
will allow family members to keep in touch with one another in an increasingly
busy world. In October 2008, Consumer Electronics’ economist stated that retail
sales for consumer electronics were up 1.2% in August 2008 from the same period
last year. In spite of the impact from the recession on other products,
flat-panel TV sets were up 40% and GPS systems sales were up
95%.  Earlier in the year, “GPS World” projected that location based
devices will increase by 168% this year and that revenue will grow by 169%
according to market research group, Gartner, Inc.  They further
projected that subscribers worldwide will rise from 16 million in 2007 to 43.2
million in 2008.  They also forecast that the number of subscribers
will reach nearly 300 million in 2011 with revenue to top $8 billion in
2011.




By taking
advantage of the latest in GPS, GSM, and Internet technology, the PocketFinder®
will optimize the ability for families to stay connected.  A 2008
national survey by the Pew Internet & American Life Project has found that
the Internet and cell phones have become central to modern family life. Rather
than hurt families, Pew said, new technologies allow new forms of connectivity.
  Pew also reports positive impacts from the high rates of technology
ownership in today’s families.




"Some
analysts have worried that new technologies hurt family togetherness, but we see
that technology allows for new kinds of connectedness built around cell phones
and the Internet," said Tracy Kennedy, author of a new report about the survey
called Networked Families. "Family members touch base with each other frequently
with their cell phones, and they use those phones to coordinate family life on
the fly during their busy lives."




Time
Deal, a senior analyst at Pike & Fischer, remembers that when he was a kid,
he'd disappear on his bike for most of Saturday, he said, and maybe check-in
with his parents for lunch and dinner. The times have changed -- and so have
safety concerns. "We are much more concerned about threats of a number of types
against our children today," Deal said. "Wireless devices have enabled us to
enjoy greater connectivity when we are not physically together. I can't imagine
a world now where I can't contact my wife or son via cell phone to check on
their location and to see if they can pick something up."




The
mobile web provides people with access to the Internet anytime and anywhere
mobile phone service is available -- at its most basic, it enables you to browse
the Internet with a mobile device.  IBM envisions a substantial
build-out of the mobile Web and a significant shift in the way the majority of
people will interact with the Web over the next 5-10 years. Their own business
think-tank predicts the Mobile Web market
for consumer services such as entertainment and email is expected to reach $80
billion by 2011, more than 36 percent annual growth.  This enhanced
capability greatly increases the benefits of the PocketFinder®
products.




2






The
PocketFinder® family of products enhances the ability for families with young
children to stay connected and to meet the demands of a fast-paced
life.  Knowing the whereabouts of family members is a crucial step to
coordination and planning.




In
addition, vertical applications may include: outdoor and extreme sports
enthusiasts, parents, adult children of the elderly, elder care providers of
patients with Alzheimer’s and dementia, special needs providers for those with
disabilities, pet owners, and for the tracking and recovery of valuable property
and luggage while traveling.  Our device is fifty millimeters in
diameter or about 2 inches.  It fits easily into a child’s pocket,
their backpack, or onto a belt.  The PocketFinder® and PetFinder®
devices will come with a form fitting silicone pouch that can easily slide onto
a belt or a pet’s collar.





We
operate with an “outsourced” model of highly selected individuals and
organizations that have quick growth capacity to keep pace with our anticipated
fast growth.  We have a small number of employees, yet have
approximately 80 full and part time contractors working on our
endeavor.  It allows us to tightly control our overhead and ensures
that we have the right resources in place at the right time.  The
infrastructure and critical organizations for success are in place. We have a
very talented senior management team that brings the right knowledge, skills and
abilities to deliver world-class products and services. Distribution
opportunities are expanding and we are carefully analyzing each market
opportunity against potential growth, economic value, and support capability
metrics.  Our contract with 24-7 INtouch will handle our call-center
customer services demand in the US and Canada.  We are developing a
business model for international market opportunities and are in discussions
with distributors in at least eleven countries at this time.




The
government-owned global positioning satellite, or GPS, system is neither
patentable nor exclusive in source.  As a result, other entrants may
utilize the same capability as well as existing wireless
technologies.  However, it is not GPS and wireless technologies that
differentiate our product from the competition.  Rather, it is the
proprietary software that transforms available technologies into an intuitive
and user-friendly interface that offers greater value, capabilities, and
convenience to the customer.




Our Personal Locator
Services.  We have begun the manufacturing process of the
PocketFinder®.  We have entered into a manufacturing agreement with
Jabil to produce the PocketFinder® devices in France.  Jabil is one of
the world’s largest original equipment manufacturer (OEM) of electronics with
facilities in China, Mexico, the US and Europe.  We will provide
end-user customer service and support in the US and Canada through 24-7 INtouch,
headquartered in Toronto, Ontario.  We anticipate exploring multiple
vertical markets including the following:




·
            Parents
      of young children (primarily 5 to 12 years of age) who seek the peace of
      mind of being able to know that their children are where they are supposed
      to be when they are supposed to be there;·
            Families with
      members who are Autistic or have Downs Syndrome, Alzheimer’s,
      etc.;·
            Elder Care support
      and applications;·
            Pet care and
      location capability; and·
            Asset tracking and
      location capability: cars, trucks, fleet management, luggage, and
      other personal assets.





We signed
a contract with KORE Telematics, a provider of “Machine-to-Machine” or M2M
protocol access, on November 26, 2007.  Our products will offer wide
network coverage throughout North America via KORE Telematics utilizing the
largest GSM carrier networks in the United States and Canada.  With
this agreement, our personal locators will have the ability to roam seamlessly
on the networks of 400 wireless providers in over 220 countries.  In
addition, our locators have the ability to work on any GSM network in the
world.




3




Our Intellectual Property
Investment.  We have invested significantly, and continue to
invest, in intellectual properties, which consist of apparatus patents and
applications and system and method patents and applications.  We have
filed claims that cover all aspects of the PocketFinder®, its operating system
and user interface.  We have expanded and filed additional claims this
fiscal year that cover new aspects of the personal locator, its operating system
and user interface.  We received Trademark approvals for the
following: PetFinder; PocketFinder and the associated Service Mark; Your World
Located; iTalk; Luggage Tracker; and the avatars (or stylized heads) found on
our website and on the product’s box.  Set forth below is a list of our
patents and patent applications.




U.S. Patent
Holdings:




1.           U.S.
Patent No. 6,879,244 title:  “Call Receiving System Apparatus and
Method having a Dedicated Switch.” filed 02/04/2000, expiration approximately
02/04/2020 or 05/21/2017 (or a combination thereof on a claim-by-claim basis)
based on priority applications.




2.           U.S.
Patent No. 7,005,963 title:  “Call Receiving Method and Apparatus
having Two-way Text Messaging and Automatic Retrieval of Call Numbers Making
Calls to Apparatus,” filed 08/15/2000, expiration date approximately 08/15/2020
based on CIP application, or approximately 02/04/2020 or 05/21/2017 (or
combination thereof on a claim by claim basis) based on priority
applications.




3.           U.S.
Patent No. 7,218,242 title:  “Communication System and Method
Including Communication Channel Mobility,” filed 9/27/2004, issued 5/15/2007,
expiration approximately (based on priority applications) 02/04/2020 or
05/21/2017 (or a combination thereof on a claim-by-claim basis).




4.           U.S.
Patent No. D/445,777, Serial No. 29/127,952, title:  “Oval Shaped
Pager/Phone Device,” filed 08/15/2007, issued 07/31,2001, expires approximately
07/31/2015.




5.           U.S.
Patent No. D/401930, Serial No. 74,733, title:  “Pager Phone with
Removable Clip,” filed 08/04/1997, issued 12/1/1998, expires approximately
12/1/2012.




6.           U.S.
Patent No. D/401395, Serial No. 74,734, title:  “Pager Phone having
Belt Loop,” filed 08/04/1997, issued 12/1/1998, expires approximately
12/1/2012.




7.           U.S.
Patent No. D/401,936, Serial No. 80,117, title:  “Pager Phone having
Top and Side Detents,” filed 08/04/1997, issued 12/1/1998, expires approximately
12/1/2012.




8.           U.S.
Patent No. D/402,291, Serial No. 74,390, title:  “Pager Phone Having
Recessed Thumb Grip and Power Button Located in Base,” filed 08/04/1997, issued
12/8/1998, expires approximately 12/8/2012.




9.           U.S.
Patent No. D/405,084, Serial No. 87,015, title:  “Pager Phone Having
Four Button Options,” filed 04/24/1998, issued 02/02/1999, expires approximately
02/02/2013.




10.        
U.S. Patent No. 7,333,796, Serial No 10/704,414, title "Wireless Telephone
Service" filed 11/10/2003, expires approximately 11/10/2023.




11.        
U.S. Patent No. X,XXX,XXX, Serial No. 11/048,395, title "System for Locating
Individuals and Objects", filed 02/01/2005 (after notice of allowance, paid
issue fee 10/29/2008.




12.         US
Patent Application D575,649, Serial No. 29/XXXXXX; title: “Location Tracking
Device”, filed 10/03/2007.




4




Published/Filed Patent
Applications:




13.         U.S.
Pub. No. 2006-XXXXXX, U.S. Patent Appl. S. N.. 11/441,563,
title:  “Call Receiving Apparatus and Method having a Dedicated
Switch”, filed on 5/27/2006.




14.         U.S.
Pub. No. 2006-XXXXXX, U.S. Patent Appl. S. N. 11/491,370, title “Apparatus and
Method for Locating Individuals and Objects Using Tracking Devices,” filed
07/21/2006.




15.         U.S.
Pub. No. 2007-XXXXXX, U.S. Patent Appl. Serial No. 11/784,400,
title:  “Communication System and Method including Dual Mode
Capability,” filed 04/05/2007.




16.         U.S.
Pub. No. 2008-XXXXXX, U.S. Patent Appl. Serial No. 11/784,400,
title:  “Communication System and Method including Communication
Billing Options,” filed on 04/05/2007.




17.         U.S.
Pub. No. 2007-XXXXXX, U.S. Patent Application, Serial No. 11/753,979,
title:  “Apparatus and Method for Providing Location Information on
Individuals and Objects Using Tracking Devices,” filed 05/25/2007.




18.         US
Patent Application, Serial No. 11/XXXXXX (Confidential -- Not Published by the
USPTO), title “Apparatus and Method for Manufacturing an Electronic Package”,
filed 11/09/2007.




19.         US
Patent Application, Serial No. 11/XXXXXX (Confidential -- Not Published by the
USPTO), title “Apparatus and Method to Provide Secure Communication Over an
Insecure Communication Channel for Location Information Using Tracking Devices”,
filed 10/18/2007.




20.         US
Patent Application, Serial No. 11/ XXXXXX (Confidential -- Not Published by the
USPTO), title “System and Method for Creating and Managing a Personalized Web
Interface for Monitoring Location Information on Individuals and Objects Using
Tracking Devices “, filed 11/08/2007.




21.      
  US Patent Application, Serial No. 11/XXXXXX (Confidential – Not
Published by the USPTO), title "Apparatus and Method for
Determining  Location and Tracking Coordinates of a
Tracking         Device",  filed
1/06/2008.




22.         US.
Patent Application, Serial No. 12/XXXXXX, title "System and Method for Improved
Communication Bandwidth Utilization When Monitoring Location Information", filed
06/20/2008.




Foreign Patent
Holdings:





23.         PCT/US2007/XXXX,
“Apparatus and Method for Locating Individuals and Objects”, filed
6/29/2007.





24.         PCT/US2008/XXXX,
“Apparatus and Method for Providing Location Information on Individuals and
Objects Using Tracking Devices”, filed 5/23/2008.





25.         PCT/US2007/XXXX,
“Apparatus and Method for Manufacturing an Electronic Package”, filed
12/7/2007





26.         PCT/US07/XXXX,
“System and Method for Creating and Managing a Personalized Web Interface for
Monitoring Location Information and Individuals and Objects Using Tracking
Devices”, filed 12/7/2007.




5




Madrid
Trademarks:




1.          
Pocketfinder (Word) Madrid Protocol TM; registered in UK and
Australia.




2.          
Pocketfinder (Stylized) Madrid Protocol TM registered in Japan, the UK and
Australia.




3.          
Stylized Heads (Design) Madrid Protocol TM registered in Japan, the UK and
Australia.




4.          
YOUR WORLD LOCATED (Word) Madrid Protocol TM registered in UK and
Australia.




We own
the Internet domain name www.pocketfinder.com
as well as the names of other related domains that could have use in future
business and vertical marketing initiatives.  Under current domain
name registration practices, no one else can obtain an identical domain name,
but someone might obtain a similar name, or the identical name with a different
suffix, such as “.org,” or with a country designation.  The regulation
of domain names in the United States and in foreign countries is subject to
change, and we could be unable to prevent third parties from acquiring domain
names that infringe or otherwise decrease the value of our domain
names.




Our Target Markets and Marketing
Strategy.




Location
Based Technologies provides wireless location based solutions for global
positioning products and its proprietary “friendly user interface” software
system.  Its PocketFinder® family of products delivers rugged, compact
products with real-time location-based information over its proprietary server
architecture.  Our products simplify the ability for families to stay
connected with one another, for pet owners to know where their pets are on
demand, and solutions for asset tracking.  The Company has the ability
to provide platform support for the integration of other location-based GPS
services within its applications in order to simplify the customers need to
locate all location-based devices in one easy tool.




The
Company is preparing for the launch of their first two products, the
PocketFinder® and PetFinder®, while also involved in numerous other “white
label” marketing opportunities.  In addition, several licensing
opportunities are being explored.




For our
PocketFinder® family of products, the Company believes that the primary target
market will consist of parents with school-aged children from ages five to
thirteen.  Secondary markets may include medical and elder care
providers, campers, hikers, backpackers, adventure seekers, extreme sports
enthusiasts, freight and cargo carriers, delivery services, pet owners, vehicle
finance companies, auto dealerships, law enforcement agencies, military
organizations and individuals wishing to track valuable personal
items.




Based on
census information, there are over 37,000,000 children in the 5 to 13 year old
market segment in the United States with an additional 4,000,000 in the prime
focus areas in Canada.  The European Community has an additional
42,500,000 children in this primary age group.  Adding in the elder
care market this represents a target market of more than 109,200,000 potential
customers in our focus age group.




Closely
related to personal locators is the desire for pet locators as it is estimated
there are 70,000,000 pets in the US.  A locator device will give
a pet owner the ability to locate their pet if it were to become lost or missing
as well as to ensure that services paid for are received, i.e., that a walking service
or pet care facility actually provide the outdoor activity contractually agreed
to.




Location
Based Technologies marketing initiatives will include:





·
            Licensing
      opportunities for the products in other areas or
  regions;


·
            Self
      branded or “white label” opportunities for niche market or vertical market
      sales;


·
            Affinity
      group marketing and outreach
opportunities;


·
            Utilization
      of direct response sales due to public relations outreach in special
      interest magazines and newsletters;
and


·
            Retail
      distribution initiatives.




6




Our Revenue
Sources.  We expect our revenues to be based on the following
sales and revenue sources:




·
            Potential
      licensing fees;


·
            Organizations
      that will self-brand the PocketFinder® for specialized niche markets
      (“white label”);


·
            Personal
      Locator device sales to Retailers;


·
            Personal
      Locator device sales through Affinity groups and through our web
      site;


·
            Personal
      Locator device accessory sales; and


·
            Monthly
      re-occurring service fees.




Our Growth
Strategy.  Our objective is to become one of the major
providers of personal and asset location services on the market.  Our
strategy is to provide high quality devices that meet themarket’s requirements
whether it is for their children, their pets, or asset tracking (luggage,
vehicles, boats, etc.).  Key elements of our strategy
include:





·
            A
      mass market retail price of under
$150.00;


·
            A
      basic monthly service fee of under $20.00 with multiple convenient access
      points (mobile phone, land line, or via the
  internet);


·
            Ease
      of use at the location interface point as well as with the device;
      and




·
            Rugged
      design that meets the rigors of an active child or
      pet.





Our Website.  Our
corporate website, www.locationbasedtech.com,
provides a description of our corporate business along with our contact
information including address, telephone number and e-mail
address.  Our website also provides prospective customers with
relevant information about our products, pricing and payment options,
pre-ordering capability, frequently asked questions and access to corporate
investor relations information.  Information contained on our website
is not a part of this report.




Our
Competition.  Personal location and property tracking devices
are just beginning to significantly penetrate the marketplace.  We
believe this condition represents a tremendous opportunity as customers will be
attracted in large numbers once the intrinsic value of such devices is
recognized and mass market adoption begins.




Our
competitors include Geospatial Platform Providers, Application Developers,
Zoombak, Snitch, and Spot.  These competitors may be better financed,
or have greater marketing and scientific resources than we do.




In
related markets, GPS devices have become widely used for automotive and marine
applications where line-of-sight to GPS satellites is not a significant
issue.  Manufacturers such as Garmin, Navman, Magellan, TomTom,
Pharos, NovAtel and DeLorne are finding a market interested in using these
products for both business and leisure purposes.  As a result, use of
GPS technology in devices such as chart plotters, fitness and training devices,
fish finders, laptop computers, and personal digital assistant (“PDA”) location
devices are gaining significant market acceptance and
commercialization.  Prices range from $199.00 to several thousand
dollars.  We expect that increasing consumer demand in these markets
will drive additional applications and lower price points.




Government
Regulation.  We are subject to federal, state and local laws
and regulations applied to businesses generally as well as FCC, Internationale
Canada (“IC”) and CE (European Economic Area) wireless device regulations and
controls.  We believe that we are in conformity with all applicable
laws in all relevant jurisdictions.  We do not believe that we are
subject to any environmental laws and regulations of the United States and the
states in which we operate.




7




Our Research and
Development.  We are currently in the final steps of the
research and development phase.  Preparation for the Certification
processes began in the first calendar quarter of 2008 (initial
certifications will include FCC, IC, CE, PTCRB, and Carrier Network
certification).  Our initial pilot manufacturing run was completed in
October 2008.  We will continue to work with several other entities
that are conducting research on key aspects of the device itself (including
expanded antennae capability, battery capacity, and enhanced location
reliability and accuracy) in an ongoing effort to provide the best quality
product at the very best size and value on the market.  We anticipate
ongoing involvement with some level of developmental activities throughout the
foreseeable future.




Employees and Outsourced
Assistance.  As of November 20, 2008, we are leveraging our
outsourcing model to world class partners and have three full-time employees and
approximately 80 contracted professionals engaged in hardware and software
development, early marketing and sales preparation, and will soon add customer
service contracted professionals.  Mr. Scalisi, our Co-President and
Chief Development Officer, Mr. Morse, our Co-President and Chief Executive
Officer, and Ms. Mejia, our Chief Operating Officer, currently devote 100% of
their business time to our operations.  We anticipate that we will
hire two to four key employees in the next three months, with selective and
controlled growth commensurate with significant increases in our
revenues.  Remaining true to our “outsourced” model for growth and
expansion, any large personnel increases will be accomplished through sales and
customer support organizations contracted to provide respective
services.





In
furtherance of our Company’s efforts to prepare to move into the marketplace, we
have entered into the following contracts with independent service providers
during the year ended August 31, 2008:




·
              Consulting
      Agreement dated July 10, 2006 and amended November 1, 2007, with Roger
      Anderson to receive encryption, data compression and interactive voice
      response (“IVR”) consulting services from Mr. Anderson regarding the
      design and implementation of the PocketFinder® device.  The
      agreement remains in effect until the assigned tasks are completed, but in
      any event no longer than ten years.  Mr. Anderson receives an
      hourly amount for his services and is entitled to earn up to 250,000
      shares of our common stock upon reaching certain
      benchmarks.  Shares issued to Mr. Anderson will be issued in
      reliance on the exemption provided by Section 4(2) of the Securities Act
      of 1933.  Such shares will be “restricted” securities as defined
      in SEC Rule 144.
 ·
              Consulting
      Agreement dated October 3, 2006 and amended November 1, 2007, with Michael
      Beydler for “back office” network and platform design consulting services
      in relation to the development and implementation of our
      PocketFinder®device, as well
      as our website.  The agreement remains in effect until such time
      as the development of the website is complete, but in no event longer than
      ten years.  Mr. Beydler’s compensation is 250,000 shares of our
      common stock upon reaching certain benchmarks. Shares issued to Mr.
      Beydler will be issued in reliance on the exemption provided by Section
      4(2) of the Securities Act of 1933.  Such shares will be
      “restricted” securities as defined in SEC Rule
  144.
 ·
              Product
      Design Agreement, dated May 1, 2007 and amended November 1, 2007, with
      Aero Technology UK Ltd. for the purpose of assisting us with the required
      circuitry, software, mechanics and radio frequency generation and
      reception functions required to make the PocketFinder® device
      usable.  The contractor is entitled to payments totaling
      $1,200,000 plus 250,000 shares of our common stock payable in five
      increments based upon reaching certain benchmarks.  Payments
      will be made when milestones are achieved.  Shares issued to the
      contractor will be issued in reliance on the exemption provided by Section
      4(2) of the Securities Act of 1933.  Such shares will be
      “restricted” securities as defined in SEC Rule
  144.
 ·
              Consulting
      Agreement, dated December 10, 2007, with Joshua Dalhauser for the design
      and implementation of the PocketFinder®.  The agreement remains
      in effect until the assigned tasks are completed, but in any event no
      longer than three years.  Mr. Dalhauser’s compensation is 10,000
      shares of our common stock upon reaching certain benchmarks. Shares issued
      to Mr. Dalhauser will be issued in reliance on the exemption provided by
      Section 4(2) of the Securities Act of 1933.  Such shares will be
      “restricted” securities as defined in SEC Rule
  144.
  8
  ·
              Consulting
      Agreement, dated December 10, 2007, with Brooks Secrest for the analysis
      and evaluation of shipping and kitting needs of PocketFinder®
      products.  The agreement remains in effect until the assigned
      tasks are completed, but in any event no longer than three
      years.  The contractor is entitled to payments totaling
      $200,000.·
              Consulting
      and Sales Representative Agreement, dated January 2, 2008, with WhizBiz,
      LLC, to act as the Company’s consultant and sales
      representative.  The agreement expires December 31, 2008, and
      shall automatically renew from year to year until terminated by either
      party.  The consultant will be compensated for certain product
      sales and is entitled to earn up to 200,000 warrants to purchase shares of
      our common stock upon reaching certain benchmarks.  Shares
      issued to consultant will be issued in reliance on the exemption provided
      by Section 4(2) of the Securities Act of 1933.  Such shares will
      be “restricted” securities as defined in SEC Rule 144.·
              Consulting
      Agreement, dated January 2, 2008, with Tina Florance, CPA, for services to
      serve as the Company’s Controller.  The agreement remains in
      effect until the assigned tasks are completed, but in any event no longer
      than three years.  Ms. Florance receives an hourly amount for
      her services and is entitled to earn up to 20,000 warrants to purchase
      shares of our common stock upon reaching certain
      benchmarks.  Shares issued to Ms. Florance will be issued in
      reliance on the exemption provided by Section 4(2) of the Securities Act
      of 1933.  Such shares will be “restricted” securities as defined
      in SEC Rule 144.·
              A
      series of professional services agreements, dated February 27,
      2008,  was entered into with NXP Software B.V., a company
      incorporated under the laws of the Netherlands (“NXP”) wherein NXP agreed
      to (i) license to the Company software capable of processing GPS satellite
      signals to provide location positioning information; (ii) provide a
      technology platform utilizing that software on which the Company can build
      its PocketFinder® products; and (iii) provide the Internet based services
      required for the PocketFinder® products to perform GPS location processing
      using NXP’s software technology.  The agreements include a
      Framework Agreement (a form of master agreement), a Technology License and
      Distribution Agreement, a Platform Development Agreement, and an
      Assistance Services Agreement. The agreements have three year terms,
      extendable for one additional year, and have standard termination
      provisions.  They are not assignable by the Company without
      NXP’s consent.  The Company will not be charged a license fee
      for the technology but will pay negotiated fees for NXP’s work in
      development the technology platform and NXP’s service
  assistance.


·
            Business
      Development Consulting Agreement, dated March 1, 2008, with The Scigliano
      Group, to assist and advise the Company on corporate governance and to
      establish contact with key strategic partners, investors, and technical
      service providers that will quickly integrate the Company’s products into
      their sales channels.  The agreement expires August 1, 2008, and
      shall automatically renew for an additional 6 months if not terminated by
      either party.  The consultant will be compensated for certain
      product sales and is entitled to earn warrants in lieu of monthly
      pay.  Shares issued to consultant will be issued in reliance on
      the exemption provided by Section 4(2) of the Securities Act of
      1933.  Such shares will be “restricted” securities as defined in
      SEC Rule 144.


·
            Manufacturing
      Service Agreement, dated May 30, 2008, with Jabil Circuit, Inc., of St.
      Petersburg, Florida. Pursuant to this Agreement, Jabil will manufacture,
      test, configure and assemble electronic assemblies and systems for the
      PocketFinder® and PetFinder®
devices.


·
            Consulting
      Agreement, dated August 15, 2008, with Richard Mejia, Jr. for business and
      financial advisory services related to fund raising, corporate governance
      and SEC filings.  The services will be provided on an as needed
      basis and the agreement expires February 15, 2009, but may be extended for
      an additional six-month period.  Mr. Mejia receives an hourly
      amount for his services that may be paid in a combination of cash and/or
      equity with the cash portion not to exceed 50%.  Mr. Mejia, is a
      retired partner from Ernst & Young LLP, one of the four largest
      accounting firms in the world, and is the father of Desiree Mejia, Chief
      Operating Officer, Secretary and Director, of the
      Company.  Through November 30, 2008, Mr. Mejia has not received,
      nor is due any compensation for services.




9




·
            Consulting
      Agreement, dated October 8, 2008, with Michael Dautermann to assist with
      the design of the Android phone PocketFinder® application.  The
      agreement remains in effect until the assigned tasks are completed, but in
      any event no longer than two weeks.  Mr. Dautermann receives an
      hourly amount for his services and is entitled to earn 500 shares of
      common stock upon successful completion of the project.  Shares
      issued to Mr. Dautermann will be issued in reliance on the exemption
      provided by Section 4(2) of the Securities Act of 1933.  Such
      shares will be “restricted” securities as defined in SEC Rule
      144.




Risk
Factors




Investing
in our common stock is highly speculative and involves a high degree of risk.
Any potential investor should carefully consider the risks and uncertainties
described below before purchasing any shares of our common stock.  The
risks described below are those we currently believe may materially affect
us.  If any of them occur, our business, financial condition,
operating results or cash flow could be materially harmed.  As a
result, the trading price for our stock could decline, and you might lose all or
part of your investment.




Risks
Related to our Business




We
have had operating losses since formation and expect to incur net losses for the
near term.




We
reported net losses of $7,734,502 for the fiscal year ended August 31, 2008, and
had net losses of $1,505,747 for the fiscal year ended August 31,
2007.  We anticipate that we will lose money in the near term and we
may not be able to achieve profitable operations.  In order to achieve
profitable operations we need to secure sales of product.  This sales
cycle has begun in Europe, New Zealand, Australia, Mexico, and early discussions
with several other countries.  In order to begin sales in the United
States we need to achieve required federal and carrier certifications, and
achieve significant sales revenues in order to establish our customer
base.  We cannot be certain that our business will be successful or
that we will generate significant revenues and become profitable.




We
may not be successful in developing our new products and services.




We are a
technology and telecommunications company whose purpose is to develop, 
market and provide a new wireless communications product and system which
combines the features of pocket pagers with cellular telephones.  The
market for telecommunications products and services is characterized by rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards.  These market
characteristics are exacerbated by the emerging nature of this market and the
fact that many companies are expected to introduce continually new and
innovative products and services.  Our success will depend partially
on our ability to introduce new products, services and technologies continually
and on a timely basis and to continue to improve the performance, features and
reliability of our products and services in response to both evolving demands of
prospective customers and competitive products.




There can
be no assurance that any of our new or proposed products or services will
maintain the market acceptance already established.  Our failure to
design, develop, test, market and introduce new and enhanced products,
technologies and services successfully so as to achieve market acceptance could
have a material adverse effect upon our business, operating results and
financial condition.




10




There can
be no assurance that we will not experience difficulties that could delay or
prevent the successful development, introduction or marketing of new or enhanced
products and services, or that our new products and services will adequately
satisfy the requirements of prospective customers and achieve significant
acceptance by those customers.  Because of certain market
characteristics, including technological change, changing customer needs,
frequent new product and service introductions and evolving industry standards,
the continued introduction of new products and services is
critical.  Delays in the introduction of new products and services may
result in customer dissatisfaction and may delay or cause a loss of
revenue.  There can be no assurance that we will be successful in
developing new products or services or improving existing products and services
that respond to technological changes or evolving industry
standards.




Additionally,
there can be no assurance that we will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
or improved products and services, or that our new products and services will
adequately satisfy the requirements of prospective customers and achieve
acceptance by those customers.  In addition, new or enhanced products
and services introduced by us may contain undetected errors that require
significant design modifications.  This could result in a loss of
customer confidence which could adversely affect the use of our products, which
in turn, could have a material adverse effect upon our business, results of
operations or financial condition.  If we are unable to develop and
introduce new or improved products or services in a timely manner in response to
changing market conditions or customer requirements, out business, operating
results and financial condition will be materially adversely
affected.




We
have no experience or history of operations or earnings.




We are
wholly dependent on our ability to market and sell our products and services for
future earnings.  The continued development of our products and
services involves significant risks, which a combination of experience,
knowledge and careful evaluation may not be able to overcome.  There
can be no assurance that unanticipated problems will not occur which would
result in material delays in our continued product development or that our
efforts will result in successful product commercialization.  An
investment in the Company is highly speculative and no assurance can be given
that the shareholders will realize any return on their investment or that they
will not lose their entire investment.




Our
future financial results are uncertain and we can expect fluctuations in
revenue.




We have
just begun the sales process.  We accepted our first purchase order in
September 2008 with delivery of package ready personal locator devices
established for January 2009.  If our relationships with any of these
retailers and affinity groups were disrupted, we could lose a significant
portion of our anticipated revenues.




Our
results of operations may vary from period to period because of a variety of
factors, including our R&D costs, our introduction of new products and
services, cost increases from third-party service providers, or product
manufacturers, production interruptions, the availability of industry service
providers, changes in marketing and sales expenditures, acceptance of our
websites, competitive pricing pressures, the interest in PocketFinder® and
general economic and industry conditions that affect customer demand and
preferences.




As with
any relatively new business enterprise operating in a specialized and intensely
competitive market, we are subject to many business risks which include, but are
not limited to, unforeseen marketing, promotional and development expenses,
unforeseen negative publicity, competition, product liability and lack of
operating experience.  Many of the risks may be unforeseeable or
beyond our control.  There can be no assurance that we will
successfully implement our business plan in a timely or effective manner, or
generate sufficient interest in PocketFinder®, or that we will be able to market
and sell enough products and services to generate sufficient revenues to
continue as a going concern.




11




There
are risks of international sales and operations.




We
anticipate that revenue from the sale of our products and services may be
derived from customers located outside the United States.  As such, a
portion of our sales and operations could be subject to tariffs and other
import-export barriers, currency exchange risks and exchange controls, foreign
product standards, potentially adverse tax consequences and the possibility of
difficulty in accounts receivable collection.  There can be no
assurance that any of these factors will not have a material effect on our
business, financial condition and results of operations.




Although
we will monitor our exposure to currency fluctuations, there can be no assurance
that exchange rate fluctuations will not have an adverse effect on our results
of operations or financial condition.  In the future, we could be
required to sell our products and services in other currencies, which would make
the management of currency fluctuations more difficult and expose our business
to greater risks in this regard.




Our
products may be subject to numerous foreign government standards and regulations
that are continually being amended.  Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that we will be able to comply with foreign government standards and
regulations, or changes thereto, or that it will be cost effective for us to
redesign our products to comply with such standards or
regulations.  Our inability to design or redesign products to comply
with foreign standards could have a material adverse effect on our business,
financial condition and results of operations.




In
addition to the uncertainty as to our ability to generate revenues from foreign
operations, there are certain risks inherent in doing business internationally,
such as unexpected changes in regulatory requirements, export restrictions,
trade barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates, software piracy, seasonal
reductions in business activity in certain other parts of the world and
potentially adverse tax consequences, which could adversely impact the success
of our international operations.  There can be no assurance that one
or more of such factors will not have a material adverse effect on our potential
future international operations and, consequently, on our business, operating
results and financial condition.




Because
of the global nature of the telecommunications business, it is possible that,
although transmissions by us originate primarily in the State of California, the
governments of other states and foreign countries might attempt to regulate our
transmissions or prosecute us for violations of their laws.  There can
be no assurance that violations of local laws will not be alleged or changed by
state or foreign governments, that we might not unintentionally violate such
law, or that such laws will not be modified, or new laws enacted, in the
future.  Any of the foregoing development could have a material
adverse effect on our business, results of operations, and financial
condition.




We
may have substantial future cash requirements but no assured financing source to
meet such requirements.




We will
continue our research and development activities which require working
capital.  To date, we have received no revenues from any sales of our
products or services.  Our continuing research and development
activities will require a commitment of substantial additional
funds.  Our future capital requirements will depend on many factors,
including continued progress in its research and development programs, the
magnitude of these programs, the time and costs involved in obtaining any
required regulatory approvals, the costs involved in preparing, filing,
prosecuting, maintaining and enforcing patents, successful completion of
technological, manufacturing and market requirements, changes in existing
research relationships, establishing collaborative arrangements, and the cost of
finalizing licensing agreements to produce licensing revenues.




We do not
know whether additional financing will be available when needed, or on terms
favorable to us or our stockholders – particularly in light of current economic
conditions, the availability of credit, and other sources of
capital.  We may raise any necessary funds through public or private
equity offerings, debt financings or additional corporate collaboration and
licensing arrangements.  To the extent we raise additional capital by
issuing equity securities, our stockholders will experience
dilution.  If we raise funds through debt financings, we may become
subject to restrictive covenants.  To the extent that we raise
additional funds through collaboration and licensing arrangements, we may be
required to relinquish some rights to our technologies or product candidates, or
grant licenses on terms that are not favorable to us.




12




If
adequate funds are not available, we may be required to delay, scale-back or
eliminate our research and development programs or obtain funds through
collaborative partners or others that may require us to relinquish rights to
certain of our potential products that we would not otherwise relinquish. There
can be no assurance that additional financing will be available on acceptable
terms or at all, if and when required.




We
are dependent on third-party providers and consultants for development,
marketing and other services.




We may
become dependent upon various consultants for one or more significant services
required for PocketFinder® which services will be provided to our business
pursuant to agreements with such providers.  Inasmuch as the capacity
for certain services by certain consultants may be limited, our inability, for
economic or other reasons, to continue to receive services from existing
providers in a timely manner or to obtain similar products or services from
additional providers in a timely manner could have a material adverse effect on
our business.




We
do not have manufacturing capability.  To meet our product cost goals,
we will rely on Jabil manufacturing companies to produce our
product.  Any problems experienced by such suppliers could negatively
affect our operations.




We have
entered a contractual agreement with Jabil Circuits, a leading manufacturer of
mobile electronic devices, for manufacturing support.  If product
volume requires, we expect to be able to use additional Jabil facilities for the
production of the PocketFinder® devices.  Any significant problem in
one of those companies or its suppliers could result in a delay or interruption
in the supply of materials to us until that supplier cures the problem or until
we locate an alternative source of supply.  Any delay or interruption
would likely lead to a delay or interruption in the production and could
negatively affect our operations.  Changes in purchasing patterns may
affect revenue timing, production schedules, inventory costs, inventory
practices and new product development and introduction.




If
product liability lawsuits are successfully brought against us, we may incur
substantial damages and demand for the potential products may be eliminated or
reduced.




Faulty
operation of our PocketFinder®device could result in product liability claims.  Regardless of
their merit or eventual outcome, product liability claims may result
in:




Ÿ           decreased
demand for the PocketFinder® device or its withdrawal
from the market;


Ÿ           injury
to our reputation and significant media attention;


Ÿ           costs
of litigation; and


Ÿ           substantial
monetary awards to plaintiffs.




We have
arranged to procure product liability insurance in the amount of $10,000,000 at
launch.  Although this meets retailer requirements for product
liability coverage, this coverage may not be sufficient to fully protect us
against product liability claims.  We intend to expand our product
liability insurance coverage as sales of our products expand.  Our
inability to obtain sufficient product liability insurance at an acceptable cost
to protect against product liability claims could prevent or limit the
commercialization of our products and expose us to liability in excess of our
coverage.




If
we fail to adequately protect our intellectual property rights, our competitors
may be able to take advantage of our research and development efforts to develop
competing devices.




Our
intellectual property rights cover certain products and methods of manufacturing
and using these products.  Our commercial success will depend in part
on our success in obtaining patent protection for our key products or
processes.  Our patent position, like that of other technology
companies, is highly uncertain.  One uncertainty is that the United
States Patent and Trademark Office, or USPTO, may deny or require significant
narrowing of claims made under our patent applications.




13




The
USPTO, as well as patent offices in other jurisdictions, has often required that
patent claims reciting technology-related inventions be limited or narrowed
substantially to cover only the specific innovations exemplified in the patent
application, thereby limiting their scope of protection. Further, technology
that is disclosed in patent applications is ordinarily published before it is
patented. As a result, if we are not able to get patent protection, we will not
be able to protect that technology through trade secret protection. Thus, if we
fail to obtain patents having sufficient claim scope or fail to adequately
protect our trade secrets, we may not be able to exclude competitors from using
our key products or processes.




Even if
the USPTO grants patents with commercially valuable claim scope, our ability to
exclude competitors will subsequently depend on our successful assertion of
these patents against third party infringers and our successful defense of these
patents against possible validity challenges.  Our competitors, many
of which have substantial resources and have made significant investments in
competing technologies, may make, use or sell our proprietary products or
processes despite our intellectual property.  Litigation may be
necessary to enforce our issued patents or protect our trade
secrets.  The prosecution of intellectual property lawsuits is costly
and time-consuming, and the outcome of such lawsuits is uncertain.  An
adverse determination in litigation could result in narrowing of our scope of
protection or the loss of our intellectual property, thereby allowing
competitors to design around or make use of our intellectual property and sell
our products in some or all markets.  Thus, if any of our patents are
invalidated or narrowed in litigation, we may not be able to exclude our
competitors from using our key technologies.




Another
risk regarding our ability to exclude competitors is that our issued patents or
pending applications could be lost or narrowed if competitors with overlapping
technologies provoke an interference proceeding (determination of first to
invent) at the USPTO.  The defense and prosecution of interference
proceedings are costly and time-consuming to pursue, and their outcome is
uncertain.  Similarly, a third party may challenge the validity of one
or more of our issued patents by presenting evidence of prior publications to
the USPTO and requesting reexamination of such patent(s).  Thus, even
if we are able to obtain patents that cover commercially significant
innovations, one or more of our patents may be lost or substantially narrowed by
the USPTO through an interference or reexamination
proceeding.  Consequently, we may not be able to exclude our
competitors from using our technologies.




Third
party patents, or extensions of third party patents beyond their normal
expiration dates, could prevent us from making, using or selling our preferred
products and processes, or require us to take license(s), or require us to
defend against claims of patent infringement.




We may
have a limited opportunity to operate freely.  Our commercial success
will depend in part on our freedom to make, use and sell our
products.  If third party patents have claims that cover any of these
products, then we will not be free to operate as described in our business plan,
without invalidating or obtaining license(s) to such patents.  We may
not be successful in identifying and invalidating prior claims of
invention.  Similarly, a license may be unavailable or prohibitively
expensive. In either case, we may have to redesign our products.  Such
redesign efforts may take significant time and money, and such redesign efforts
may fail to yield commercially feasible options.  If we are unable to
develop products or processes that lie outside the scope of the third party’s
patent claims, and we continue to operate, then we may be faced with claims of
patent infringement, wherein the third party may seek to enjoin us from
continuing to operate within our claim scope and seek monetary compensation for
commercial damages resulting from our infringing activity.




14




The
technology industry has been characterized by extensive patent litigation and
companies have employed intellectual property litigation to gain a competitive
advantage.




The
defense of patent infringement suits is costly and time-consuming and their
outcome is uncertain.  An adverse determination in litigation could
subject us to significant liabilities, require us to obtain licenses from third
parties, or restrict or prevent us from selling our products in certain
markets.  Although patent and intellectual property disputes are often
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include ongoing
royalties.  Furthermore, the necessary licenses may not be available
to us on satisfactory terms, if at all.  Thus, as discussed above, if
third party patents cover any aspect of our products, then we may lack freedom
to operate in accordance with our business plan.  Among such patents
are various patents owned by third parties that cover the manufacture, sale and
use of various forms of wireless technology.  If necessary, we believe
we can avoid possible infringement of these patents by designing around them,
obtaining licenses or delaying entry into certain markets, until expiration of
the relevant patents. Nevertheless, there remains some risk arising from these
patents.




If
any of our key senior executives discontinue their employment with us, our
efforts to develop our business may be delayed.




We are
highly dependent on the principal members of our management team and the loss of
our Co-President and Chief Executive Officer, David Morse, or our Co-President
and Chief Development Officer, Joseph Scalisi, or our Chief Operating Officer
and Secretary, Desiree Mejia, could significantly impede the achievement of our
development efforts and objectives.




We
may not be able to obtain the licenses and consents from governmental agencies
or other holders of intellectual property that are necessary for our business
plan to be accomplished.




The
utilization or other exploitation of the products and services developed by us
may require us to obtain licenses or consents from government regulatory
agencies or from other producers or other holders of patents, copyrights or
other similar rights relating to our products and services.  In the
event we are unable, if so required, to obtain any necessary license or consent
on terms and conditions which we consider to be reasonable, we may be required
to stop developing, utilizing, or exploiting products and services affected by
government regulation or by patents, copyrights or similar rights.  In
the event we are challenged by a government regulatory agency, or by the holders
of patents, copyrights or other similar rights, there can be no assurance that
we will have the financial or other resources to defend any resulting legal
action, which could be significant.




We may
rely on certain proprietary technologies, trade secrets, and know-how that are
not patentable.  Although we may take steps to protect our unpatented
trade secrets, our technology and our proprietary information, in part, by the
use of confidentiality agreements with our employees, consultants and certain of
our contractors.  There can be no assurance that (i) these agreements
will not be breached, (ii) we would have adequate remedies for any breach; or
(iii) our proprietary trade secrets and know-how will not otherwise become known
or be independently developed or discovered by competitors.  There is
also no assurance that our actions will be sufficient to prevent imitation or
duplication of either of our products and services by others or prevent others
from claiming violations of their trade secrets and proprietary
rights.




Rapid
technological advances, changes in customer requirements and frequent new
product introductions and enhancements which characterize the telecommunications
industries, would adversely affect our financial condition if we are not able to
respond with upgrades or changes that are acceptable to the market.




Our
future success will depend upon its ability to enhance the technologies and to
develop and introduce new products and technologies that keep pace with
technological developments, respond to evolving customer requirements and
achieve market acceptance.  We may determine that, in order to remain
competitive, it is in its best interests to introduce new products and
technologies and to cease exploitation of the technologies.  It is
doubtful that we would be able to maintain operations should changes render the
technologies obsolete or should we determine that the technologies are
unexploitable.




15




Our
financial success will depend on continued growth in use of wireless
telecommunications products, as well as the ability of the wireless networks we
plan to use to withstand natural and other disasters.




Our
future success is at least partially dependent upon continued growth in the use
of wireless telecommunications products.  The PocketFinder® may not prove to be viable
commercial products for a number of reasons, including lack of acceptable
functionality, potentially inadequate development of the necessary
infrastructure, or timely development and commercialization of performance
improvements.  To the extent that PocketFinder® experiences
significant growth in the number of users and use, there can be no assurance
that our infrastructure will continue to be able to support the demands placed
upon it by such potential growth or that the performance or reliability of our
system will not be adversely affected by this continued growth.  If
use of the PocketFinder® does not increase, or if our infrastructure does not
effectively support growth that may occur, our business, operating results and
financial condition may be materially and adversely affected.




Our
systems may fail due to natural disasters, telecommunications failures and other
events, any of which would limit the use of our products.  Fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events could damage our communications hardware and computer hardware
operations for our products and services and cause interruptions in our
services.  If any of these circumstances were to occur, our business
could be harmed.  Our insurance policies may not adequately compensate
us for any losses that may occur due to any failures of or interruptions in our
systems.




The
potential for conflicts of interest exists among the Company and affiliated
persons for future business opportunities that may not be presented to the
Company.




The
Company’s officers may engage in other activities.  Our officers and
employees may have conflicts of interest in allocating time, services, and
functions between other business ventures in which those persons may be or may
become involved.  Our officers, however, believe that we will have
sufficient staff, consultants, employees, agents, contractors and managers to
adequately conduct our business.




An
investor might lose its entire investment if the Company is dissolved and
liquidated.




In the
event of dissolution of the Company, the proceeds realized from the liquidation
of the Company’s assets, if any, will be distributed to our Shareholders only
after satisfaction of claims of our creditors.  The ability of the
Shareholder to recover all or any portion of his or her purchase price for the
Shares in that event will depend on the amount of funds realized and the claims
to be satisfied there-from.




We may
require additional cash to implement our business strategies, including cash for
(i) payment of increased operating expense and (ii) additional implementation of
those business strategies.  No assurance can be given, however, that
we will have access to additional funds in the future, or that additional funds
will be available on acceptable terms and conditions to satisfy our cash
requirements to implement our business strategies.  Our inability to
obtain acceptable financing could have a material adverse effect on our results
of operations and financial condition.




Our
production and operating costs may be greater than anticipated.




We have
used reasonable efforts to assess and predict costs and
expenses.  However, there can be no assurance that implementing our
business plan may not require more employees, capital equipment, supplies or
other expenditure items than management has predicted.  Similarly, the
cost of compensating additional management, employees and consultants or other
operating costs may be more than our estimated, which could result in sustained
losses.




16




Risks
Related to Owning Our Common Stock




Our
common stock is quoted on the OTC Bulletin Board for trading, and we expect that
the price of our common stock will fluctuate substantially.




Our stock
will be available for trading on the OTC Bulletin Board for the foreseeable
future.  An active public trading market may not develop or, if
developed, may not be sustained.  The market prices for securities of
technology companies historically have been highly volatile, and the market has
from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.  The
market price of our common stock will be affected by a number of factors,
including:




Ÿ           product
liability claims or other litigation;


Ÿ           the
announcement of new products or product enhancements by us or our
competitors;


Ÿ           quarterly
variations in our or our competitors’ results of operations;


Ÿ           changes
in earnings estimates or comments by securities analysts;


Ÿ           developments
in our industry;


Ÿ           developments
in patent or other proprietary rights;


Ÿ           general
market conditions; and


Ÿ           future
sales of common stock by existing stockholders.




If any of
the above-listed risks occur, it could cause our stock price to fall
dramatically and may expose us to class action securities lawsuits which, even
if unsuccessful, would be costly to defend and a distraction to
management.




A
sale of a substantial number of shares of our common stock may cause the price
of our common stock to decline.




Sales of
a substantial number of shares of our common stock in the public market
following this report could harm the market price of our common
stock.  There are approximately 62,437,000 shares of our common stock
currently available for resale under Rule 144.   As additional
shares of our common stock become available for resale in the public market, the
supply of our common stock will increase, which could decrease the
price.




Our
principal shareholders have significant voting power and may take actions that
may not be in the best interests of our other stockholders.




Our
officers, directors and principal stockholders together control approximately
56.85% of our outstanding common stock.  These shareholders intend to
act together although they have not signed an agreement to do so.  If
they act together, they will be able to control our management and affairs in
all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions.  This
concentration of ownership may have the effect of delaying or preventing a
change in control and might adversely affect the market price of our common
stock.  This concentration of ownership may not be in the best
interest of our other shareholders.




In
selling our convertible notes, we may have violated the registration
requirements of the Securities Act of 1933 (“Securities Act”) which, if it
occurred, would give noteholders a right to rescind their
purchases.




17




In 2007,
we sold convertible notes each bearing interest at a rate of 8%.  The
proceeds raised from the sale of these notes have been used for research and
development, as well as operating costs.  The notes were sold to
accredited investors.  We made these sales in reliance on an exemption
from registration provided by Section 4(2) of the Securities Act and similar
state exemptions.  Our counsel has advised us that the availability of
those exemptions cannot be determined with legal certainty due to the fact that
we may not have complied with all of the provisions of exemption safe-harbors
for such sales offered by rules promulgated under the Securities Act by the
SEC.  Thus, it is possible that the sale of the convertible notes may
have violated the registration requirements of the Securities Act. As to those
sales, a right of rescission may exist on which the statute of limitations has
not run.  For those noteholders that elect to convert to common stock,
we may have a contingent liability arising from the original purchase of the
convertible notes that such noteholders converted.  Assuming all
noteholders convert their notes to common stock, if these sales had to be
rescinded, our total potential liability could be $5,242,000 plus interest that
may be accrued.  That liability would extend for up to three years
(five years in California) after the date of the sale of the applicable
convertible note that was converted to common stock.




We
incur substantial costs as a result of being a public company.




As a
public company, we incur significant legal, accounting and other
expenses.  In addition, the Sarbanes-Oxley Act of 2002, as well as
rules subsequently implemented by the SEC, have required changes in corporate
governance practices of public companies.  We expect these rules and
regulations to increase our legal and financial compliance costs and to make
some activities more time-consuming and costly.  For example, as a
result of being a public company, we intend to add independent directors, create
additional board committees and adopt policies regarding internal controls and
disclosure controls and procedures.  In addition, we will incur
additional costs associated with our public company reporting
requirements.  We also expect these rules and regulations to make it
difficult and more expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar
coverage.  As a result, it may be more difficult for us to attract and
retain qualified persons to serve on our board of directors or as executive
officers.  We cannot predict or estimate the amount of additional
costs we may incur or the timing of such costs.




If
our common stock becomes subject to the SEC’s penny stock rules, our
stockholders may find it difficult to sell their stock.




If the
trading price of our common stock is less than $5.00 per share, our common stock
will be subject to the SEC’s penny stock rules.  Before a
broker-dealer can sell a penny stock, the penny stock rules require the firm to
first approve the customer for the transaction and receive from the customer a
written agreement to the transaction.  The firm must furnish the
customer a document describing the risks of investing in penny
stocks.  The broker-dealer must tell the customer the current market
quotation, if any, for the penny stock and the compensation the firm and its
broker will receive for the trade.  Finally, the firm must send
monthly account statements showing the market value of each penny stock held in
the customer’account.  These disclosure requirements tend to make it
more difficult for a broker-dealer to make a market in penny stocks, and could,
therefore, reduce the level of trading activity in a stock that is subject to
the penny stock rules.  Consequently, if our common stock becomes
subject to the penny stock rules, our stockholders may find it difficult to sell
their shares.




ITEM
2. DESCRIPTION OF PROPERTY





Our executive, administrative and operating offices are located
at 4989 East La Palma Avenue, Anaheim, California 92807.  Our office
space is approximately 7,000 square feet and consists of administrative work
space for base rent of $11,300 per month.  The Company is also
responsible for its share of lease related operating expense which is
approximately $1,500 per month.  The lease expires on December 31,
2009.




ITEM 3. LEGAL PROCEEDINGS




We are
not aware of any pending or threatened litigation against us that we expect will
have a material adverse effect on our business, financial condition, liquidity,
or operating results. However, legal claims are inherently uncertain, and we
cannot assure you that we will not be adversely affected in the future by legal
proceedings.




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




None.




18





PART II





ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES


Market
Information.  Our common shares are traded in the
over-the-counter market on the OTC Bulletin Board under the symbol
“LBAS.”  This market is extremely limited and the prices quoted are
not a reliable indication of the value of our common stock.




The
following table sets forth the high and low bid prices for our stock on a
quarterly basis since trading commenced and is based on information available
from the Research Library Department of Pink Sheets LLC.  The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
conversion, and may not represent actual transactions.




Inception
      of Tradingthrough
      August 31, 2008High Bid
            
            
            Low BidFiscal
      Quarter ended November 30, 2005
              Fiscal
      Quarter ended February 28, 2006
              Fiscal
      Quarter ended May 31, 2006
              Fiscal
      Quarter ended August 31, 2006
              Fiscal
      Quarter ended November 30, 2006
              Fiscal
      Quarter ended February 28, 2007
              Fiscal
      Quarter ended May 31, 2007
              Fiscal
      Quarter ended August 31, 2007
              Fiscal
      Quarter ended November 30, 2007
              Fiscal
      Quarter ended February 29, 2008
            
            $
            *
              *
              *
              *
              *
              *
              0.65
              $3.02
              $4.51
              $6.08
            
            
            $
            *
              *
              *
              *
              *
              *
              0.65
              $0.65
              $2.20
              $3.41Fiscal
      Quarter ended May 31, 2008
            
            $
            6.64
            
            
            $
            4.55Fiscal
      Quarter ended August 31, 2008
            
            $
            10.55
            
            
            $
            6.00


* No
trading information reported.




Reports to Security
Holders.  We are a reporting company pursuant to the Securities
and Exchange Act of 1934.  As such, we provide an annual report to our
security holders, which will include audited financial statements, and quarterly
reports, which will contain unaudited financial statements.




Record Holders.As of November 20, 2008, an aggregate of
88,776,770 shares of our common stock were issued and outstanding and were owned
by approximately 145 holders of record, based on information provided by our
transfer agent.




Recent Sales of Unregistered
Securities.  Previously reported in Current Report on Form 8-K
filed with the SEC on October 12, 2007, as amended and filed with the SEC on
October 31, 2007.




Re-Purchase of Equity
Securities.  None




Dividends.We
announced on October 10, 2008, that the Board declared a 200% dividend (3 for 1
stock dividend) payable in stock for shareholders of record as of close of
business on October 20, 2008.




19




Securities Authorized for Issuance
Under Equity Compensation Plans.  The following table provides
information with respect to outstanding options and warrants as of November 20,
2008, pursuant to compensation plans (including individual compensation
arrangements) under which equity securities of are authorized for
issuance.




Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
            
            
            
            (b)
            
            
            
            (c)Equity
      compensation plans approved by security holders
            
            
            (1)
            
            
            
            --
            
            
            
            --Equity
      compensation plans not approved by security holders
            
            
            7,121,135(1)-(5)
            
            
            
            1.29
            
            
            
            1,128,865(6)Total




(1)
            Stock
      options granted to Mr. Morse, Mr. Scalisi and Ms. Mejia to each
      purchase up to 2,000,000 shares of common stock at $1.00 per
      share.  Options to purchase 1,000,000 shares each are
      exercisable when we achieve 100,000 customers, and the remaining options
      to purchase 1,000,000 shares each are exercisable when we achieve a total
      of 250,000 customers.  All such options vest on a change of
      control.  The options expire ten years from the date
      of performance goal achieved.


(2)
            “A
      Warrant” and “B Warrant” issued to Northstar Investments, Inc. for certain
      consulting services to purchase 500,000 shares at $1.00 per share and
      250,000 shares at $2.00 per share, respectively.  These warrants
      are currently exercisable.  Both are void at the end of five
      years, or August 14, 2012, and contain standard anti-dilution
      provisions.


(3)
              “C
      Warrant” issued to six consultants for certain legal advisory and
      technology consulting services to purchase a total of 60,000 shares at
      $6.00 per share.  The warrants are currently
      exercisable.  They are void at the end of five years, or June 2,
      2013, and contain standard anti-dilution
  provisions.
 (4)
                “D
      Warrant” and “E Warrant” issued to a sales consultant for certain advisory
      services related to the sale of the Company’s PocketFinder®family of products to purchase 6,135 shares at $4.89 per share and
      5,000 shares at $6.00 per share, respectively.  These warrants
      are currently exercisable.  The “D Warrant” and “E Warrant” are
      void at the end of five years, or March 3, 2013 and June 2, 2013,
      respectively, and contain standard anti-dilution
    provisions.
 (5)
                  “F
      Warrant” issued to Redwood Consultants LLC for certain consulting services
      related to capital raising efforts and investor relations to purchase
      300,000 shares at $6.00 per share.  The warrants are currently
      exercisable.  They are void at the end of five years, or October
      21, 2013, and contain standard anti-dilution
  provisions.
 (6)
                    The
      plan reserves 1,128,865 shares for issuance pursuant to options or
      stock
awards.


ITEM
6.





MANAGEMENT'S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS





RESULTS
OF OPERATIONS.




For the
fiscal year ended August 31, 2008 as compared to the fiscal year ended August
31, 2007.




20




Revenues.




We
generated $5,818 of consulting revenue for the year ended August 31,
2008.   There was no revenue generated for the year ended August
31, 2007.




Operating
Expenses.




For the
year ended August 31, 2008, our total operating expenses were $5,408,220 as
compared to total operating expenses of $1,183,733 for the year ended August 31,
2007.  The increase in operating expenses is attributed to the
following:




·
            A
      significant increase in research and development costs for the year ended
      August 31, 2008, to $2,124,767 as compared to $447,022 for the year ended
      August 31, 2007 as significant efforts were made to develop and build the
      first production ready devices and development of the website and mapping
      interface services.


·
            A
      significant increase in professional fees to $2,049,316 for the year ended
      August 31, 2008, as compared to $116,703 for the year ended August 31,
      2007.  The increase in professional fees is the result of the
      following:


·
            The
      recognition of $1,183,447 in stock based compensation issued to
      consultants for technology services
rendered;


·
            Incurring
      sales and technology consulting fees in preparation for the initial launch
      of the PocketFinder® products; and


·
            A
      significant increase in legal and accounting fees as a result of the
      reporting requirements of being a public
  company.


·
            An
      increase in general and administrative costs to $759,366 for the year
      ended August 31, 2008, as compared to $188,016 for the year ended August
      31, 2007.  The increase in general and administrative costs is
      the result of increases in the
following:


·
            Advertising,
      marketing and promotional costs in preparation for the initial launch of
      the PocketFinder® products;


·
            Corporate
      filing fees, stock transfer agent fees and Edgar filing fees as a result
      of being a public company;


·
            Computer
      expenses due to technological advances;
and


·
            Travel
      expenses to secure international technology, manufacturing and sales
      contracts.


·
            An
      increase in rent to $114,771 for the year ended August 31, 2008, as
      compared to $71,992 for the year ended August 31, 2007.   The
      increase in rent is due to the Company expanding their leased office space
      for their growing team of
professionals.




Other
Expenses.




For the
year ended August 31, 2008, we reported net interest income, net interest
forgiven, debt issuance costs, foreign currency losses and asset disposal losses
totaling $2,330,500 as compared to $320,414 for the year ended August 31,
2007.  The increase is primarily attributed to the amortization of
debt issuance costs during the year ended August 31, 2008, while there was no
such amortization expense during the year ended August 31, 2007.




Net
Loss.




For the
year ended August 31, 2008, we reported a net loss of $7,734,502 as compared to
a net loss of $1,505,747 for the year ended August 31, 2007, due to an increase
in operating expenses and other expenses as previously discussed.




21




Liquidity
and Capital Resources.




We had
cash and cash equivalents of $20,569 as of August 31, 2008, as compared to cash
and cash equivalents of $3,671,900 as of August 31, 2007.  The
significant decrease in cash and cash equivalents is the result of funding
operating losses during the year.  Prepaid expenses totaled $86,616 as
of August 31, 2008, and primarily consisted of prepaid manufacturing and
production costs.




As of
August 31, 2008, the total of our property and equipment, less accumulated
depreciation, was a net value of $1,043,861, compared to the net value of
$371,566 for our property and equipment, less accumulated depreciation, as of
August 31, 2007.  The increase is primarily due to the development of
the website and database during the year ended August 31, 2008.




Other
assets, consisted of patents, trademarks and deposits, amounted to $1,141,186 as
of August 31, 2008, as compared to $1,001,357 as of August 31,
2007.  The increase is the result of increased legal fees to obtain
and secure additional patents and trademarks.




Our total
assets as of August 31, 2008, were $2,292,232 as compared to our total assets as
of August 31, 2007, which were $5,545,125.  The decrease in our total
assets as between the two years was due primarily to a decrease in cash and cash
equivalents as of August 31, 2008.




As of
August 31, 2008, our accounts payable and accrued expenses, including accrued
officer compensation, were $903,225 as compared to $1,133,975 as of August 31,
2007.  The decrease in accounts payable and accrued expenses,
including accrued officer compensation, as of August 31, 2008 is primarily due
to the conversion of $270,495 of accrued officer compensation into the Company’s
common stock.




Advances
from officer, notes payable and convertible notes payable, including related
accrued interest, totaled $159,409 as of August 31, 2008, as compared to
$5,874,305 as of August 31, 2007.  The decrease is primarily due to
the conversion of $5,242,000 in notes payable into the Company’s common
stock.  In addition, $924,099 of related party notes payable and
accrued interest was also converted into the Company’s common
stock.  We had no other long term liabilities, commitments or
contingencies.




Other
than the proposed increases in research and development expenses and the
increases in legal and accounting costs we expect due to the reporting
requirements of becoming a reporting company, we are not aware of any other
known trends, events or uncertainties, which may affect our future
liquidity.




PLAN
OF OPERATIONS




Cash
Requirements.




We are an
early stage wireless technology company focused on the marketing and sales of
the PocketFinder® family of products for retail distribution.  Since
our inception, we have generated significant losses.  As of August 31,
2008, we had an accumulated deficit of $10,023,845 and we expect to incur
continual losses until sometime in calendar year 2009.




We have a
limited history of operations.  To date, we have funded our operations
primarily through personal loans by the founders and the private placement of
our common stock and convertible notes.




As of
August 31, 2008, we had $20,569 in cash, cash equivalents and short-term
investments.  In September 2008, we received a loan of $950,000 from
an officer of the Company to fund operations over the next several
months.   Over the next several quarters we expect to invest
significant amounts of funds (in addition to cooperative advertising costs of
approximately five percent which costs are included in the cost of goods sold)
to develop our sales, marketing and manufacturing programs associated with the
commercialization and launch of the PocketFinder® family of
products.  We expect to fund additional inventory and any necessary
general overhead requirements through capital raised through the sale of debt or
equity securities although there is no assurance that we will be successful in
that regard.




22




We expect
to have to raise additional funds in the coming months to purchase and maintain
inventory and for related purposes such as packaging, shipping, and direct sales
and marketing costs.  We are not able to estimate the amount of funds
necessary as it will be determined by the volume represented by purchase orders
from targeted retailers who desire to sell our product.




Our
funding requirements will depend on numerous factors, including:





- Costs
  involved in production and manufacturing to fill Purchase Orders, software and
  interface customization for OEM partners, and the network necessary to
  commence the commercialization of the PocketFinder® Personal
  Locator;
- The
  costs of outsourced manufacturing;
- The costs of commercialization activities, including product
  marketing, sales and distribution; and
- Our
  revenues, if any, from successful commercialization of the PocketFinder®
  Personal Locator and the PocketFinder® Network platform
  services.

As noted
above, we will need to raise additional external funds through the sale of
additional equity or debt securities.  We will need to raise
additional funds during the next three months to finance the inventory necessary
to meet anticipated demand and to support related marketing, sales, and
distribution expenses.  The sale of additional equity securities may
result in additional dilution to our shareholders.  Sale of debt
securities could involve substantial operational and financial covenants that
might inhibit our ability to follow our business plan.  Additional
financing may not be available in amounts or on terms acceptable to us or at
all.  If we are unable to obtain additional financing, we may be
required to reduce the scope of, delay or eliminate some or all of our planned
commercialization activities, which could harm our financial conditions and
operating results.




Product
Research and Development




Production
ready units are now available.  We plan to continue to develop new
product enhancements while we deliver the initial market launch of the
PocketFinder® and PetFinder® including manufacturing in the first calendar
quarter of 2009.  Our first purchase order was secured in September
2008, and others are being negotiated at this time.  Many of our
distributors were waiting for the Company to deliver final production ready
product.  These were delivered by Jabil in late October
2008.  We anticipate that we will be prepared to begin delivery of
product to retailers in the first quarter of 2009, although there can be no
assurance that we will meet that target time period.




Plant
and Equipment, Employees




We do not
plan to purchase or sell any significant equipment, plant or properties during
the foreseeable future.  Our business operations are based on a
strategic outsourcing model, thereby negating the need for additional plant and
equipment, or significant numbers of employees.  Thus, we do not
anticipate hiring any significant number of additional employees during the next
12 months but will add a few selected and strategic employees.




Off-Balance
Sheet Arrangements




As of
August 31, 2008, we had no off-balance sheet arrangements.




23




ITEM
7. FINANCIAL STATEMENTS






LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 AND
FOR THE PERIOD FROM INCEPTION
 (SEPTEMBER
16, 2005) THROUGH AUGUST 31, 2008
   TABLE
OF CONTENTS
  PageReport
      of Independent Registered Public Accounting Firm
                F-1Report
      of Independent Registered Public Accounting Firm
                F-2Financial
      StatementsConsolidated
      Balance Sheets
                F-3Consolidated
      Statements of Operations
                F-4Consolidated
      Statements of Changes in Stockholders’ Equity (Deficit)
                F-5Consolidated
      Statements of Cash Flows
                F-8Notes
      to Financial Statements
                F-10
 24
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   To the
Board of Directors and Stockholders
 Location
Based Technologies, Inc
 Anaheim,
California
  We have
audited the accompanying consolidated balance sheet of Location Based
Technologies, Inc. (a Development Stage Company) as of August 31, 2008, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended August 31, 2008 and for the period from inception
(September 16, 2005) to August 31, 2008. These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our
audit.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Location Based Technologies, Inc.
and subsidiary as of August 31, 2008, and the results of its operations, changes
in stockholders' equity and cash flows for the year ended August 31, 2008 and
for the period from inception (September 16, 2005) to August 31, 2008, in
conformity with U.S. generally accepted accounting principles.
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has incurred recurring losses during the development
stage and has an accumulated deficit in excess of $10,000,000. These conditions
raise substantial doubt about its ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
  Denver,
      Colorado
                    December
      3, 2008/s/
      Comiskey & CompanyPROFESSIONAL
      CORPORATION
 F-1
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders
 Location
Based Technologies Corp. (formerly PocketFinder, Inc.) and
Subsidiary
 Anaheim,
California
 
 We have
audited the accompanying balance sheets of Location Based Technologies Corp. (a
development stage company) and subsidiary, as of August 31, 2007 and 2006, and
the related statements of operations, stockholders’ equity (deficit) and cash
flows for years then ended and the period from inception (September 16, 2005)
through August 31, 2007.  These financial statements are the
responsibility of the Companies’ management.  Our responsibility is to
express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Companies are not required to have, nor were we engaged to perform, an audit of
their internal control over financial reporting.  Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Companies’
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Location Based Technologies Corp.
and subsidiary, as of August 31, 2007 and 2006, and the results of operations
and cash flows for the years then ended and the period from inception (September
16, 2005) through August 31, 2007 in conformity with accounting principles
generally accepted in the United States of America.
 
 Mendoza
Berger & Company, LLP
 /s/ Mendoza
      Berger & Company, LLP
 Irvine,
California
 November
7, 2007
  F-2
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
BALANCE SHEET
 August
31, 2008 and 2007
   August
      31,
                
                
                August
      31,2008
                
                
                2007ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                
                $
                20,569
                
                
                $
                3,671,900Prepaid
      expenses
                
                
                86,616
                
                
                
                53,526Debt
      issuance costs
                
                
                -
                
                
                
                446,776Total
      current assets
                
                
                107,185
                
                
                
                4,172,202Property and equipment, net of accumulated depreciation
                
                
                1,043,861
                
                
                
                371,566OTHER
      ASSETSPatents and trademarks, net of accumulated amortization
                
                
                1,120,728
                
                
                
                994,297Deposits
                
                
                20,458
                
                
                
                7,060Total
      other assets
                
                
                1,141,186
                
                
                
                1,001,357TOTAL
      ASSETS
                
                $
                2,292,232
                
                
                $
                5,545,125LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                
                $
                634,822
                
                
                $
                680,000Accrued
      officer compensation
                
                
                268,403
                
                
                
                453,975Advances
      from officer
                
                
                159,409
                
                
                
                25,020Notes
      payable, related party
                
                
                -
                
                
                
                803,500Accrued
      interest, related party notes payable
                
                
                -
                
                
                
                120,599Convertible
      notes payable
                
                
                -
                
                
                
                4,892,000Accrued
      interest, convertible notes payable
                
                
                -
                
                
                
                58,206Total
      current liabilities
                
                
                1,062,634
                
                
                
                7,033,300TOTAL
      LIABILITIES
                
                
                1,062,634
                
                
                
                7,033,300Commitments
      and contingencies
                
                
                -
                
                
                
                -STOCKHOLDERS'
      EQUITY (DEFICIT)Preferred stock, $0.001 par value, 10,000,000 sharesauthorized; no shares issued or outstanding
                
                
                -
                
                
                
                -Common stock, $0.001 par value; 300,000,000 shares
    authorized;87,091,914 shares and 52,725,000 shares issued and
    outstandingat August 31, 2008 and 2007, respectively
                
                
                24,693
                
                
                
                17,575Additional
      paid-in capital
                
                
                11,228,750
                
                
                
                783,593Deficit accumulated during the development stage
                
                
                (10,023,845
                )
                
                
                (2,289,343
                )Total
      stockholders' equity (deficit)
                
                
                1,229,598
                
                
                
                (1,488,175
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                2,292,232
                
                
                $
                5,545,125
   See
accompanying notes to financial statements.
  F-3
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF OPERATIONS
 For the
years ended August 31, 2008 and 2007
 and for
the period from Inception (September 16, 2005) to August 31,
2008
   Inception(Sept
      16, 2005)August
      31,
                
                
                August
      31,
                
                
                to
      August 31,2008
                
                
                2007
                
                
                2008Net
      revenue
                
                $
                5,818
                
                
                $
                -
                
                
                $
                5,818Operating
      expensesGeneral
      and administrative
                
                
                759,366
                
                
                
                188,016
                
                
                
                969,708Officer
      compensation
                
                
                360,000
                
                
                
                360,000
                
                
                
                1,215,000Professional
      fees
                
                
                2,049,316
                
                
                
                116,703
                
                
                
                2,283,348Rent
                
                
                114,771
                
                
                
                71,992
                
                
                
                214,005Research
      and development
                
                
                2,124,767
                
                
                
                447,022
                
                
                
                2,638,353Total
      operating expenses
                
                
                5,408,220
                
                
                
                1,183,733
                
                
                
                7,320,414Net
      operating loss
                
                
                (5,402,402
                )
                
                
                (1,183,733
                )
                
                
                (7,314,596
                )Other
      income (expense)Interest
      income (expense), net
                
                
                75,572
                
                
                
                (320,414
                )
                
                
                (298,377
                )Interest
      forgiven, net
                
                
                58,206
                
                
                
                -
                
                
                
                58,206Debt
      issuance costs - commissions
                
                
                (491,775
                )
                
                
                -
                
                
                
                (491,775
                )Debt
      issuance costs - warrants
                
                
                (1,971,791
                )
                
                
                -
                
                
                
                (1,971,791
                )Foreign
      currency gain (loss), net
                
                
                (339
                )
                
                
                -
                
                
                
                (339
                )Loss
      on asset disposal
                
                
                (373
                )
                
                
                -
                
                
                
                (373
                )Total
      other income (expense)
                
                
                (2,330,500
                )
                
                
                (320,414
                )
                
                
                (2,704,449
                )Net
      loss before income taxes
                
                
                (7,732,902
                )
                
                
                (1,504,147
                )
                
                
                (10,019,045
                )Provision
      for income taxes
                
                
                1,600
                
                
                
                1,600
                
                
                
                4,800Net
      Loss
                
                
                (7,734,502
                )
                
                
                (1,505,747
                )
                
                
                (10,023,845
                )Accumulated
      DeficitBalance,
      beginning of period
                
                
                (2,289,343
                )
                
                
                (783,596
                )
                
                
                -Balance,
      end of period
                
                $
                (10,023,845
                )
                
                $
                (2,289,343
                )
                
                $
                (10,023,845
                )Basic
      - Earnings (loss) per share
                
                $
                (0.10
                )
                
                $
                (0.11
                )Basic
      - Weighted Average Numberof
      Shares Outstanding
                
                
                80,061,402
                
                
                
                14,049,492
   See
accompanying notes to financial statements.
  F-4
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For the
period from Inception (September 16, 2005 to August 31, 2008
  DeficitAccumulated
                
                
                TotalPreferred
      Stock
                
                
                Common
      Stock
                
                
                Additional
                
                
                During
      the
                
                
                StockholdersNumber
                
                
                
                
                
                Number
                
                
                To
      be
                
                
                
                
                
                Paid-In
                
                
                Development
                
                
                Equityof
      Shares
                
                
                Amount
                
                
                of
      Shares
                
                
                issued
                
                
                Amount
                
                
                Capital
                
                
                Stage
                
                
                (Deficit)Balance,
      September 16, 2005
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Cash
      received for 20,000 shares of common stock to be issued, November 30,
      2005
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                20
                
                
                
                19,980
                
                
                
                -
                
                
                
                20,000Cash
      received for 30,000 shares of common stock to be issued, November 30,
      2005
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                30
                
                
                
                29,970
                
                
                
                -
                
                
                
                30,000Cash
      received for 25,000 shares of common stock to be issued, March 14,
      2006
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                25
                
                
                
                24,975
                
                
                
                -
                
                
                
                25,000Cash
      received for 50,000 shares of common stock to be issued, August 4, 2006,
      net of offering costs
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                50
                
                
                
                -
                
                
                
                46,950
                
                
                
                -
                
                
                
                47,000Cash
      received for 50,000 shares of common stock to be issued, August 18,
      2006
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                50
                
                
                
                -
                
                
                
                49,950
                
                
                
                -
                
                
                
                50,000Issuance
      of common stock for services, July 2006
                
                
                -
                
                
                
                -
                
                
                
                225,000
                
                
                
                -
                
                
                
                75
                
                
                
                74,925
                
                
                
                -
                
                
                
                75,000Additional
      paid-in capital in exchange for services
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                150,000
                
                
                
                -
                
                
                
                150,000Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (783,596
                )
                
                
                (783,596
                )Balance,
      August 31, 2006
                
                
                -
                
                
                
                -
                
                
                
                225,000
                
                
                
                100
                
                
                
                150
                
                
                
                396,750
                
                
                
                (783,596
                )
                
                
                (386,596
                )Issuance
      of common stock, net of offering costs, for cash, September
      2006
                
                
                -
                
                
                
                -
                
                
                
                450,000
                
                
                
                -
                
                
                
                150
                
                
                
                110,600
                
                
                
                -
                
                
                
                110,750Issuance
      of common stock, net of offering costs, for cash, November
      2006
                
                
                -
                
                
                
                -
                
                
                
                90,000
                
                
                
                -
                
                
                
                30
                
                
                
                22,470
                
                
                
                -
                
                
                
                22,500Issuance
      of common stock, net of offering costs, for cash, February
      2007
                
                
                -
                
                
                
                -
                
                
                
                750,000
                
                
                
                -
                
                
                
                250
                
                
                
                181,750
                
                
                
                -
                
                
                
                182,000Issuance
      of common stock, net of offering costs, for cash, March
    2007
                
                
                -
                
                
                
                -
                
                
                
                75,000
                
                
                
                -
                
                
                
                25
                
                
                
                18,725
                
                
                
                -
                
                
                
                18,750
  F-5
 Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For the
period from Inception (September 16, 2005 to August 31, 2008
 (continued)
   TotalPreferred
      Stock
                  
                  
                  Common
      Stock
                  
                  
                  Additional
                  
                  
                  During
      the
                  
                  
                  StockholdersNumber
                  
                  
                  
                  
                  
                  Number
                  
                  
                  To
      be
                  
                  
                  
                  
                  
                  Paid-In
                  
                  
                  Development
                  
                  
                  Equityof
      Shares
                  
                  
                  Amount
                  
                  
                  of
      Shares
                  
                  
                  issued
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  (Deficit)Issuance
      of 525,000 shares of common stock, June 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  525,000
                  
                  
                  
                  (100
                  )
                  
                  
                  100
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Issuance
      of 165,000 shares of common stock for cash proceeds of $55,000, June
      2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  165,000
                  
                  
                  
                  -
                  
                  
                  
                  55
                  
                  
                  
                  54,945
                  
                  
                  
                  -
                  
                  
                  
                  55,000Issuance
      of 50,400,000 shares of common stock for cash proceeds of $168, June
      2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,400,000
                  
                  
                  
                  -
                  
                  
                  
                  16,800
                  
                  
                  
                  (16,632
                  )
                  
                  
                  -
                  
                  
                  
                  168Issuance
      of common stock for conversion of note payable, August
2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  45,000
                  
                  
                  
                  -
                  
                  
                  
                  15
                  
                  
                  
                  14,985
                  
                  
                  
                  -
                  
                  
                  
                  15,000Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,505,747
                  )
                  
                  
                  (1,505,747
                  )Balance,
      August 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  52,725,000
                  
                  
                  
                  -
                  
                  
                  
                  17,575
                  
                  
                  
                  783,593
                  
                  
                  
                  (2,289,343
                  )
                  
                  
                  (1,488,175
                  )Issuance
      of Series A warrants, September 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,408,167
                  
                  
                  
                  -
                  
                  
                  
                  1,408,167Issuance
      of Series B warrants, September 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  563,624
                  
                  
                  
                  -
                  
                  
                  
                  563,624Issuance
      of common stock for services, October 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  18,000
                  
                  
                  
                  -
                  
                  
                  
                  6
                  
                  
                  
                  5,994
                  
                  
                  
                  -
                  
                  
                  
                  6,000Issuance
      of common stock for conversion of related party note payable, October
      2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,410,500
                  
                  
                  
                  -
                  
                  
                  
                  804
                  
                  
                  
                  802,696
                  
                  
                  
                  -
                  
                  
                  
                  803,500Share
      exchange with Springbank Resources resulting in recapitalization, October
      2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  13,012,500
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  419
                  
                  
                  
                  -
                  
                  
                  
                  419Issuance
      of common stock for services, November 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,276,632
                  
                  
                  
                  -
                  
                  
                  
                  426
                  
                  
                  
                  425,118
                  
                  
                  
                  -
                  
                  
                  
                  425,544Issuance
      of common stock for services, November 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  600,000
                  
                  
                  
                  -
                  
                  
                  
                  200
                  
                  
                  
                  829,800
                  
                  
                  
                  -
                  
                  
                  
                  830,000
  See
accompanying notes to financial statements.
  F-6
 Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For the
period from Inception (September 16, 2005 to August 31, 2008
 (continued)
 DeficitAccumulated
                
                
                TotalPreferred
      Stock
                
                
                Common
      Stock
                
                
                Additional
                
                
                During
      the
                
                
                StockholdersNumber
                
                
                
                
                
                Number
                
                
                To
      be
                
                
                
                
                
                Paid-In
                
                
                Development
                
                
                Equityof
      Shares
                
                
                Amount
                
                
                of
      Shares
                
                
                issued
                
                
                Amount
                
                
                Capital
                
                
                Stage
                
                
                (Deficit)Issuance
      of common stock for conversion of notes payable, November and December
      2007
                
                
                -
                
                
                
                -
                
                
                
                15,726,000
                
                
                
                -
                
                
                
                5,242
                
                
                
                5,236,758
                
                
                
                -
                
                
                
                5,242,000Issuance
      of common stock for conversion of accrued interest on related party note
      payable, February 2008
                
                
                -
                
                
                
                -
                
                
                
                361,797
                
                
                
                -
                
                
                
                120
                
                
                
                120,479
                
                
                
                -
                
                
                
                120,599Issuance
      of common stock for conversion of accrued officer compensation, February
      2008
                
                
                -
                
                
                
                -
                
                
                
                811,485
                
                
                
                -
                
                
                
                270
                
                
                
                270,225
                
                
                
                -
                
                
                
                270,495Issuance
      of common stock for services, June 2008
                
                
                -
                
                
                
                -
                
                
                
                150,000
                
                
                
                -
                
                
                
                50
                
                
                
                373,950
                
                
                
                -
                
                
                
                374,000Issuance
      of Series C warrants, June 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                353,447
                
                
                
                -
                
                
                
                353,447Issuance
      of Series D and E warrants, August 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                54,480
                
                
                
                -
                
                
                
                54,480Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (7,734,502
                )
                
                
                (7,734,502
                )Balance,
      August 31, 2008
                
                
                -
                
                
                $
                -
                
                
                
                87,091,914
                
                
                $
                -
                
                
                $
                24,693
                
                
                $
                11,228,750
                
                
                $
                (10,023,845
                )
                
                $
                1,229,598
   See
accompanying notes to financial statements.
  F-7
 Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 For the
years ended August 31, 2008 and 2007
 and for the period from
Inception (September 16, 2005) to August 31, 2008
   InceptionFor
      the years ended
                  
                  
                  (Sept
      16, 2005)August
      31,
                  
                  
                  August
      31,
                  
                  
                  to
      August 31,2008
                  
                  
                  2007
                  
                  
                  2008Cash
      Flows from Operating ActivitiesNet
      loss
                  
                  $
                  (7,734,502
                  )
                  
                  $
                  (1,505,747
                  )
                  
                  $
                  (10,023,845
                  )Adjustment
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                  
                  
                  14,107
                  
                  
                  
                  1,951
                  
                  
                  
                  16,208Common
      stock issued for services
                  
                  
                  374,000
                  
                  
                  
                  -
                  
                  
                  
                  629,000Warrants
      issued for services
                  
                  
                  407,927
                  
                  
                  
                  -
                  
                  
                  
                  407,927Recapitalization
      adjustment
                  
                  
                  419
                  
                  
                  
                  -
                  
                  
                  
                  419Changes
      in operating assets and liabilities:(Increase)
      decrease in accounts receivable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -(Increase)
      decrease in prepaid expenses
                  
                  
                  (33,090
                  )
                  
                  
                  (53,526
                  )
                  
                  
                  (86,616
                  )(Increase)
      decrease in other receivables
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -(Increase)
      decrease in debt issuance costs
                  
                  
                  446,776
                  
                  
                  
                  (446,776
                  )
                  
                  
                  -(Increase)
      decrease in deposits
                  
                  
                  (13,398
                  )
                  
                  
                  -
                  
                  
                  
                  (20,458
                  )Increase
      (decrease) in accounts payable and accrued expenses
                  
                  
                  (45,178
                  )
                  
                  
                  664,731
                  
                  
                  
                  634,822Increase
      (decrease) in accrued officer compensation
                  
                  
                  84,923
                  
                  
                  
                  149,550
                  
                  
                  
                  538,898Increase
      (decrease) in accrued interest
                  
                  
                  (58,206
                  )
                  
                  
                  125,270
                  
                  
                  
                  120,599Net
      cash used in operating activities
                  
                  
                  (6,556,222
                  )
                  
                  
                  (1,064,547
                  )
                  
                  
                  (7,783,046
                  )Cash
      Flows from Investing ActivitiesPurchase
      of property and equipment
                  
                  
                  (685,986
                  )
                  
                  
                  (371,867
                  )
                  
                  
                  (1,059,653
                  )Additions
      to patents and trademarks
                  
                  
                  (126,847
                  )
                  
                  
                  (79,357
                  )
                  
                  
                  (221,144
                  )Net
      cash used in investing activities
                  
                  
                  (812,833
                  )
                  
                  
                  (451,224
                  )
                  
                  
                  (1,280,797
                  )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of common stock, net of offering costs
                  
                  
                  -
                  
                  
                  
                  404,168
                  
                  
                  
                  404,168Proceeds
      from common stock be to issued
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  142,000(Repayments)
      / advances from officer
                  
                  
                  134,389
                  
                  
                  
                  5,935
                  
                  
                  
                  159,409Proceeds
      from convertible notes payable
                  
                  
                  350,000
                  
                  
                  
                  4,892,000
                  
                  
                  
                  5,242,000Proceeds
      from notes payable, related party
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,000Repayment
      on notes payable, related party
                  
                  
                  -
                  
                  
                  
                  (118,000
                  )
                  
                  
                  (146,500
                  )Net
      cash provided by financing activities
                  
                  
                  484,389
                  
                  
                  
                  5,184,103
                  
                  
                  
                  5,851,077Net
      (decrease) increase in cash and cash equivalents
                  
                  
                  (6,884,666
                  )
                  
                  
                  3,668,332
                  
                  
                  
                  (3,212,766
                  )Cash
      and cash equivalents, beginning of period
                  
                  
                  3,671,900
                  
                  
                  
                  3,568
                  
                  
                  
                  -Cash
      and cash equivalents, end of period
                  
                  $
                  (3,212,766
                  )
                  
                  $
                  3,671,900
                  
                  
                  $
                  (3,212,766
                  )
   See
accompanying notes to financial statements.
  F-8
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 For the
years ended August 31, 2008 and 2007
 and for the period from
Inception (September 16, 2005) to August 31, 2008
   InceptionFor
      the years ended
                  
                  
                  (Sept
      16, 2005)August
      31,
                  
                  
                  August
      31,
                  
                  
                  to
      August 31,2008
                  
                  
                  2007
                  
                  
                  2008Supplemental
      disclosure of cash flow information:Income
      taxes paid
                  
                  $
                  800
                  
                  
                  $
                  -
                  
                  
                  $
                  1,600Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Supplemental
      disclosure of noncash financing and investing activities:Issuance
      of shares of common stock for services
                  
                  $
                  374,000
                  
                  
                  $
                  -
                  
                  
                  $
                  629,000Issuance
      of warrants for services
                  
                  $
                  407,927
                  
                  
                  $
                  -
                  
                  
                  $
                  407,927Acquisition
      of patents for note payable
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  900,000Issuance
      of common stock for conversion of notes payable
                  
                  $
                  5,242,000
                  
                  
                  $
                  15,000
                  
                  
                  $
                  5,512,000Issuance
      of common stock for conversion of related party note
    payable
                  
                  $
                  803,500
                  
                  
                  $
                  -
                  
                  
                  $
                  803,500Issuance
      of common stock for conversion of accrued interest on related party note
      payable
                  
                  $
                  120,599
                  
                  
                  $
                  -
                  
                  
                  $
                  120,599Issuance
      of common stock for conversion of accrued officer
    compensation
                  
                  $
                  270,495
                  
                  
                  $
                  -
                  
                  
                  $
                  270,495
   See
accompanying notes to financial statements.
  F-9
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007






1.
              NATURE OF OPERATIONS
      AND SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
 
 Organization
 
 Location Based Technologies, Inc.
(formerly known as Springbank Resources, Inc.) (the “Company,” “our,” or “LBT”)
was incorporated under the laws of the State of Nevada on April 10,
2006.
 
 Location
Based Technologies, Corp. (formerly known as PocketFinder, Inc.) was
incorporated under the laws of the State of California on September 16,
2005.    On July 7, 2006, it established PocketFinder, LLC
(“LLC”), a California Limited Liability Company.  On May 29, 2007,
PocketFinder, Inc. filed amended articles with the Secretary of State to change
its name to Location Based Technologies, Corp.
 
 Merger
 
 On August
24, 2007, Location Based Technologies, Corp. merged with PocketFinder,
LLC.  The merger was approved by the shareholders of Location Based
Technologies, Corp. and PocketFinder, LLC by unanimous written
consent.  Location Based Technologies, Corp. was the survivor of the
merger with PocketFinder, LLC.
 
 Each
Class A Membership Unit of the LLC was converted into 150,000 shares of common
stock of the Company or fraction thereof and each Class C Membership Unit of the
LLC was cancelled.  Upon consummation of the merger, 10.9 Class A
Membership Units of the LLC were converted into 1,635,000 shares of common stock
of the Company.
 
 Stock Exchange
Agreement
 
 On
October 11, 2007, Location Based Technologies, Corp. effected a stock exchange
agreement and plan of reorganization (the “Agreement”) with Springbank
Resources, Inc. (“SRI”) whereby SRI acquired all of the issued and outstanding
shares of Location Based Technologies, Corp. in exchange for shares of SRI’s
common stock.
 
 Subject
to the terms and conditions of the Agreement, SRI issued, and the stockholders
of Location Based Technologies, Corp. accepted 55,153,500 shares of SRI’s common
stock in consideration for all of the issued and outstanding shares of Location
Based Technologies, Corp.  The shares of SRI’s common stock were
allocated to the shareholders of Location Based Technologies, Corp. in
accordance with the Agreement.
  F-10
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Stock
Exchange Agreement (Continued)
 
 The
former shareholders of Location Based Technologies, Corp. acquired control of
SRI upon the closing of the stock exchange transaction. The exchange was
accounted for as a reverse acquisition. Accordingly, for financial statement
purposes, Location Based Technologies, Corp. was considered the accounting
acquiror, and the related business combination was considered a recapitalization
of Location Based Technologies, Corp. rather than an acquisition by SRI. The
historical financial statements prior to the Agreement are those of Location
Based Technologies, Corp., and the name of the consolidated company was changed
to Location Based Technologies, Inc.
 
 Consolidation
Policy
 
 The
accompanying financial statements include the operations of the Company and its
wholly owned subsidiary,  Intercompany balances and transactions have
been eliminated in consolidation.
 
 Forward Stock
Split
 
 All share
and per-share amounts in the accompanying financial statements, unless otherwise
indicated, have been retroactively restated to reflect a 3 for 1 forward stock
split approved by the Board in October 2008, as if the split had been in effect
since inception.  See Note 9.
 
 Nature of
Business
 
 The
Company is in the final development stage of creating PocketFinder® personal
locators. PocketFinders® are small
personal location devices designed to give parents, guardians, and pet owners
peace of mind. Utilizing the U.S. Department of Defense’s multi-billon dollar
Global Positioning System (GPS) satellites and existing wireless technology, our
team of engineers have developed technology which allows our network of members
to locate anyone carrying our device, whether that person is inside of a
building/structure or in the great outdoors (Systems and Method Patent pending).
PocketFinders® are
small, rugged, and water tight. The devices can be used to locate children,
elderly or disabled persons and pets as well as for the tracking of valued
personal property.
  F-11
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Basis of Presentation and
Going Concern
 
 The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern.  The
Company has incurred net losses since inception, and as of August 31, 2008, had
an accumulated deficit of $10,023,845.  These conditions raise
substantial doubt as to the Company's ability to continue as a going
concern.  These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.  These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
 
 Management
recognizes that the Company must generate additional resources to enable it to
continue operations.  Management intends to raise additional financing
through debt financing and equity financing or through other means that it deems
necessary, with a view to moving forward and sustaining a prolonged growth in
its strategy phases. However, no assurance can be given that the Company will be
successful in raising additional capital.  Further, even if the
Company raises additional capital, there can be no assurance that the Company
will achieve profitability or positive cash flow. If management is unable to
raise additional capital and expected significant revenues do not result in
positive cash flow, the Company will not be able to meet its obligations and may
have to cease operations.
 
 Use of
Estimates
 
 The
preparation of combined financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reported periods.  Actual results could materially
differ from those estimates.
 
 Reclassifications
  Certain
reclassifications have been made in the 2007 financial statements to conform
with the 2008 presentation.
  F-12
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Cash and Cash
Equivalents
 
 For
purposes of the balance sheets and statements of cash flows, the Company
considers all highly liquid debt instruments purchased with maturity of three
months or less to be cash equivalents.
 
 Concentration of Credit
Risk
 
 Cash and cash equivalents –
The cash and cash equivalent balances at August 31, 2008, are principally held
by one institution which insures our aggregated accounts with the Federal
Deposit Insurance Corporation ("FDIC") up to $250,000.  At times, the
Company has maintained bank balances which have exceeded FDIC
limits.  The Company has not experienced any losses with respect to
its cash balances.
 
 Revenues – Revenue generated
during the year ended August 31, 2008, consisted of sales to a single
customer.  Total revenues from this customer were $5,818 for the year
ended August 31, 2008.
 
 Fair Value of Financial
Instruments
 
 Pursuant
to Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments, the Company is required to estimate the fair value
of all financial instruments included on its balance sheet.  The
carrying value of cash, prepaid expenses, accounts payable and accrued expenses
approximate their fair value due to the short period to maturity of these
instruments.
  Intangible Assets – Patents
and Trademarks
 
 The
Company capitalizes internally developed assets related to certain costs
associated with patents and trademarks. These costs include legal and
registration fees needed to apply for and secure patents. The intangible assets
acquired from other enterprises or individuals in an “arms length” transaction
are recorded at cost. As of August 31, 2008 and August 31, 2007, the Company
capitalized $1,055,396 and $990,572 for patent related expenditures,
respectively. As of August 31, 2008 and August 31, 2007, the Company has
capitalized $65,748 and $3,725 for trademark related expenditures,
respectively.
  F-13
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Intangible
Assets – Patents and Trademarks (Continued)
 
 Patents
are subject to amortization upon issuance by the United States Patent and
Trademark Office.  Intangible assets are amortized in accordance with
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, using the straight-line method over the shorter of their
estimated useful lives or remaining legal life.  Amortization expense
totaled $416 and $0 for the years ended August 31, 2008 and 2007,
respectively.
 
 Property and
Equipment
 
 Property
and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are calculated using the straight-line method and
with useful lives used in computing depreciation ranging from 3 to 5 years. When
property and equipment are retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the respective accounts, and any
gain or loss is included in operations. Expenditures for maintenance and repairs
are charged to operations as incurred; additions, renewals and betterments are
capitalized.
 
 Internal Website Development
Costs
 
 Under
Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force
Statement 00-2 ("EITF 00-2"), Accounting for Web Site Development
Costs, costs and expenses incurred during the planning and operating
stages of the Company's web site development are expensed as incurred. Under
EITF 00-2, costs incurred in the web site application and infrastructure
development stages are capitalized by the Company and amortized to expense over
the web site's estimated useful life or period of benefit. As of August 31,
2008, the Company had capitalized costs of $985,122 related to its website
development.  The website development costs will be depreciated when
the website is completed and ready for use.
  F-14
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANTACCOUNTINGPOLICIES (Continued)
 
 Long-Lived
Assets
 
 The
Company accounts for its long-lived assets in accordance with Statement of
Financial Accounting Standards No. 144 (“SFAS No. 144”), Accounting for the Impairment or
Disposal of Long-Lived Assets.  SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the historical cost carrying value of an asset may
no longer be appropriate. The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition. If the future net cash flows are
less than the carrying value of the asset, an impairment loss is recorded equal
to the difference between the asset's carrying value and fair value or
disposable value. As of August 31, 2008, the Company did not deem any of its
long-term assets to be impaired.
 
 Revenue
Recognition
 
 Revenues
are recognized in accordance with Staff Accounting Bulletin
(“SAB”) No. 101, Revenue Recognition in Financial
Statements, as amended by SAB No. 104, Revenue Recognition, when (a)
persuasive evidence of an arrangement exists, (b) the products or services have
been provided to the customer, (c) the fee is fixed or determinable, and (d)
collectibility is reasonably assured. In instances where the customer, at its
discretion, has the right to reject the product or services prior to final
acceptance, revenue is deferred until such acceptance occurs.
 
 Research and
Development
 
 Research
and development costs are clearly identified and are expensed as incurred in
accordance with Statement of Financial Accounting Standards No. 2, Accounting for Research and
Development Costs.  For the years ended August 31, 2008 and
2007, the Company incurred $2,124,767 and $447,022 of research and development
costs, respectively.
  F-15
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANTACCOUNTINGPOLICIES (Continued)
 
 Provision for Income
Taxes
 
 The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (“SFAS No. 109”), Accounting for Income
Taxes.  Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statements’
carrying amounts of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.  Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period the enactment
occurs.  A valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not realize tax
assets through future operations.  The Company has included its $800
franchise fee in its provision for income taxes for each of the years ended
August 31, 2008 and 2007.
 
 Earnings/ Loss Per
Share
 
 The
Company computes basic earnings (loss) per share using the weighted average
number of common shares outstanding during the period in accordance with
Statement of Financial Standards No. 128 ("SFAS No. 128"), Earnings Per Share, which
specifies the compilation, presentation, and disclosure requirements for income
per share for entities with publicly held common stock or instruments which are
potentially common stock. Under SFAS No. 128, diluted earnings (loss) per share
are computed using the weighted average number of common shares outstanding and
the dilutive potential common shares outstanding during the period. Dilutive
potential common shares primarily consist of stock options and warrants issued
by the Company. These potential common shares are excluded from diluted loss per
share as their effect would be anti-dilutive.
  F-16
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
  1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent Accounting
Pronouncements
 
 FASB Interpretation No.
48 – In July 2006, the FASB issued Interpretation No. 48 (“FIN No. 48”),
Accounting for Uncertainty in
Income Taxes, which supplements SFAS No. 109, Accounting for Income Taxes,
by defining the confidence level that a tax position must meet in order to be
recognized in the financial statements. The Interpretation requires that the tax
effects of a position be recognized only if it is “more-likely-than-not” to be
sustained based solely on its technical merits as of the reporting
date.  The more-likely-than-not threshold represents a positive
assertion by management that a company is entitled to the economic benefits of a
tax position.  If a tax position is not considered
more-likely-than-not to be sustained based solely on its technical merits, no
benefits of the position are to be recognized.  This Interpretation is
effective for fiscal years beginning after December 15, 2006.  The
Company has adopted this interpretation.
 
 SFAS No. 157 – In
September 2006, the FASB issued Statement of Financial Standards No. 157 (“SFAS
No. 157”), Fair Value
Measurements.  This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(“GAAP”), and expands disclosures about fair value measurements.  This
Statement applies under other accounting pronouncements that require or permit
fair value measurements, the Board having previously concluded in those
accounting pronouncements that fair value is the relevant measurement
attribute.  Accordingly, this Statement does not require any new fair
value measurements.  However, for some entities, the application of
this Statement will change current practice.  In February 2008, the
FASB staff issued Staff Position No. 157-2, Effective Date of FASB Statement No.
157 ("FSP FAS 157-2").  FSP FAS 157-2 delayed the effective
date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The provisions of FSP FAS
157-2 are effective for the Company's fiscal year beginning September 1, 2009.
The Company believes that the adoption of this standard will not a have a
material impact on its financial statements.
  F-17
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent
Accounting Pronouncements (Continued)
 
 SFAS No. 158 – In
September 2006, the FASB issued Statement of Financial Standards No. 158 (“SFAS
No. 158”), Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans - an
amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement
improves financial reporting by requiring an employer to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit
organization.  This Statement also improves financial reporting by
requiring an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited
exceptions.  An employer with publicly traded equity securities is
required to initially recognize the funded status of a defined benefit
postretirement plan and to provide the required disclosures as of the end of the
fiscal year ending after December 15, 2006.  An employer without
publicly traded equity securities is required to recognize the funded status of
a defined benefit postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after June 15, 2007.  The Company
presently has no such defined benefit pension or other post retirement
plan.  If and at such time the Company establishes a defined benefit
pension or other post retirement plan, the Company will apply SFAS No.
158.
 
 SAB No. 108
– In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108 (“SAB No. 108”), Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements.  The guidance in SAB No. 108 requires
Companies to base their materiality evaluations on all relevant quantitative and
qualitative factors. This involves quantifying the impact of correcting all
misstatements, including both the carryover and reversing effects of prior year
misstatements, on the current year financial statements. The Company has adopted
this standard.
  F-18
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent
Accounting Pronouncements (Continued)
 
 SFAS No. 141(R) – In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R) (“SFAS No. 141(R)”), Business Combinations.SFAS
No. 141(R) requires the acquiring entity in a business combination to recognize
all assets acquired and liabilities assumed in the transaction, establishes the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed, and requires the acquirer to disclose the nature and
financial effect of the business combination. SFAS No. 141(R) is effective for
fiscal years beginning on or after December 15, 2008.  If and
when the Company acquires one or more entities in the future, it will apply SFAS
No. 141(R) for the purposes of accounting for such acquisitions.
 
 SFAS No. 160 – In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160 (“SFAS No. 160”), Noncontrolling Interests in
Consolidated Financial Statements.SFAS No. 160 amends Accounting
Research Bulletin No. 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008.  The Company presently has no such
noncontrolling interests. If and at such time as such an interest exists, it
will apply SFAS No. 160.
 
 SFAS No. 161 – In
March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161 (“SFAS No. 161”), Disclosures about Derivative
Instruments and Hedging Activities.SFAS No. 161 amends and
expands the disclosure requirements of SFAS No. 133, Accounting for Derivative
Instruments and Hedging. SFAS No. 161 is effective for fiscal years
beginning after November 15, 2008.  The Company believes that the
adoption of this standard will not a have a material impact on its financial
statements.
 
 FSP No. 142-3 – In
April 2008, the FASB issued Staff Position No. 142-3 (“FSP No.
142-3”), Determination of the
Useful Life of Intangible Assets.  FSP No. 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets. The FSP is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years.  Early adoption is prohibited.  The Company is
currently assessing the potential effect of FSP No. 142-3 on its financial
statements.
  F-19
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent
Accounting Pronouncements (Continued)
 
 SFAS No. 162 – In
May 2008, the FASB issued Statement of Financial Accounting Standards
No. 162 (“SFAS No. 162”), The Hierarchy of Generally Accepted
Accounting Principles.  SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States.  SFAS No. 162 will become effective 60 days
following Securities and Exchange Commission (“SEC”) approval of the Public
Company Accounting Oversight Board (“PCAOB”) amendments to AU
Section 411, The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The Company does not anticipate the adoption of SFAS No. 162
to have a material impact on its financial statements.
  EITF No. 03-6-1 – In
June 2008, the FASB issued Staff Position No. EITF 03-6-1 (“EITF No.
03-6-1”), Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities. EITF No. 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore, need to be included in the earnings allocation in calculating
earnings per share under the two-class method described in Statement of
Financial Accounting Standards No. 128, Earnings per
Share.  EITF No. 03-6-1 requires companies to treat unvested
share-based payment awards that have non-forfeitable rights to dividend or
dividend equivalents as a separate class of securities in calculating earnings
per share. EITF No. 03-6-1 is effective for fiscal years beginning after
December 15, 2008.  The Company is currently assessing the
potential effect of EITF No. 03-6-1 on its financial statements.
  F-20
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 2.
              PROPERTY AND
      EQUIPMENT
 
 Property
and equipment at August 31, 2008 and 2007 consists of the
following:
  August
      31,
                
                
                August
      31,2008
                
                
                2007Website
      development costs
                
                $
                985,122
                
                
                $
                361,825Machinery
      and equipment
                
                
                38,990
                
                
                
                -Computer
      and video equipment
                
                
                21,216
                
                
                
                10,076Office
      furniture
                
                
                11,546
                
                
                
                1,766Leasehold
      improvements
                
                
                2,445
                
                
                
                -1,059,319
                
                
                
                373,667Less:
      accumulated depreciation
                
                
                (15,458
                )
                
                
                (2,101
                )Total
      property and equipment
                
                $
                1,043,861
                
                
                $
                371,566
  Depreciation
expense for the years ended August 31, 2008 and 2007 amounted to $13,691 and
$1,951, respectively.
  3.           
 CONVERTIBLE
NOTES PAYABLE
 
 From
March 2007 through October 2007, the Company entered into convertible note
agreements totaling $5,242,000.  Under the terms of the agreements,
amounts borrowed must be repaid by March 31, 2008 and accrue interest at the
rate of 8% per annum.  At the option of the Company or the convertible
note holder, the notes plus any accrued and unpaid interest may be converted
into shares of the Company’s common stock on the basis of $0.33 per
share.  The notes may be prepaid at any time, at the option of the
Company, in whole or in part without penalty.
 
 From
November 2007 through December 2007, all of the convertible notes payable
totaling $5,242,000 were converted into 15,726,000 shares of the Company’s
common stock on the basis of $0.33 per share.  In connection with the
note payable conversions, each note holder agreed to forgive accrued interest on
the notes totaling $168,989.
  F-21
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 4.            
NOTES PAYABLE –
RELATED PARTY
 
 On
November 28, 2005, the Company entered into a promissory note agreement with the
Company’s CEO and stockholder for $900,000 in exchange for the assignment of
certain intellectual property and trademark rights. Under the terms of the
promissory note agreement, the principal and any unpaid interest shall not
become due until the Company attains financial stability, defined as strong
revenue generation and cash flow.  Up to twelve quarterly payments may
be made to fulfill payment of this note.  The note may be prepaid
without premium or penalty. The note bears interest at 8% per annum and is
payable at any time before the repayment date. The note is secured by all
intellectual property, trademarks, ongoing research and development and all
other assets owned by the Company. On October 29, 2007, the CEO elected to
convert the outstanding balance on the promissory note agreement into common
stock of the Company.  The note payable balance totaling $803,500 was
converted into 2,410,500 shares of the Company’s common stock on the basis of
$0.33 per share.  In February 2008, accrued interest on the note
payable totaling $120,599 was converted into 361,797 shares of the Company’s
common stock on basis of $0.33 per share.
  5.           COMMITMENTS AND
CONTINGENCIES
 
 Consulting
Agreements
 
 In July
2007, the Company entered into a financial consulting agreement whereby the
consultant will be compensated 2% of the Company’s first ten million dollars of
sales and 1% of the second ten million dollars of sales.  The
agreement expires July 16, 2010.
 
 In
January 2008, the Company entered into a consulting and sales representative
agreement whereby the consultant will be compensated 5% of certain product
sales.  In addition, the consultant may earn warrants to purchase up
to 600,000 shares of the Company’s common stock upon meeting certain sales
targets.  The agreement expires December 31, 2008 and shall
automatically renew from year to year until terminated by either
party.
 
 In
February 2008, the Company entered into a framework, platform development and
assistance services agreement related to technological developments of the
database and website. Under the terms of the agreements, the Company is
obligated to pay approximately $270,000 from March 2008 through January
2009.  The agreements expire February 2011.
  F-22
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 5.        
    COMMITMENTS
AND CONTINGENCIES (Continued)
 
 Consulting
Agreements (Continued)
 
 In March
2008, the Company entered into a consulting services agreement for business
development and capital raising services.  Under the agreement, the
consultant will be compensated $10,000 per month in cash or in the form of
warrants.  In addition, the consultant will be paid a 7% commission
for capital raised and sales commissions ranging from 3% to 7% of net revenue
from certain customers.  The agreement expires August 1, 2008 and may
be extended for an additional six-month period.  In August 2008, the
agreement was extended for an additional six-month period expiring February 1,
2009.
 
 Operating
Leases
 
 The
Company leases approximately 7,000 square feet of general office space in
Anaheim, California, for base rent of $11,300.  The Company is also
responsible for its share of lease related operating expenses approximating
$1,500 per month.  The lease expires on December 31,
2009.
 
 Total
rental expense on operating leases for the years ended August 31, 2008, and 2007
was $114,771 and $71,992, respectively.
 
 As of
August 31, 2008, the future minimum lease payments are as follows:
 
 For the Years Ending
      August 312009
                
                $
                138,3122010
                
                
                46,556Total
                
                $
                184,868
 
 6.        
    EQUITY
 
 Common Stock (Reflects 3 for
1 stock split distributed October 20, 2008)
 
 All
shares of common stock for amounts received during the period from inception
(September 16, 2005) through August 31, 2006 were issued in June
2007.
  F-23
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 6.         
   EQUITY
 
 Common
Stock (Continued)
 
 In
November 2005, the Company performed a private placement and agreed to issue
60,000 shares of common stock at $0.33 per share for an aggregate total of
$20,000.
 
 In
November 2005, the Company agreed to issue 90,000 shares of its common stock in
exchange for legal services related to patents.  The shares were
valued at $30,000, which represents the fair market value on the date the
services were rendered.
 
 In March
2006, the Company performed a private placement and agreed to issue 75,000
shares of common stock at $0.33 per share for an aggregate total of
$25,000.
 
 In August
2006, the Company performed a private placement and agreed to issue 300,000
shares of common stock at $0.33 per share for an aggregate total of
$100,000.  The Company received cash proceeds totaling
$97,000.
 
 In July
2006, the Company issued 225,000 shares of common stock in exchange for $25,000
of accounting services and $50,000 in legal services.  The shares were
valued at $75,000, which represents the fair market value of the services
provided on the date of issuance.
 
 In July
2006, the Company received services valued at $150,000 and treated it as
additional paid-in capital.
 
 In
September 2006, the Company issued 450,000 shares of common stock for net cash
of $110,850 which is net of offering costs of $39,250, in cash
proceeds.
 
 In
November 2006, the Company issued 90,000 shares of common stock for net cash of
$22,500, which is net of offering costs of $7,500, in cash
proceeds.
 
 In
February 2007, the Company issued 750,000 shares of common stock in exchange for
net cash of $182,000, which is net of offering costs of $68,000, in cash
proceeds.
 
 In March
2007, the Company issued 75,000 shares of common stock in exchange for net cash
of $18,750, which is net of offering costs of $6,250 in cash
proceeds.
 
 In June
2007, the Company issued 165,000 shares of common stock for $55,000 in cash
proceeds.
  F-24
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 6.         
   EQUITY
 
 Common
Stock (Continued)
 
 In June
2007, the Company issued 50,400,000 shares of its common stock for cash proceeds
of $168.
 
 In August
2007, the Company issued 45,000 shares of common stock in exchange for the
conversion of a $15,000 note payable.
 
 In
October 2007, the Company issued 18,000 shares of common stock in exchange for
$6,000 of legal services.  The shares were valued at $6,000, which
represents the fair market value of the services provided.
 
 In
October 2007, the Company issued 2,410,500 shares of common stock in exchange
for the conversion of a $803,500 related party note payable (see Note
4).
 
 In
November 2007, the Company issued 1,276,632 shares of common stock in exchange
for $425,544 of consulting services.  The shares were valued at
$425,544, which represents the fair market value of the services
provided.
 
 In
November 2007, the Company issued 600,000 shares of common stock in exchange for
$830,000 of consulting services.  The shares were valued at $830,000,
which represents the fair market value of the services provided on the date of
issuance.
 
 In
November 2007, the Company issued 3,202,500 shares of common stock in exchange
for the conversion of $1,067,500 in notes payable (see Note 3).
 
 In
December 2007, the Company issued 12,523,500 shares of common stock in exchange
for the conversion of $4,174,500 in notes payable (see Note 3).
 
 In
February 2008, the Company issued 361,797 shares of common stock in exchange for
the conversion of $120,599 in accrued interest on a related party note payable
(see Note 4).
 
 In
February 2008, the Company issued 811,485 shares of common stock in exchange for
the conversion of $270,495 in accrued officer compensation.
 
 In June
2008, the Company issued 150,000 shares of common stock in exchange for
consulting services related to research and development.  The shares
were valued at $374,000, which represents the fair market value of the services
provided on the date of issuance.
  F-25
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 6.          
  EQUITY
(Continued)
 
 Warrants
 
 In August
2007, the Company issued a “Series A” warrant to purchase 1,500,000 common
shares at $0.33 per share and a “Series B” warrant to purchase 750,000 common
shares at $0.67 per share, in exchange for consulting services related to the
sale of the Company’s convertible promissory notes.  The fair value of
the warrants using the Black-Scholes option pricing model amounted to $1,408,167
and $563,624 for the “Series A” and “Series B” warrants, respectively (see Note
7).
 
 In June
2008, the Company issued “Series C” warrants to certain technology and legal
consultants to purchase a total of 180,000 common shares at $2.00 per share, in
exchange for consulting and advisory services related to developing the PocketFinder®.  The
fair value of the warrants using the Black-Scholes option pricing model amounted
to $353,447 (see Note 7).
 
 In August
2008, the Company issued a “Series D” warrant to purchase 18,405 common shares
at $4.89 per share and a “Series E” warrant to purchase 15,000 common shares at
$2.00 per share, to a sales consultant in exchange for advisory services related
to product sales.The
fair value of the warrants using the Black-Scholes option pricing model amounted
to $18,088 and $36,392 for the “Series D” and “Series E” warrants, respectively
(see Note 7).
 
 Stock Incentive
Plan
 
 On
September 10, 2007, the directors and shareholders adopted a 2007 Stock
Incentive Plan.  The plan reserves 750,000 shares for issuance
pursuant to options, grants of restricted stock or other stock-based
awards.  The plan is administered by the board of directors which has
the power, pursuant to the plan, to delegate the administration of the plan to a
committee of the board.  There were no grants made under the plan for
the year ended August 31, 2008.
 
 F-26
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 7.           
 STOCK OPTIONS
AND WARRANTS
 
 On August
15, 2007, the Company issued a “Series A” warrant to a consultant to purchase
1,500,000 shares of the Company’s common stock at $0.33 per share and a “Series
B” warrant to purchase 750,000 shares of the Company’s common stock at $0.67 per
share.  Both warrants terminate at the earlier of August 14, 2012 or
upon the Company’s sale and issuance of stock in a public offering with gross
proceeds in excess of $10 million.  The fair value of the Series A and
Series B warrants is capitalized as debt issuance costs, and will be amortized
over the remaining life of the note payable.  For the year ended
August 31, 2008, the Company recognized debt issuance cost amortization totaling
$1,971,791 for the Series A and Series B warrants.  The Company
calculated the fair value of the warrants by using the Black-Scholes option
pricing model.  No warrants were exercised as of August 31,
2008.
  On June
2, 2008, the Company issued “Series C” warrants to six technology and legal
consultants to purchase a total of 180,000 common shares at $2.00 per share, in
exchange for consulting and advisory services related to developing the PocketFinder®. The warrants
expire June 2, 2013.  The fair value of the warrants using the
Black-Scholes option pricing model amounted to $353,447 and is included in
general and administrative operating expenses for the year ended August 31,
2008.  No warrants were exercised as of August 31, 2008.
  On August
29, 2008, the Company issued a “Series D” warrant to purchase 18,405 common
shares at $1.63 per share and a “Series E” warrant to purchase 15,000 common
shares at $2.00 per share, to a sales consultant in exchange for advisory
services related to the sale of the Company’s PocketFinder®family of
products.The “Series D”
warrants and “Series E” warrants expire March 3, 2013 and June 2, 2013,
respectively.  The fair value of the warrants using the Black-Scholes
option pricing model amounted to $18,088 and $36,392 for the “Series D” and
“Series E” warrants, respectively.  No warrants were exercised as of
August 31, 2008.
  8.          
  PROVISION
FOR INCOME TAXES
 
 Deferred
income taxes are reported using the liability method.  Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary
differences.  Temporary differences arise from the difference between
the reported amounts of assets and liabilities and their tax
basis.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
  F-27
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 8.            
PROVISION
FOR INCOME TAXES (Continued)
 
 Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and tax rates on the date of enactment.
 
 The
Company did not provide any current or deferred U.S. federal income taxes or
benefits for any of the periods presented because the Company has experienced
operating losses since inception. The Company provided a full valuation
allowance on the net deferred tax asset, consisting of net operating loss carry
forwards, because management has determined that it is more likely than not that
we will not earn sufficient income to realize the deferred tax assets during the
carry forward period.
 
 The
components of the Company’s deferred tax asset as of August 31, 2008, are as
follows:
  Net
      operating loss carry forward
              
              $
              3,448,000Valuation
      allowance
              
              
              (3,448,000
              )Net
      deferred tax asset
              
              $
              -
 
 
 A
reconciliation of the combined federal and state statutory income taxes rate and
the effective rate is as follows:
  Federal
      tax at statutory rate
              
              $
              34.00
              %State
      income tax net of federal benefit
              
              
              5.83
              %Valuation
      allowance
              
              
              (39.83
              %)$
              -
  The
Company’s valuation allowance increased by $1,546,000 for the year ended August
31, 2008.
  F-28
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 8.        
    PROVISION
FOR INCOME TAXES (Continued)
 
 As of
August 31, 2008, the Company had federal and state net operating loss
carryforwards of approximately $10,000,000 which can be used to offset future
federal income tax.  The federal and state net operating loss
carryforwards expire at various dates through 2028.  Deferred tax
assets resulting from the net operating losses are reduced by a valuation
allowance, when, in the opinion of management, utilization is not reasonably
assured. These carryforwards may be limited upon a change in ownership or
consummation of a business combination under IRC Sections 381 and
382.
 
 9.           
 SUBSEQUENT
EVENTS
  On
September 3, 2008, the Company entered into an unsecured promissory note
agreement with the Company’s Co-President and stockholder for $950,000. Under
the terms of the promissory note agreement, the principal and any unpaid
interest shall be repaid by March 3, 2009, six months from the date of
issuance.  The note bears interest at 8% per annum and may be repaid
at any time before the repayment date, in part or in full, without
penalty.
 
 On
September 9, 2008, the Company paid its device manufacturer approximately
$219,000 to begin developing, calibrating and testing the production
lines.  An additional $225,000 is due to the device manufacturer
related to the establishment of the production lines.
 
 On
September 26, 2008, the Company received a purchase order for approximately
$3,700,000 from TagWorks LLC for PetFinderTMdevices to be delivered
in January 2009.  TagWorks LLC was co-founded by a shareholder of the
Company.
 
 On
October 13, 2008, the Board of Directors declared a 3 for 1 stock split to be
effected in the nature of a 200% stock dividend, whereby the holders of each
share of common stock received an additional two shares of common
stock.  The record date for the stock dividend was October 20, 2008
and resulted in the issuance of an additional 58,061,276 (pre-split) shares of
common stock. In addition, the Company’s articles of incorporation were amended
to increase its authorized shares in an amount that corresponds to the stock
split, thereby increasing the authorized shares of common stock from 100,000,000
to 300,000,000.  Unless otherwise indicated, all share and per-share
amounts in these financial statements have been retroactively restated to
reflect the 3 for 1 stock split as if the split had been in effect since
inception.
  F-29
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED AUGUST 31, 2008 AND 2007
 9.          
  SUBSEQUENT
EVENTS (Continued)
 
 On
October 16, 2008, the Company issued 1,500 shares of common stock in exchange
for consulting services related to technology development.  The shares
were valued at $4,050, which represents the fair market value of the services
provided on the date of issuance.
 
 On
October 21, 2008, the Company issued “Series F” warrants to purchase 300,000
common shares at $6.00 in exchange for consulting services related to capital
raising efforts and investor relations.  The warrants expire October
21, 2013.
 
 On
October 28, 2008, the Company issued 50,000 shares of common stock in exchange
for financial related advisory services.  The shares were valued at
$122,500, which represents the fair market value of the services provided on the
date of issuance.
 
 On
October 28, 2008, the Company issued 125,000 shares of common stock in exchange
for capital raising advisory services.  The shares were valued at
$306,250, which represents the fair market value of the services provided on the
date of issuance.
 
 On
October 28, 2008, the Company issued 8,356 shares of common stock in exchange
for legal advisory services.  The shares were valued at $18,383, which
represents the fair market value of the services provided on the date of
issuance.
 
 On
November 10, 2008, the Company issued “Series G” warrants to purchase 81,724
common shares at $2.45 in exchange for consulting services related to capital
raising efforts.  The warrants expire November 3, 2011.
 
 On
November 19, 2008, the Company issued 100,000 shares of common stock in exchange
for consulting services related to capital raising efforts.  The
shares were valued at $118,000, which represents the fair market value of the
services provided on the date of issuance.
  F-30


ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE




None.





ITEM
8A(T). CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures




Management
is responsible for establishing adequate internal controls and procedures
designed to ensure that information required to be disclosed in the reports that
we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.





As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's chief executive officer and the Company's chief
operating officer and principal financial officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended). Based on this evaluation, the Company's chief executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures were effective in ensuring that (i) information required
to be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
Securities and Exchange Commission and (ii) information required to be disclosed
in the reports the Company files or submits under the Securities Exchange Act of
1934, as amended, is accumulated and communicated to management, including the
Company's chief executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.




Changes
in Internal Controls Over Financial Reporting




There
were no changes in our internal controls over financial reporting during or that
could significantly affect these controls subsequent to the date of the
evaluation of those controls by the chief executive officer and principal
financial officer.





ITEM
8B. OTHER INFORMATION




None.





PART III





ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT




Executive Officers and
Directors.  Each of our directors is elected by the
stockholders for a term of one year and serves until his or her successor is
elected and qualified.  At present, no director is compensated for his
or her services as director.  The Company has not adopted any formal
procedure by which a stockholder may recommend non-issuers to serve on our board
of directors.




25




The board
of directors has no nominating, audit or compensation committee at this
time.




Each of
our three executive officers serve pursuant to employment contracts which
terminate in October 2012 subject to the automatic and successive one-year
extensions if not cancelled by either party.  See “Item 11, Executive
Compensation – Employment Contracts.”




The
following table sets forth information regarding our executive officer and
directors.




Name
            Age
            PositionDavid
      M. Morse
            55
            Co-President
      and Chief Executive Officer and DirectorJoseph
      F. Scalisi
            45
            Co-President
      and Chief Development Officer and DirectorDesiree
      Mejia
            37
            Chief
      Operating Officer, Secretary and
Director




Dr. Morse has been
Co-President, Chief Executive Officer and Chairman of the Board of Directors
since October 8, 2007.  From late 2001 to 2005, Dr. Morse was involved
in several start-up ventures providing consulting services (People Basics from
August 2001 to April, 2002 and ESP Networks from April, 2002 to July,
2004).  Early development work on the PocketFinder® began in 2004 and
resulted in the establishment of the Company in September of
2005.  Dr. Morse brings 20 years of executive-level experience to the
Company.  The majority of his career (1982 to 2001) has focused on the
consumer market, leading him to serve as Vice President of Consumer Billing
Services from 2000 to 2001 and his passion for customer service led to his
appointment as Chief Customer Officer for Pacific Bell (1997 to 2000) where he
worked directly with the Chairman and the Executive Committee to establish the
alignment of corporate strategy and process management
objectives.  Prior to then, he served as Vice President of Sales and
Service for SBC, now AT&T, the second largest telecommunications company in
the United States from 1991 to 1997.  While at SBC, he led an
organization of more than 4,000 employees in 23 locations, serving 7,000,000
households.  Subsequent to leading the consumer organization, he
served as Vice President of Product Marketing responsible for SBC’s core billing
product.




Dr. Morse
received a PhD in Organizational Behavior from Columbia Pacific University, a
Master of Arts degree in Psychology from the University of Northern Colorado and
a Bachelor of Science degree from Brigham Young University.




Dr. Morse
has given keynote addresses on education and business management to several
organizations and has lectured at University of California at Berkeley,
University of California at Davis, University of California at Los Angeles and
Massachusetts Institute of Technology and serves as Chair for the University of
California’s Board focused on Mathematics, Engineering, and Science Achievement
(MESA).




Mr. Scalisi has been
Co-President, Chief Development Officer and a director since October 11,
2007.  As co-founder of the operating Company, Mr. Scalisi designed
the first generation PocketFinder® device.  With vast of knowledge of
the communications industry, including expertise in patents and trademarks, Mr.
Scalisi is responsible for filing intellectual property applications,
architecting the PocketFinder design team (interactive voice recognition,
or IVR, mapping interface, man-machine user interface, and hardware design) and
participates in the negotiation of contracts.




Prior to
becoming involved with the PocketFinder® device, from February 2000 to November
2004, Mr. Scalisi was employed by ESP Networks doing wireless development for a
restricted use cellular phone with an automated pager system.




Mr. Scalisi has received 14
domestic issued patents along with four international patents.  He is
currently working on 12 additional patent applications filed over the past four
years.  He has attended Fullerton College.




26




Ms. Mejia
has been Chief Operating Officer, Secretary and a director since October 11,
2007.  As a co-founder of the Company, Ms. Mejia is responsible for
running the day-to-day operations and directly interacts with the Accounting and
Marketing departments.




Ms. Mejia
developed the PocketFinder® concept after realizing that a true need exists to
“see” your children even when you can’t be with them.  With co-founder
Joseph Scalisi, Ms. Mejia then took the concept of using a GSM/GPRS tracking
platform, combining it with a mapping service and creating a revolutionary
tracking system.  Thus the PocketFinder® system was born.




For the
five years prior to becoming our Chief Operating Officer, Ms. Mejia worked for
ESP Networks from December 2000 through November 2004.  Prior to that,
Ms. Mejia worked with venture capital firms to help raise funds for the
technology sector prior to 2000.  She also consulted with a wireless
manufacturing company to assist the launch of a new wireless
device.  Prior to this, Ms. Mejia worked with Deloitte and Touche, LLP
where her specialties were in the technology and telecommunications
field.  Previously, Ms. Mejia acted as the head researcher and
assistant to the Chairman at MESA Research, whose clients included AT&T,
Motorola, Nortel, 3Com and Phillips.  She has a Bachelor of Arts
degree in Sociology from California State University, Dominguez Hills,
California.




There are
no orders, judgments, or decrees of any governmental agency or administrator, or
of any court of competent jurisdiction, revoking or suspending for cause any
license, permit or other authority to engage in the securities business or in
the sale of a particular security or temporarily or permanently restraining any
of our officers or directors from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of securities, or
convicting such person of any felony or misdemeanor involving a security, or any
aspect of the securities business or of theft or of any felony, nor are any of
the officers or directors of any corporation or entity affiliated with us so
enjoined.  There have been no bankruptcy petitions filed by or against
any business in which any of our executive officers or directors was an
executive officer or general partner.  None of our executive officers
or directors has been convicted in a criminal proceeding (excluding traffic
violations) and none is subject to a pending criminal proceeding.




Other
Persons Expected to Make Significant Contributions.




DavidButler, through our agreement
with Aero Technology UK Ltd., provides us with wireless product development
consulting services.  For more than five years, he has been Managing
Director of Aero Technology UK Ltd., a British company, providing international
wireless communications expertise to its clients.




Roger Anderson provides us
with encryption, data compression and IVR consulting services.  For
more than five years, he has been the President or Manager of Call Knowing, LLC,
providing encryption, data compression and IVR expertise to its
clients.




Michael Beydler is
responsible for our “back office” network and platform design through a
consulting agreement with the Company.  For more than five years, he
has been the President or Manager of Coregenic LLC providing wireless network,
engineering and design services to its clients.




Any
compensation received by our officers directors, and management personnel will
be determined from time to time by our Board of Directors.  Our
officers, directors, and management personnel will be reimbursed for any
out-of-pocket expenses incurred on the Company’s behalf.




Code of Ethics.  We
have adopted a Code of Ethics (the “Code”) that applies to our directors,
officers and employees, including our principal executive officer and principal
financial and accounting officer, respectively.  A written copy of the
Code is available on written request to the Company.




27





Compliance with Section 16(a) of the
Exchange Act.  The Company does not yet have a class of equity
securities registered under the Securities Exchange Act of 1934, as
amended.  Hence, compliance with Section 16(a) thereof by Company
officers and directors is not required.











ITEM
10. EXECUTIVE COMPENSATION




Summary Compensation
Table.  The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our
executive officers during the years ending August 31, 2008 and
2007.  Our board of directors may adopt an incentive stock option plan
for our executive officers which would result in additional
compensation.




Summary Compensation
Table




Name
      and Principal Position
            
            Fiscal
              Year
              Ended
              8/31
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
              Awards
              ($)
            
            
            Option
      Awards
              ($)
            
            
            Non-Equity
      Incentive
              Plan
      Compensation($)
            
            
            Nonqualified
      Deferred Compensation Earnings
              ($)
            
            
            All
      Other Compensation
              ($)
            
            
            Total
              ($)David M. Morse(1)
            
            2008
            
            
            120,000
            (4)
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            120,000
            (4)2007
            
            
            120,000
            (4)
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            120,000
            (4)Joseph F.
      Scalisi (2)
            
            2008
            
            
            120,000
            (5)
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            120,000
            (5)2007
            
            
            120,000
            (5)
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            120,000
            (5)Desiree Mejia (3)
            
            2008
            
            
            120,000
            (6)
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            120,000
            (6)2007
            
            
            120,000
            (6)
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            –
            
            
            
            120,000
            (6)




(1)
            Co-President,
      Chief Executive Officer and Chairman of the Board(2)
            Co-President,
      Chief Development Officer and Director(3)
            Chief
      Operating Officer, Secretary and Director(4)
            In
      2008, $95,000 was paid and $25,000 was accrued for future
      payment.  In 2007, $30,000 was paid and $90,000 was accrued for
      future payment.  At the election of the officer, accrued officer
      compensation may be converted into common stock of the Company at a rate
      of $1 per share.


(5)
            In
      2008, $64,980 was paid and $55,020 was accrued for future
      payment.  In 2007, $103,450 was paid and $16,550 was accrued for
      future payment.  At the election of the officer, accrued officer
      compensation may be converted into common stock of the Company at a rate
      of $1 per share.  In June 2008, $140,495 of accrued compensation
      was converted into 140,925 shares of common
  stock.


(6)
            In
      2008, $115,097 was paid and $4,903 was accrued for future
      payment.  In 2007, $77,000 was paid and $43,000 was accrued for
      future payment.  At the election of the officer, accrued officer
      compensation may be converted into common stock of the Company at a rate
      of $1 per share.  In June 2008, $130,000 of accrued compensation
      was converted into 130,000 shares of common
  stock.




28




Outstanding Equity
Awards.  The table below summarizes the outstanding equity
awards to our executive officers as of August 31, 2008.




Outstanding
Equity Awards at Fiscal Year-End




Name
            
            Number
      of Securities Underlying Unexercised Options (#)
    Exercisable
            
            Number
      of Securities Underlying Unexercised Options (#)
    Unexercisable
            
            Equity
              Incentive
              Plan
      Awards: Number of Securities Underlying Unexercised Unearned
              Options
              (#)
            
            Option
      Exercise
              Price
              ($)
            
            Option
      Expiration Date
            
            Number
      of Shares or Units of
              Stock
      That Have Not Vested
              (#)
            
            Market
              Value
      of
              Shares
      or
              Units
      of
              Stock
      That
              Have
      Not
              Vested
              ($)
            
            Equity
              Incentive
      Plan Awards: Number
              of
      Unearned
              Shares,
      Units
              or
      Other rights
              That
      Have
              Not
      Vested
              (#)
            
            Equity
              Incentive
      Plan Awards: Market
              or
      Payout Value
              of
      Unearned
              Shares,
      Units
              or
      Other Rights
              That
      Have
              Not
      Vested
              ($)David
      Morse
            
            --
            
            2,000,000(1)
            
            --
            
            $1/share
            
            2017
            
            --
            
            --
            
            --
            
            --Joseph
      Scalisi
            
            --
            
            2,000,000(1)
            
            --
            
            $1/share
            
            2017
            
            --
            
            --
            
            --
            
            --Desiree
      Mejia
            
            --
            
            2,000,000(1)
            
            --
            
            $1/share
            
            2017
            
            --
            
            --
            
            --
            
            --





(1)
            Each
      officer holds an option to purchase up to 2,000,000 shares of common stock
      at $1 per share.  Options to purchase 1,000,000 shares each are
      exercisable when we achieve 100,000 customers, and the remaining options
      to purchase 1,000,000 shares each are exercisable when we achieve a total
      of 250,000 customers.  None of such options is presently
      exercisable.  All such options vest on a change of
      control.  The options expire ten years from the date of performance
      goal achieved.




Long-Term Incentive
Plans.  There are no arrangements or plans in which we provide
pension, retirement or similar benefits for directors or executive
officers.




Compensation of
Directors.  Our directors who are also our employees receive no
extra compensation for their service on our board of directors.




Employment
Contracts.




David Morse, our Chief
Executive Officer, is employed pursuant to a written agreement.  The
agreement expires on October 11, 2012; provided however, that it is
automatically extended for additional one-year periods unless either party
provides written notice to the contrary at least 60 days prior to the end of the
term then in effect.  Mr. Morse is entitled to a base salary of
$10,000 per month and is entitled to adjustments to his base salary based on
certain performance standards.  He may participate in any general
bonus plan established by the board of directors and is entitled to participate
in the stock incentive plan of the Company on such terms as the board deems
appropriate from time to time.  He will also be entitled to
participate in any and all benefits and perquisites as are generally provided
for the benefit of executive employees.  The agreement terminates on
his death, incapacity (after 180 days), resignation, good cause as defined and
good cause.  If he is terminated without cause, he is entitled to base
salary, all bonuses otherwise applicable, and medical benefits for two
years.




29




Joseph Scalisi, our
Co-President and Chief Development Officer, is employed pursuant to a written
agreement.  The agreement expires on October 11, 2012; provided
however, that it is automatically extended for additional one-year periods
unless either party provides written notice to the contrary at least 60 days
prior to the end of the term then in effect.  Mr. Scalisi is entitled
to a base salary of $10,000 per month and is entitled to adjustments to his base
salary based on certain performance standards.  He may participate in
any general bonus plan established by the board of directors and is entitled to
participate in the stock incentive plan of the Company on such terms as the
board deems appropriate from time to time.  He will also be entitled
to participate in any and all benefits and perquisites as are generally provided
for the benefit of executive employees.  The agreement terminates on
his death, incapacity (after 180 days),  resignation, and good cause
as defined.  If he is terminated without cause, he is entitled to base
salary, all bonuses otherwise applicable, and medical benefits for two
years.




Desiree Mejia, our Chief
Operating Officer and Secretary, is employed pursuant to a written
agreement.  The agreement expires on October 11, 2012; provided
however, that it is automatically extended for additional one-year periods
unless either party provides written notice to the contrary at least 60 days
prior to the end of the term then in effect.  Ms. Mejia is entitled to
a base salary of $10,000 per month and is entitled to adjustments to her base
salary based on certain performance standards.  She may participate in
any general bonus plan established by the board of directors and is entitled to
participate in the stock incentive plan of the Company on such terms as the
board deems appropriate from time to time.  She will also be entitled
to participate in any and all benefits and perquisites as are generally provided
for the benefit of executive employees.  The agreement terminates on
her death, incapacity (after 180 days), resignation, good cause as defined and
good cause.  If she is terminated without cause, she is entitled to
base salary, all bonuses otherwise applicable, and medical benefits for two
years.




ITEM
11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS




The
following table sets forth certain information as of November 20, 2008,
regarding the beneficial ownership of our common stock by (i) each stockholder
known by us to be the beneficial owner of more than five percent of our common
stock, (ii) by each of our executive officers and (iii) by all of our executive
officers and directors as a group.  Each of the persons named in the
table has sole voting and investment power with respect to common stock
beneficially owned.  Unless otherwise noted in the table, the address
for each of the persons identified is 4989 East La Palma Avenue, Anaheim,
California 92807.




Name
      and Address
              of
      Beneficial Owner
            
            Amount
      and Nature
              of
      Beneficial Ownership
            
            Percent
              of
      Common StockDavid
      M. Morse
              Co-President,
      CEO and Chairman of the Board
            
            16,800,000
      shares
            
            18.95%Joseph
      F. Scalisi
              Co-President
      and Chief Development Officer and Director
            
            16,800,000
      shares
            
            18.95%Desiree
      Mejia
              Chief
      Operating Officer, Secretary and Director
            
            16,800,000
      shares
            
            18.95%All
      directors and named executive officers as a group
            
            16,800,000
      shares
            
            56.85%




Changes in
Control.  We are not aware of any arrangements which may result
in “changes in control” as that term is defined by the provisions of Item 403 of
Regulation S-B.




30




ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE




Director
Independence.  None of our directors are independent within the
definition of “independence” set forth in Item 407(a) of Regulation
S-B.





Related Party
Transactions.  There have been no related party transactions,
or any other transactions or relationships required to be disclosed pursuant to
Item 404 of Regulation S-B, except as follows:




On
November 28, 2005, the Company issued a promissory note to David Morse in the
amount of $900,000 for funds loaned by Dr. Morse.  The note was
secured by a pledge of the patents and trademarks owned by the
Company.  As of the date hereof, the principal balance of the note has
been reduced to zero through a combination of cash payments in the amount of
$96,500 and the issuance of 803,500 shares of common stock at $1 per
share.  In addition, accrued interest related to the note totaling
$120,599 was converted into common stock of the Company at $1 per
share.




From
inception to August 31, 2008, each of David Morse, Joseph Scalisi and Desiree
Mejia were paid salaries or other compensation totaling $405,000 (of which
$230,000 was accrued for future payment), $405,000 (of which $20,000 was accrued
for future payment) and $405,000 (of which $18,403 was accrued for future
payment), respectively.





On August
15, 2008, the Company entered into a consulting agreement with Richard Mejia,
Jr. for business and financial advisory services related to fund raising,
corporate governance and SEC filings.  The agreement expires February
15, 2009, but may be extended for an additional six-month period.  Mr.
Mejia receives an hourly amount for his services that may be paid in a
combination of cash and/or equity with the cash portion not to exceed
50%.  Mr. Mejia is related to Desiree Mejia, Chief Operating Officer,
Secretary and Director, of the Company.  Mr. Mejia, is a retired
partner from Ernst & Young LLP, one of the four largest accounting firms in
the world, and is the father of Desiree Mejia, Chief Operating Officer,
Secretary and Director, of the Company.  Through November 30, 2008,
Mr. Mejia has not received, nor is due any compensation for
services.





On
September 3, 2008, the Company entered into an unsecured promissory note
agreement with Joseph Scalisi, the Company’s Co-President and stockholder, for
$950,000. Under the terms of the promissory note agreement, the principal and
any unpaid interest shall be repaid by March 3, 2009, six months from the date
of issuance.  The note bears interest at 8% per annum and may be
repaid at any time before the repayment date, in part or in full, without
penalty.





Dr.
Morse, Mr. Scalisi and Ms. Mejia have employment contracts with the Company and
each holds an option to purchase up to 2,000,000 shares at $1 per share upon
achieving certain operational benchmarks.  (See “Directors, Executive
Officer, Promoters and Control Persons – Outstanding Equity Awards;” and “Item
11.  Executive Compensation – Employment Contracts” for
details.)




With
regard to any future related party transaction, we plan to fully disclose any
and all related party transactions in the following manor:




Ÿ           disclosing
such transactions in reports where required;


Ÿ           disclosing
in any and all filings with the SEC, where required;


Ÿ           obtaining
disinterested directors consent; and


Ÿ           obtaining
shareholder consent where required.




All
members of the Board of Directors are also employees at the present
time.  It is expected that independent Board members will be brought
onto the Board within 90 days of product launch.




31




ITEM
13. EXHIBITS




Exhibit
      No.*
            
            Document Description3.1
            
            Articles
      of Incorporation of Springbank Resources, Inc. (now known as Location
      Based Technologies, Inc.)(1)3.1A
            
            Amended
      Articles of Incorporation, dated October 20, 2008 (12)3.2
            
            Amended
      and Restated By-Laws of Location Based Technologies,
    Inc.(2)4.1
            
            Form
      of Convertible Note (convertible at the option of the Company) issued by
      PocketFinder, LLC, a company the liabilities of which were assumed by the
      registrant ($3,175,000 represented by six of such notes were
      issued)(3)4.2
            
            Form
      of Convertible Note (convertible at the option of the noteholder) issued
      by PocketFinder, LLC, a company the liabilities of which were assumed by
      the registrant ($2,067,000 represented by 26 of such notes were
      issued)(3)10.1
            
            Executive
      Employment Agreement, dated October 11, 2007, between the Company and
      David Morse(3)10.2
            
            Executive
      Employment Agreement, dated October 11, 2007, between the Company and
      Joseph Scalisi(3)10.3
            
            Executive
      Employment Agreement, dated October 11, 2007, between the Company and
      Desiree Mejia(3)10.4
            
            Stock
      Option Award Agreement between Location Based Technologies, Corp. and
      David Morse, dated August 30, 2007 (obligation assumed by the Company)
      (3)10.5
            
            Stock
      Option Award Agreement between Location Based Technologies, Corp. and
      Joseph Scalisi, dated August 30, 2007 (obligation assumed by the
      Company)(3)10.6
            
            Stock
      Option Award Agreement between Location Based Technologies, Corp. and
      Desiree Mejia, dated August 30, 2007 (obligation assumed by the
      Company)(3)10.7
            
            Series
      A Warrant Agreement, dated August 15, 2007, in favor of Northstar
      Investments, Inc. (3)10.8
            
            Series
      B Warrant Agreement, dated August 15, 2007, in favor of Northstar
      Investments, Inc. (3)10.9
            
            Finders
      Fee Agreement, dated March 9, 2007, between Northstar Investments, Inc.
      and PocketFinder, LLC (obligation assumed by the
    Company)(3)10.10
            
            Consulting
      Agreement, dated July 16, 2007, between Northstar Investments, Inc. and
      PocketFinder, LLC (obligation assumed by the Company
  )(3)10.11
            
            2007
      Stock Incentive Plan of Location Based Technologies, Corp., adopted
      September 10, 2007 (obligation assumed by the
  Company)(3)10.12
            
            Product
      Design Agreement, dated May 1, 2007, between Location Based Technologies
      and Aero Technology UK, Ltd. (obligation assumed by the
      Company)(3)10.13
            
            PocketFinder
      Branding and Website – Control Agreement, dated September 20, 2006,
      between Coregenic LLC and PocketFinder, LLC (obligation assumed by the
      Company)(3)10.14
            
            Coregenic
      Professional Services Contract, dated September 27, 2006, between
      Coregenic LLC and PocketFinder, LLC (obligation assumed by the
      Company)(3)10.15
            
            Consulting
      Agreement, dated October 3, between Location Based Technologies and
      Michael Beydler (obligation assumed by the Company)(3)10.16
            
            Consulting
      Agreement, dated July 10, 2006, between Location Based Technologies and
      Roger Anderson (obligation assumed by the Company)(3)10.17
            
            Loan
      Promissory Note in the amount of $900,000, dated November 28, 2005, with
      PocketFinder, Inc. as maker and David Morse as payee, secured by the
      intellectual property of maker (obligation assumed by the
      Company)(3)10.18
            
            M2M
      Telecommunications Services Agreement (portions of Attachment D to this
      Exhibit 99.1 have been omitted pursuant to a request for confidential
      treatment which has been approved by the
  Commission)(4)




32




10.19
            
            Consulting
      Agreement between the Company and Brooks Secrest, dated December 10, 2007
      (13)10.20
            
            Consulting
      and Sales Representative Agreement, dated January 2, 2008, with WhizBiz,
      LLC, to act as the Company’s consultant and sales representative
      (13)10.21
            
            Consulting
      Agreement, dated January 2, 2008, with Tina Florance, CPA, for services to
      serve as the Company’s Controller (13)10.22
            
            Framework
      Agreement between the Company and NXP Software, B.V. (“NXP”), dated
      February 27, 2008 (6)10.23
            
            Technology
      License and Distribution Agreement between the Company and NXP, dated
      February 27, 2008 (7)10.24
            
            Platform
      Development Agreement between the Company and NXP, dated February 27, 2008
      (8)10.25
            
            Assistance
      Services Agreement between the Company and NXP, dated February 27, 2008
      (9)10.26
            
            Call
      Center Services Contract between the Company and 24/7 INtouch, dated
      September 25, 2007 (14)10.27
            
            Manufacturing
      Services Agreement between the Company and Jabil Circuit, Inc., dated May
      30, 2008 (10)10.28
            
            Business
      Development Consulting Agreement between the Company and The Scigliano
      Group, dated March 1, 2008 (14)10.29
            
            Consulting
      Services Agreement between the Company and Richard Mejia, Jr., dated
      August 15, 200810.30
            
            Loan
      Promissory Note in the amount of $950,000, dated September 3, 2008, with
      the Company as maker and Joseph Scalisi as payee (11)10.31
            
            Consulting
      Services Agreement between the Company and Michael Dautermann, dated
      October 16, 200810.32
            
            Consent
      of Independent Registered Public Accounting Firm31.1
            
            Sarbanes
      Oxley Act Section 302 Certification of Chief Executive
    Officer31.2
            
            Sarbanes
      Oxley Act Section 302 Certification of Principal Financial
      Officer32
            
            Sarbanes
      Oxley Act Section 906 Certification of Chief Executive Officer and
      Principal Financial Officer99.1
            
            Code
      of Ethics (5)


(1)
            Filed
      as Exhibit 3.(I) to registrant’s registration statement on Form SB-2 filed
      with the SEC December 15, 2006 (Commission File No. 333-139395) (the “SRI
      SB-2”) and incorporated herein by this reference.(2)
            Filed
      as Exhibit 3.(II) to the SRI SB-2 and incorporated herein by this
      reference.


(3)
            Filed
      as like-numbered exhibits to the registrant’s Current Report on Form 8-K
      filed with the SEC on October 12, 2007 (the “October 12, 2007 8-K”) and
      incorporated herein by this reference.(4)
            Filed
      as Exhibit 99.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on December 5, 2007 and incorporated herein by this
      reference.


(5)
            Filed
      as Exhibit 99.4 to the October 12, 2007 8-K.(6)
            Filed
      as Exhibit 10.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on February 29, 2008 (“February 29, 2008
  8-K”).


(7)
            Filed
      as Exhibit 10.2 to registrant’s February 29, 2008 8-K.(8)
            Filed
      as Exhibit 10.3 to registrant’s February 29, 2008
  8-K.


(9)
            Filed
      as Exhibit 10.4 to registrant’s February 29, 2008 8-K.(10)
            Filed
      as Exhibit 99.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on June 4, 2008 (“June 4, 2008 8-K”).(11)
            Filed
      as Exhibit 99.1 to registrants’ Current Report on Form 8-K filed with the
      SEC on September 12, 2008 (“September 12, 2008 8-K”)(12)
            Filed
      as Exhibit 3.01 to registrants’ Current Report on Form 8-K filed with the
      SEC on October 22, 2008 (“October 22, 2008 8-K”)(13)
            Filed
      as like-numbered exhibits to registrant’s Form 10-QSB filed with the SEC
      on April 10, 2008(14)
            Filed
      as like-numbered exhibits to registrant’s Form 10-QSB filed with the SEC
      on July 14, 2008





*
            Exhibit
      numbers follow the numbering pattern for exhibits set forth in Item 601 of
      Regulation S-B




33




ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.





Comiskey
& Company and Mendoza Berger & Company LLP served as our independent
registered public accounting firms for the fiscal years ended August 31, 2008
and 2007, respectively.  The following table represents the fees
billed to us for the audit and other services provided by our
accountants:





2008
            
            
            2007Audit
      Fees
            
            $
            98,891
            
            
            $
            -Tax
      Fees
            
            
            2,400
            
            
            
            -All
      other Fees
            
            
            -
            
            
            
            -Total
      Fees
            
            $
            101,291
            
            
            $
            -





AUDIT
FEES. This category includes the annual audit of our consolidated financial
statements included in our Form 10-KSB and the quarterly reviews of our
consolidated financial statements included in our Form 10-QSB.  This
category also includes advice on accounting matters that is normally provided by
the accountant in connection with statutory and regulatory filings.





TAX FEES.
These fees relate to the preparation and review of tax returns, tax planning and
tax advisory services.





ALL OTHER
FEES. None.





Pre-Approval Policies and
Procedures.Prior to engaging our accountants to perform a
particular service, our board of directors obtains an estimate for the service
to be performed.  All of the services described above were approved by
the board of directors in accordance with its procedures.




34




Signatures




In
accordance with Section 13 or 15(d) of the Exchange Act, the company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




LOCATION
      BASED TECHNOLOGIES, INC.
              (Registrant)Date:
      December 11, 2008
            By:
            /s/ David
      M. MorseDavid
      M. MorseCo-
      President and Chief Executive Officer






In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the company and in the capacities and on the
dates indicated.




Date:
      December 11, 2008
            By:
            /s/ David
      M. MorseDavid
      M. MorseDirector




Date:
      December 11, 2008
            By:
            /s/ Joseph
      ScalisiJoseph
      ScalisiDirector




Date:
      December 11, 2008
            By:
            /s/ Desiree
      MejiaDesiree
      MejiaDirector






SUPPLEMENTAL
INFORMATION TO BE FURNISHED WITH REPORTS FILED


PURSUANT
TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS




1.
            No
      annual report to security holders covering the company’s fiscal year ended
      August 31, 2008, has been sent as of the date of this
    report.




2.
            No
      proxy soliciting material have been sent to the company’s security holders
      with respect to the 2009 annual meeting of security
    holders.




3.
            If
      such report or proxy material is furnished to security holders subsequent
      to the filing of this Report on Form 10-KSB, the company will furnish
      copies of such material to the Commission at the time it is sent to
      security holders.