UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q







(Mark One)




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




For the
quarter ended May 31, 2009




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)




888-600-1044


(Issuer’s
telephone number)







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





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





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




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





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





There are 96,157,054 shares outstanding
of the issuer’s common stock as of July 6, 2009.









TABLE
OF CONTENTS




PAGEPART
      I
                                    
                                    FINANCIAL
      INFORMATION
                                    
                                    1ITEM 1.
                                    
                                    FINANCIAL
      STATEMENTS (UNAUDITED)
                                    
                                    1ITEM
      2.
                                    
                                    MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                    
                                    2ITEM
      3.
                                    
                                    QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                    
                                    10ITEM
      4T.
                                    
                                    CONTROLS
      AND PROCEDURES
                                    
                                    11PART
      II
                                    
                                    OTHER
      INFORMATION
                                    
                                    11ITEM 1.
                                    
                                    LEGAL
      PROCEEDINGS
                                    
                                    11ITEM
      1.A.
                                    
                                    RISK
      FACTORS
                                    
                                    11ITEM 2.
                                    
                                    UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                                    
                                    11ITEM 3.
                                    
                                    DEFAULTS
      UPON SENIOR SECURITIES
                                    
                                    11ITEM 4.
                                    
                                    SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                                    
                                    11ITEM
      5.
                                    
                                    OTHER
      INFORMATION
                                    
                                    12ITEM 6.
                                    
                                    EXHIBITS
                                    
                                    13SIGNATURE
                                    
                                    16




i




PART
I – FINANCIAL INFORMATION






ITEM
1.  FINANCIAL STATEMENTS






LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 AND
FOR THE PERIOD FROM INCEPTION
 (SEPTEMBER
16, 2005) THROUGH MAY 31, 2009
 
 TABLE
OF CONTENTS
 
 Financial
      StatementsConsolidated
      Balance Sheets
                              F-1Consolidated
      Statements of Operations
                              F-2Consolidated
      Statements of Changes in Stockholders’ Equity (Deficit)
                              F-3Consolidated
      Statements of Cash Flows
                              F-8Notes
      to Financial Statements
                              F-10
  1




LOCATION
BASED TECHNOLOGIES, INC.


(A
Development Stage Company)


CONSOLIDATED
BALANCE SHEETS


MAY
31, 2009 and August 31, 2008






May
      31,
                      
                      
                      August
      31,2009
                      
                      
                      2008(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                      
                      $
                      211,756
                      
                      
                      $
                      20,569Costs
      and estimated earnings in excess of billingson
      uncompleted contracts
                      
                      
                      72,050
                      
                      
                      
                      -Prepaid
      expenses
                      
                      
                      76,796
                      
                      
                      
                      86,616Deferred
      financing costs
                      
                      
                      79,000
                      
                      
                      
                      -Total
      current assets
                      
                      
                      439,602
                      
                      
                      
                      107,185Property
      and equipment, net of accumulated depreciation
                      
                      
                      1,236,496
                      
                      
                      
                      1,043,861OTHER
      ASSETSPatents
      and trademarks, net of accumulated amortization
                      
                      
                      1,221,048
                      
                      
                      
                      1,120,728Deposits
                      
                      
                      20,458
                      
                      
                      
                      20,458Total
      other assets
                      
                      
                      1,241,506
                      
                      
                      
                      1,141,186TOTAL
      ASSETS
                      
                      $
                      2,917,604
                      
                      
                      $
                      2,292,232LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                      
                      $
                      1,014,243
                      
                      
                      $
                      634,822Accrued
      officer compensation
                      
                      
                      459,653
                      
                      
                      
                      268,403Advances
      from officers
                      
                      
                      -
                      
                      
                      
                      159,409Notes
      payable
                      
                      
                      1,125,000
                      
                      
                      
                      -Accrued
      interest, notes payable
                      
                      
                      56,737
                      
                      
                      
                      -Total
      current liabilities
                      
                      
                      2,655,633
                      
                      
                      
                      1,062,634TOTAL
      LIABILITIES
                      
                      
                      2,655,633
                      
                      
                      
                      1,062,634Commitments
      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;95,791,851
      and 87,091,914 shares issued and outstandingat
      May 31, 2009 and August 31, 2008, respectively
                      
                      
                      33,392
                      
                      
                      
                      24,693Common
      stock to be issued
                      
                      
                      92
                      
                      
                      
                      -Additional
      paid-in capital
                      
                      
                      20,138,485
                      
                      
                      
                      11,228,750Prepaid
      services paid in common stock
                      
                      
                      (1,754,980
                      )
                      
                      
                      -Deficit
      accumulated during the development stage
                      
                      
                      (18,155,018
                      )
                      
                      
                      (10,023,845
                      )Total
      stockholders' equity (deficit)
                      
                      
                      261,971
                      
                      
                      
                      1,229,598TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                      
                      $
                      2,917,604
                      
                      
                      $
                      2,292,232






See accompanying notes to
unaudited financial statements.




F-1


LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For
the three and nine months ended May 31, 2009 and 2008
 and for the period from
Inception (September 16, 2005) to May 31, 2009
 (Unaudited)


InceptionFor
      the three months ended
                                              
                                              
                                              For
      the nine months ended
                                              
                                              
                                              (Sept
      16, 2005)May
      31,
                                              
                                              
                                              May
      31,
                                              
                                              
                                              May
      31,
                                              
                                              
                                              May
      31,
                                              
                                              
                                              to
      May 31,2009
                                              
                                              
                                              2008
                                              
                                              
                                              2009
                                              
                                              
                                              2008
                                              
                                              
                                              2009RevenueConsulting
                                              
                                              $
                                              553,059
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              623,841
                                              
                                              
                                              $
                                              5,818
                                              
                                              
                                              $
                                              629,659Cost
      of revenueConsulting
                                              
                                              
                                              173,712
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              224,320
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              224,320Gross
      profit (loss)
                                              
                                              
                                              379,347
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              399,521
                                              
                                              
                                              
                                              5,818
                                              
                                              
                                              
                                              405,339Operating
      expensesGeneral
      and administrative
                                              
                                              
                                              309,648
                                              
                                              
                                              
                                              196,446
                                              
                                              
                                              
                                              620,724
                                              
                                              
                                              
                                              601,394
                                              
                                              
                                              
                                              1,590,432Officer
      compensation
                                              
                                              
                                              1,389,750
                                              
                                              
                                              
                                              90,000
                                              
                                              
                                              
                                              1,569,750
                                              
                                              
                                              
                                              270,000
                                              
                                              
                                              
                                              2,784,750Professional
      fees
                                              
                                              
                                              431,837
                                              
                                              
                                              
                                              127,066
                                              
                                              
                                              
                                              1,265,395
                                              
                                              
                                              
                                              1,543,393
                                              
                                              
                                              
                                              3,548,743Rent
                                              
                                              
                                              33,900
                                              
                                              
                                              
                                              33,900
                                              
                                              
                                              
                                              101,700
                                              
                                              
                                              
                                              80,871
                                              
                                              
                                              
                                              315,705Research
      and development
                                              
                                              
                                              333,022
                                              
                                              
                                              
                                              915,840
                                              
                                              
                                              
                                              1,130,486
                                              
                                              
                                              
                                              1,464,281
                                              
                                              
                                              
                                              3,768,839Total
      operating expenses
                                              
                                              
                                              2,498,157
                                              
                                              
                                              
                                              1,363,252
                                              
                                              
                                              
                                              4,688,055
                                              
                                              
                                              
                                              3,959,939
                                              
                                              
                                              
                                              12,008,469Net
      operating loss
                                              
                                              
                                              (2,118,810
                                              )
                                              
                                              
                                              (1,363,252
                                              )
                                              
                                              
                                              (4,288,534
                                              )
                                              
                                              
                                              (3,954,121
                                              )
                                              
                                              
                                              (11,603,130
                                              )Other
      income (expense)Interest
      income (expense), net
                                              
                                              
                                              (52,910
                                              )
                                              
                                              
                                              11,385
                                              
                                              
                                              
                                              (109,243
                                              )
                                              
                                              
                                              74,941
                                              
                                              
                                              
                                              (407,620
                                              )Interest
      forgiven, net
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              58,206
                                              
                                              
                                              
                                              58,206Debt
      issuance costs - commissions
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (491,775
                                              )
                                              
                                              
                                              (491,775
                                              )Debt
      issuance costs - warrants
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (1,971,791
                                              )
                                              
                                              
                                              (1,971,791
                                              )Financing
      costs
                                              
                                              
                                              (849,642
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (3,727,191
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (3,727,191
                                              )Foreign
      currency gain (loss), net
                                              
                                              
                                              (1,956
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (5,405
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (5,744
                                              )Loss
      on asset disposal
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (373
                                              )
                                              
                                              
                                              (373
                                              )Total
      other income (expense)
                                              
                                              
                                              (904,508
                                              )
                                              
                                              
                                              11,385
                                              
                                              
                                              
                                              (3,841,839
                                              )
                                              
                                              
                                              (2,330,792
                                              )
                                              
                                              
                                              (6,546,288
                                              )Net
      loss before income taxes
                                              
                                              
                                              (3,023,318
                                              )
                                              
                                              
                                              (1,351,867
                                              )
                                              
                                              
                                              (8,130,373
                                              )
                                              
                                              
                                              (6,284,913
                                              )
                                              
                                              
                                              (18,149,418
                                              )Provision
      for income taxes
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              800
                                              
                                              
                                              
                                              1,600
                                              
                                              
                                              
                                              5,600Net
      Loss
                                              
                                              $
                                              (3,023,318
                                              )
                                              
                                              $
                                              (1,351,867
                                              )
                                              
                                              $
                                              (8,131,173
                                              )
                                              
                                              $
                                              (6,286,513
                                              )
                                              
                                              $
                                              (18,155,018
                                              )Accumulated
      Deficit:Balance,
      beginning of period
                                              
                                              
                                              (15,131,700
                                              )
                                              
                                              
                                              (7,223,989
                                              )
                                              
                                              
                                              (10,023,845
                                              )
                                              
                                              
                                              (2,289,343
                                              )
                                              
                                              
                                              -Balance,
      end of period
                                              
                                              $
                                              (18,155,018
                                              )
                                              
                                              $
                                              (8,575,856
                                              )
                                              
                                              $
                                              (18,155,018
                                              )
                                              
                                              $
                                              (8,575,856
                                              )
                                              
                                              $
                                              (18,155,018
                                              )Basic
      - Earnings (loss) per share
                                              
                                              $
                                              (0.03
                                              )
                                              
                                              $
                                              (0.02
                                              )
                                              
                                              $
                                              (0.09
                                              )
                                              
                                              $
                                              (0.08
                                              )Basic
      - Weighted Average Numberof
      Shares Outstanding
                                              
                                              
                                              89,618,119
                                              
                                              
                                              
                                              86,941,914
                                              
                                              
                                              
                                              88,225,918
                                              
                                              
                                              
                                              77,707,362






See accompanying notes to
unaudited financial statements.




F-2




LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For
the period from Inception
(September 16, 2005) to May 31, 2009
 (Unaudited)


Prepaid
                    
                    
                    DeficitServices
                    
                    
                    Accumulated
                    
                    
                    TotalPreferred
      Stock
                    
                    
                    Common
      Stock
                    
                    
                    Additional
                    
                    
                    Paid-In
                    
                    
                    During
      the
                    
                    
                    StockholdersNumber
                    
                    
                    
                    
                    
                    Number
                    
                    
                    
                    
                    
                    To
      be
                    
                    
                    Paid-In
                    
                    
                    Common
                    
                    
                    Development
                    
                    
                    Equityof
      Shares
                    
                    
                    Amount
                    
                    
                    of
      Shares
                    
                    
                    Amount
                    
                    
                    issued
                    
                    
                    Capital
                    
                    
                    Stock
                    
                    
                    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
                    
                    
                    
                    150
                    
                    
                    
                    100
                    
                    
                    
                    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
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    182,000   See accompanying notes to
unaudited financial statements.
  F-3
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For
the period from Inception
(September 16, 2005) to May 31, 2009
 (Unaudited)
 Prepaid
                      
                      
                      DeficitServices
                      
                      
                      Accumulated
                      
                      
                      TotalPreferred
      Stock
                      
                      
                      Common
      Stock
                      
                      
                      Additional
                      
                      
                      Paid-In
                      
                      
                      During
      the
                      
                      
                      StockholdersNumber
                      
                      
                      
                      
                      
                      Number
                      
                      
                      
                      
                      
                      To
      be
                      
                      
                      Paid-In
                      
                      
                      Common
                      
                      
                      Development
                      
                      
                      Equityof
      Shares
                      
                      
                      Amount
                      
                      
                      of
      Shares
                      
                      
                      Amount
                      
                      
                      issued
                      
                      
                      Capital
                      
                      
                      Stock
                      
                      
                      Stage
                      
                      
                      (Deficit)
 Issuance
      of common stock, net of offering costs, for cash, March
    2007
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        75,000
                        
                        
                        
                        25
                        
                        
                        
                        -
                        
                        
                        
                        18,725
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        18,750Issuance
      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
unaudited financial statements.
  F-4
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For
the period from Inception
(September 16, 2005) to May 31, 2009
 (Unaudited)
 Prepaid
                        
                        
                        DeficitServices
                        
                        
                        Accumulated
                        
                        
                        TotalPreferred
      Stock
                        
                        
                        Common
      Stock
                        
                        
                        Additional
                        
                        
                        Paid-In
                        
                        
                        During
      the
                        
                        
                        StockholdersNumber
                        
                        
                        
                        
                        
                        Number
                        
                        
                        
                        
                        
                        To
      be
                        
                        
                        Paid-In
                        
                        
                        Common
                        
                        
                        Development
                        
                        
                        Equityof
      Shares
                        
                        
                        Amount
                        
                        
                        of
      Shares
                        
                        
                        Amount
                        
                        
                        issued
                        
                        
                        Capital
                        
                        
                        Stock
                        
                        
                        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
                          )
                          
                          
                          1,229,598Issuance
      of common stock for services, October 2008
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          184,856
                          
                          
                          
                          184
                          
                          
                          
                          -
                          
                          
                          
                          453,088
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          453,272Issuance
      of common stock for services, November 2008
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          100,000
                          
                          
                          
                          100
                          
                          
                          
                          -
                          
                          
                          
                          112,900
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          113,000Issuance
      of Series G warrants, November 2008
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          160,939
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          160,939Issuance
      of Series H warrants, November 2008
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,115,361
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,115,361Issuance
      of common stock for services, December 2008
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          401,500
                          
                          
                          
                          402
                          
                          
                          
                          -
                          
                          
                          
                          398,828
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          399,230
 See accompanying notes to
unaudited financial statements.
 F-5
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For
the period from Inception
(September 16, 2005) to May 31, 2009
 (Unaudited)
 Prepaid
                        
                        
                        DeficitServices
                        
                        
                        Accumulated
                        
                        
                        TotalPreferred
      Stock
                        
                        
                        Common
      Stock
                        
                        
                        Additional
                        
                        
                        Paid-In
                        
                        
                        During
      the
                        
                        
                        StockholdersNumber
                        
                        
                        
                        
                        
                        Number
                        
                        
                        
                        
                        
                        To
      be
                        
                        
                        Paid-In
                        
                        
                        Common
                        
                        
                        Development
                        
                        
                        Equityof
      Shares
                        
                        
                        Amount
                        
                        
                        of
      Shares
                        
                        
                        Amount
                        
                        
                        issued
                        
                        
                        Capital
                        
                        
                        Stock
                        
                        
                        Stage
                        
                        
                        (Deficit)
 Issuance
      of common stock for services, January 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            136,000
                            
                            
                            
                            136
                            
                            
                            
                            -
                            
                            
                            
                            140,021
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            140,157Issuance
      of common stock for services, February 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            330,000
                            
                            
                            
                            330
                            
                            
                            
                            -
                            
                            
                            
                            309,870
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            310,200Issuance
      of common stock in connection with note payable extensions, April
      2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            100,000
                            
                            
                            
                            100
                            
                            
                            
                            -
                            
                            
                            
                            63,900
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            64,000Issuance
      of common stock for services, April 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            235,000
                            
                            
                            
                            235
                            
                            
                            
                            -
                            
                            
                            
                            150,165
                            
                            
                            
                            (92,480
                            )
                            
                            
                            -
                            
                            
                            
                            57,920Recognition
      of prepaid services paid in common stock upon conversion of related
      advances from officers, May 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (1,662,500
                            )
                            
                            
                            -
                            
                            
                            
                            (1,662,500
                            )Issuance
      of common stock for services, May 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            281,101
                            
                            
                            
                            281
                            
                            
                            
                            -
                            
                            
                            
                            303,946
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            304,227Issuance
      of common stock for officer compensation, May 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            900,000
                            
                            
                            
                            900
                            
                            
                            
                            -
                            
                            
                            
                            1,295,100
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,296,000Issuance
      of common stock for conversion of related party notes payable, advances
      from officers, and accrued interest, May 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            5,950,835
                            
                            
                            
                            5,950
                            
                            
                            
                            -
                            
                            
                            
                            4,210,041
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            4,215,991Issuance
      of common stock for cash proceeds, net of offering costs, May
      2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            80,645
                            
                            
                            
                            81
                            
                            
                            
                            -
                            
                            
                            
                            108,669
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            108,750Cash
      received for 91,713 shares of common stock and 22,936 warrants to be
      issued, May 27, 2009, net of offering costs
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            92
                            
                            
                            
                            86,908
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            87,000Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (8,131,173
                            )
                            
                            
                            (8,131,173
                            )Balance,
      May 31, 2009
                            
                            
                            -
                            
                            
                            $
                            -
                            
                            
                            
                            95,791,851
                            
                            
                            $
                            33,392
                            
                            
                            $
                            92
                            
                            
                            $
                            20,138,485
                            
                            
                            $
                            (1,754,980
                            )
                            
                            $
                            (18,155,018
                            )
                            
                            $
                            261,971






See accompanying notes to
unaudited financial statements.




F-6




LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For
the nine months ended May 31, 2009 and 2008
 and for the period from
Inception (September 16, 2005) to May 31, 2009
 (Unaudited)






InceptionFor
      the nine months ended
                                      
                                      
                                      (Sept
      16, 2005)May
      31,
                                      
                                      
                                      May
      31,
                                      
                                      
                                      to
      May 31,2009
                                      
                                      
                                      2008
                                      
                                      
                                      2009Cash
      Flows from Operating ActivitiesNet
      loss
                                      
                                      $
                                      (8,131,173
                                      )
                                      
                                      $
                                      (6,286,513
                                      )
                                      
                                      $
                                      (18,155,018
                                      )Adjustment
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                                      
                                      
                                      33,316
                                      
                                      
                                      
                                      6,930
                                      
                                      
                                      
                                      49,524Common
      stock issued for services
                                      
                                      
                                      1,778,006
                                      
                                      
                                      
                                      1,261,544
                                      
                                      
                                      
                                      3,668,550Common
      stock issued for officer compensation
                                      
                                      
                                      1,296,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,296,000Common
      stock issued for interest expense
                                      
                                      
                                      52,082
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      52,082Common
      stock issued for financing costs
                                      
                                      
                                      1,251,500
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,251,500Warrants
      issued for services
                                      
                                      
                                      1,276,299
                                      
                                      
                                      
                                      1,971,791
                                      
                                      
                                      
                                      3,656,017Recapitalization
      adjustment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      419
                                      
                                      
                                      
                                      419Changes
      in operating assets and liabilities:(Increase)
      decrease in costs and estimated earnings inexcess
      of billings on uncompleted contracts
                                      
                                      
                                      (72,050
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (72,050
                                      )(Increase)
      decrease in other receivables
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (14,424
                                      )
                                      
                                      
                                      -(Increase)
      decrease in prepaid expenses
                                      
                                      
                                      9,820
                                      
                                      
                                      
                                      30,961
                                      
                                      
                                      
                                      (76,796
                                      )(Increase)
      decrease in debt issuance/financing costs
                                      
                                      
                                      (79,000
                                      )
                                      
                                      
                                      446,776
                                      
                                      
                                      
                                      (79,000
                                      )(Increase)
      decrease in deposits
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (13,398
                                      )
                                      
                                      
                                      (20,458
                                      )Increase
      (decrease) in accounts payable and accrued expenses
                                      
                                      
                                      379,421
                                      
                                      
                                      
                                      (542,549
                                      )
                                      
                                      
                                      1,014,243Increase
      (decrease) in accrued officer compensation
                                      
                                      
                                      191,250
                                      
                                      
                                      
                                      26,520
                                      
                                      
                                      
                                      730,148Increase
      (decrease) in accrued interest
                                      
                                      
                                      56,737
                                      
                                      
                                      
                                      (58,206
                                      )
                                      
                                      
                                      177,336Net
      cash used in operating activities
                                      
                                      
                                      (1,957,792
                                      )
                                      
                                      
                                      (3,170,149
                                      )
                                      
                                      
                                      (6,507,503
                                      )Cash
      Flows from Investing ActivitiesPurchase
      of property and equipment
                                      
                                      
                                      (225,600
                                      )
                                      
                                      
                                      (337,349
                                      )
                                      
                                      
                                      (1,285,253
                                      )Additions
      to patents and trademarks
                                      
                                      
                                      (100,671
                                      )
                                      
                                      
                                      (127,412
                                      )
                                      
                                      
                                      (321,815
                                      )Net
      cash used in investing activities
                                      
                                      
                                      (326,271
                                      )
                                      
                                      
                                      (464,761
                                      )
                                      
                                      
                                      (1,607,068
                                      )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of common stock, net of offering costs
                                      
                                      
                                      108,750
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      512,918Proceeds
      from common stock be to issued, net of offering costs
                                      
                                      
                                      87,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      229,000Advances
      / (repayments) from officers, net
                                      
                                      
                                      549,000
                                      
                                      
                                      
                                      (25,020
                                      )
                                      
                                      
                                      708,409Proceeds
      from convertible notes payable
                                      
                                      
                                      -
                                      
                                      
                                      
                                      350,000
                                      
                                      
                                      
                                      5,242,000Proceeds
      from note payable
                                      
                                      
                                      1,125,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,125,000Proceeds
      from notes payable, related party
                                      
                                      
                                      1,300,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,350,000Repayment
      on notes payable, related party
                                      
                                      
                                      (694,500
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (841,000
                                      )Net
      cash provided by financing activities
                                      
                                      
                                      2,475,250
                                      
                                      
                                      
                                      324,980
                                      
                                      
                                      
                                      8,326,327Net
      increase (decrease) in cash and cash equivalents
                                      
                                      
                                      191,187
                                      
                                      
                                      
                                      (3,309,930
                                      )
                                      
                                      
                                      211,756Cash
      and cash equivalents, beginning of period
                                      
                                      
                                      20,569
                                      
                                      
                                      
                                      3,671,900
                                      
                                      
                                      
                                      -Cash
      and cash equivalents, end of period
                                      
                                      $
                                      211,756
                                      
                                      
                                      $
                                      361,970
                                      
                                      
                                      $
                                      211,756
   See
accompanying notes to unaudited financial statements.
  F-7
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For
the nine months ended May 31, 2009 and 2008
 and for the period from
Inception (September 16, 2005) to May 31, 2009
 (Unaudited)
   InceptionFor
      the nine months ended
                                                                          
                                                                          
                                                                          (Sept
      16, 2005)May
      31,
                                                                          
                                                                          
                                                                          May
      31,
                                                                          
                                                                          
                                                                          to
      May 31,2009
                                                                          
                                                                          
                                                                          2008
                                                                          
                                                                          
                                                                          2009Supplemental
      disclosure of cash flow information:Income
      taxes paid
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          1,600Interest
      paid
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          -Supplemental
      disclosure of noncash financing and investing activities:Issuance
      of common stock for financing costs
                                                                          
                                                                          $
                                                                          2,850,000
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          2,850,000Issuance
      of common stock for services
                                                                          
                                                                          $
                                                                          1,778,006
                                                                          
                                                                          
                                                                          $
                                                                          1,261,544
                                                                          
                                                                          
                                                                          $
                                                                          3,668,550Issuance
      of common stock for officer compensation
                                                                          
                                                                          $
                                                                          1,296,000
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          1,296,000Issuance
      of common stock for interest costs
                                                                          
                                                                          $
                                                                          52,082
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          52,082Issuance
      of warrants for services
                                                                          
                                                                          $
                                                                          1,276,299
                                                                          
                                                                          
                                                                          $
                                                                          1,971,791
                                                                          
                                                                          
                                                                          $
                                                                          3,656,017Acquisition
      of patents for note payable
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          900,000Issuance
      of common stock for conversion of notes payable
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          5,242,000
                                                                          
                                                                          
                                                                          $
                                                                          5,512,000Issuance
      of common stock for conversion of related party notes
    payable
                                                                          
                                                                          $
                                                                          605,500
                                                                          
                                                                          
                                                                          $
                                                                          803,500
                                                                          
                                                                          
                                                                          $
                                                                          803,500Issuance
      of common stock for conversion of advances from officers
                                                                          
                                                                          $
                                                                          549,000
                                                                          
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          549,000Issuance
      of common stock for conversion of accrued interest on related party notes
      payable
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          120,599
                                                                          
                                                                          
                                                                          $
                                                                          120,599Issuance
      of common stock for conversion of accrued officer
    compensation
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          270,495
                                                                          
                                                                          
                                                                          $
                                                                          270,495






See
accompanying notes to unaudited financial statements.




F-8


LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008


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-9
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 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.
 
 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 stock split
approved by the Board in October 2008, as if the split had been in effect since
inception.
 
 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-billion 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-10
 
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Basis of
Presentation
 
 The
unaudited financial statements included herein have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and notes required by
generally accepted accounting principles for complete financial statements.
However, except as disclosed herein, there has been no material changes in the
information disclosed in the notes to financial statements included in the
annual report on Form 10-KSB of Location Based Technologies, Inc. for the year
ended August 31, 2008. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended May
31, 2009, are not necessarily indicative of the results that may be expected for
any other interim period or the entire year. For further information, these
unaudited financial statements and the related notes should be read in
conjunction with the Company’s audited financial statements for the year ended
August 31, 2008, included in the Company’s report on Form 10-KSB.
  Use of
Estimates
 
 The
preparation of consolidated 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.
 
 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.
  F-11
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Concentration of Credit
Risk
 
 Cash and Cash
Equivalents– The cash and cash
equivalent balances at May 31, 2009 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– For the nine months
ended May 31, 2009, the Company transacted its business with two
customers. The Company’s largest customer accounted for 99.8% of total
revenues. Total revenues from this customer were $552,003 for the nine months
ended May 31, 2009.
 
 Allowance for Doubtful
Accounts
 
 The
allowance for doubtful accounts on accounts receivable is charged to operations
in amounts sufficient to maintain the allowance for uncollectible accounts at a
level management believes is adequate to cover any probable losses. Management
determines the adequacy of the allowance based on historical write-off
percentages and the current status of accounts receivable. Accounts receivable
are charged off against the allowance when collectibility is determined to be
permanently impaired. As of May 31, 2009, there was no allowance for
doubtful accounts recorded, as all of the Company’s receivables were considered
collectible.
 
 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, accounts receivable, prepaid expenses, accounts payable and accrued
expenses approximate their fair value due to the short period to maturity of
these instruments.
  F-12
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 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 May 31, 2009 and August 31, 2008, the Company
capitalized $1,125,967 and $1,055,396 for patent related expenditures,
respectively. As of May 31, 2009 and August 31, 2008, the Company has
capitalized $95,848 and $65,748 for trademark related expenditures,
respectively.
 
 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
$351 and $0 for the nine months ended May 31, 2009 and 2008,
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 2 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 May 31, 2009
and August 31, 2008, the Company capitalized costs totaling $1,155,072 and
$985,122, respectively, related to its website development. The website
development costs will be depreciated when the website is completed and ready
for use.
  F-13
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (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 May 31, 2009, 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.
 
 Consulting
Revenue – The  Company’s consulting revenue consists of
software customization and consulting service contracts recognized utilizing the
percentage-of-completion method in accordance with Accounting Research
Bulletin No. 45, Long-Term Construction-Type
Contracts and the relevant guidance of Statement of Position (“SOP”)
No. 81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts,
as prescribed by SOP 97-2, Software Revenue Recognition.
For fixed fee contracts the percentage-of-completion is measured by the
percentage of software customization or consulting hours incurred to date to
total estimated hours. This method is used because management believes that
hours expended is the best measure of progress on these engagements. Revisions
in total estimated hours are reflected in the accounting period in which the
required revisions become known. Anticipated losses on contracts are charged to
income in their entirety when such losses become evident.
  F-14
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Revenue
Recognition (Continued)
 
 Costs and
Estimated Earnings in Excess of Billings on Uncompleted Contracts –Costs
and estimated earnings in excess of billings on uncompleted contracts reflected
in the consolidated balance sheets arise when revenues have been recognized but
the amounts cannot be billed under the terms of the contracts. Such amounts are
recoverable from customers based upon various measures of performance, including
achievement of certain milestones, completion of specified units or completion
of the contract.
 
 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 nine months ended May 31, 2009 and 2008, the
Company incurred $1,130,486 and $1,464,281 of research and development costs,
respectively.
 
 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 the nine months ended May 31, 2009 and
2008.
 
 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.
  F-15
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Earnings/
Loss Per Share (Continued)
 
 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.
 
 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 have a material
impact on its financial statements.
  F-16
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 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-17
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 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-18
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 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.
 
 SFAS No.165 – In May
2009, the FASB issued Statement of Financial Accounting Standards No. 165 (“SFAS
No. 165”), Subsequent
Events. SFAS No. 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or ready to be issued. SFAS No. 165 will be
effective for the Company’s fiscal year ending August 31, 2009. The Company
does not anticipate the adoption of SFAS No. 165 to have a material impact on
its financial statements.
  F-19
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 2.
              PROPERTY AND
      EQUIPMENT
 
 Property
and equipment at May 31, 2009 and August 31, 2008 consists of the
following:
 
 May
      31,
                                                        
                                                        
                                                        August
      31,2009
                                                        
                                                        
                                                        2008Website
      development costs
                                                        
                                                        $
                                                        1,155,072
                                                        
                                                        
                                                        $
                                                        985,122Machinery
      and equipment
                                                        
                                                        
                                                        63,388
                                                        
                                                        
                                                        
                                                        38,990Computer
      software
                                                        
                                                        
                                                        30,051
                                                        
                                                        
                                                        
                                                        -Computer
      and video equipment
                                                        
                                                        
                                                        22,417
                                                        
                                                        
                                                        
                                                        21,216Office
      furniture
                                                        
                                                        
                                                        11,546
                                                        
                                                        
                                                        
                                                        11,546Leasehold
      improvements
                                                        
                                                        
                                                        2,445
                                                        
                                                        
                                                        
                                                        2,4451,284,919
                                                        
                                                        
                                                        
                                                        1,059,319Less:
      accumulated depreciation
                                                        
                                                        
                                                        (48,423
                                                        )
                                                        
                                                        
                                                        (15,458
                                                        )Total
      property and equipment
                                                        
                                                        $
                                                        1,236,496
                                                        
                                                        
                                                        $
                                                        1,043,861
  Depreciation
expense for the nine months ended May 31, 2009 and 2008 amounted to $28,991 and
$6,930, respectively.
 
 3.           
 ADVANCES FROM
OFFICERS
 
 From time
to time, the Company’s officers advance funding to the Company to cover
operating expenses. Beginning December 1, 2008, cash advances from officers
accrued interest at the rate of 8% per annum. The advances from officers have no
formal repayment terms. In January 2009, officers of the Company transferred
2,500,000 shares of their personally owned LBT common stock to certain advisors
in exchange for capital raising services to be provided in 2009.  The
amount recorded totaled $2,850,000, which represents the fair value of the stock
transferred, and of the services to be received. For the nine months ended May
31, 2009, cash advances from officers totaling $582,000 were provided to the
Company to cover operating expenses.
 
 On May 1,
2009, advances from officers and related accrued interest amounting to
$2,180,835 and $18,254, respectively, was converted into 3,315,210 shares of the
Company’s common stock on basis of $0.66 per share.
  F-20
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 3.          
  ADVANCES
FROM OFFICERS (Continued)
 
 On May
14, 2009, advances from officers amounting to $1,377,574 were converted into
1,671,814 shares of the Company’s common stock on basis of $0.82 per
share.
 
 4.           
 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.
  5.          
  NOTES
PAYABLE
 
 $625,000 Senior Secured
Promissory Note
 
 On
November 18, 2008, the Company entered into a senior secured promissory note
agreement for $625,000. Under the terms of the promissory note agreement,
principal and any unpaid interest shall be repaid by February 18, 2009, or upon
a minimum of $1,500,000 being raised by the Company. The note bears interest at
12% per annum and may be repaid at any time before the repayment date, in part
or in full, without penalty, and is secured by common stock personally owned by
an officer of the Company.  In addition, the Company issued 50,000
shares of common stock valued at $55,000 on the date of issuance.
 
 On
January 30, 2009, the promissory note agreement was extended for an additional
three months and due on May 18, 2009.  As consideration for the
promissory note extension, the Company issued an additional 50,000 shares of
common stock valued at $47,000 on the date of issuance.
  F-21
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 5.           
 NOTES
PAYABLE (Continued)
 
 $625,000
Senior Secured Promissory Note(Continued)
 
 On May 7,
2009, the promissory note agreement was extended for an additional six months
and due on November 18, 2009.  As consideration for the promissory
note extension, the Company issued an additional 50,000 shares of common stock
valued at $32,000 on the date of issuance.
 
 As of May
31, 2009, the note payable balance and accrued interest totaled $625,000 and
$40,068, respectively.
 
 $300,000 Promissory
Note
 
 On
December 24, 2008, the Company entered into a promissory note agreement for
$300,000. Under the terms of the promissory note agreement, principal and any
unpaid interest shall be repaid by March 24, 2009, or upon a minimum of
$1,500,000 being raised by the Company. The note bears interest at 12% per annum
and may be repaid at any time before the repayment date, in part or in full,
without penalty. In addition, the Company issued 100,000 shares of common stock
valued at $94,000 on the date of issuance.
 
 On March
24, 2009, the promissory note agreement was extended for an additional six
months and due on September 24, 2009.  As consideration for the
promissory note extension, the Company issued an additional 50,000 shares of
common stock valued at $32,000 on the date of issuance.
 
 As of May
31, 2009, the note payable balance and accrued interest totaled $300,000 and
$15,682, respectively.
 
 $100,000 Senior Secured
Promissory Note
 
 On May 7,
2009, the Company entered into a senior secured promissory note agreement for
$100,000. Under the terms of the promissory note agreement, principal and any
unpaid interest shall be repaid by August 18, 2009, or upon a minimum of
$1,500,000 being raised by the Company. The note bears interest at 12% per annum
and may be repaid at any time before the repayment date, in part or in full,
without penalty, and is secured by common stock personally owned by an officer
of the Company. In addition, the Company issued 50,000 shares of common stock
valued at $32,000 on the date of issuance. As of May 31, 2009, the note payable
balance and accrued interest totaled $100,000 and $822,
respectively.
  F-22
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 5.        
    NOTES
PAYABLE (Continued)
 
 $100,000 Promissory
Note
 
 On May
27, 2009, the Company entered into a promissory note agreement for $100,000.
Under the terms of the promissory note agreement, principal and any unpaid
interest shall be repaid by November 27, 2009, or upon a minimum of $5,000,000
being raised by the Company. The note bears interest at 12% per annum and may be
repaid at any time before the repayment date, in part or in full, without
penalty. At the option of the Company, the note may be converted into shares of
the Company’s restricted common stock.  The conversion rate is
determined as the Company’s average closing stock price ten days prior to the
conversion grant date. In addition, the Company issued 25,000 shares of common
stock valued at $31,000 on the award date. As of May 31, 2009, the note payable
balance and accrued interest totaled $100,000 and $164,
respectively.
  6.          
  NOTES
PAYABLE – RELATED PARTY
 
 $900,000 Promissory
Note
 
 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.
  F-23
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 6.NOTES
PAYABLE – RELATED PARTY (Continued)
 
 $950,000 Promissory
Note
 
 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 March
3, 2009 the promissory note agreement was extended for an additional six months
and due on September 3, 2009.
 
 On May 1,
2009, the note payable balance and accrued interest amounting to $255,500 and
$26,541, respectively, was converted into 425,187 shares of the Company’s common
stock on the basis of $0.66 per share.
 
 $350,000 Promissory
Note
 
 On
January 26, 2009, the Company entered into an unsecured promissory note
agreement with the Company’s Co-President and stockholder for $350,000. Under
the terms of the promissory note agreement, the principal and any unpaid
interest shall be repaid by April 26, 2009, three 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 April
26, 2009 the promissory note agreement was extended for an additional six months
and due on October 26, 2009.
 
 On May 1,
2009, the note payable balance and accrued interest totaling $350,000 and
$7,288, respectively, was converted into 538,625 shares of the Company’s common
stock on the basis of $0.66 per share.
  7.          
  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.
  F-24
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 7.         
   COMMITMENTS
AND CONTINGENCIES(Continued)
 
 Consulting
Agreements (Continued)
 
 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 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 February 2009, the agreement was extended for an additional
six-month period expiring August 1, 2009.
 
 Other
Commitments
 
 On
September 26, 2008, the Company received a purchase order for approximately
$3,700,000 from TagWorks LLC for PetFinderTMdevices. The Company
expects to begin delivery in June 2009. TagWorks LLC was co-founded by a
shareholder of the Company.
 
 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 nine months ended May 31, 2009 and
2008 was $101,700 and $80,871, respectively.
 
 As of May
31, 2009, the future minimum lease payments on operating leases for the year
ended May 31, 2010 amounted to $81,473.
  F-25
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 7.           COMMITMENTS
AND CONTINGENCIES(Continued)
 
 Contingencies – Convertible
Note Shares
 
 In 2007,
the Company sold convertible notes to accredited investors in reliance on an
exemption from registration provided by Section 4(2) of the Securities Act and
similar state exemptions. Management has been advised by counsel that the
availability of those exemptions cannot be determined with legal certainty due
to the fact that the company or its predecessors 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
a right of rescission may exist for shares underlying the convertible notes for
which the statute of limitations has not run.  As disclosed in note 4,
convertible notes totaling $5,242,000 were exchanged for common shares, and
subsequently, some of the shares were sold in the open market. Management has
performed an analysis under FAS 5, Accounting for Contingencies,
and concluded that the likelihood of a right of rescission being successfully
enforced on the remaining convertible note shares is remote, and consequently,
has accounted for these shares in permanent equity in the financial
statements.
 
 8.          
  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.
 
 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.
  F-26
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.         
   EQUITY(Continued)
 
 Common
Stock (Continued)
 
 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 cash
proceeds of $110,850, net of offering costs of $39,250.
 
 In
November 2006, the Company issued 90,000 shares of common stock for cash
proceeds of $22,500, net of offering costs of $7,500.
 
 In
February 2007, the Company issued 750,000 shares of common stock in exchange for
cash proceeds of $182,000, net of offering costs of $68,000.
 
 In March
2007, the Company issued 75,000 shares of common stock in exchange for cash
proceeds of $18,750, net of offering costs of $6,250.
 
 In June
2007, the Company issued 165,000 shares of common stock for $55,000 in cash
proceeds.
 
 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
6).
  F-27
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.           
 EQUITY(Continued)
 
 Common
Stock (Continued)
 
 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 4).
 
 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 4).
 
 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 6).
 
 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.
 
 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-28
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.          
  EQUITY(Continued)
 
 Common
Stock (Continued)
 
 In
October 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.
 
 In
October 2008, the Company issued 50,000 shares of common stock in exchange for
accounting 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.
 
 In
October 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.
 
 In
October 2008, the Company issued 8,356 shares of common stock in exchange for
legal advisory services. The shares were valued at $20,472, which represents the
fair market value of the services provided on the date of issuance.
 
 In
November 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 $113,000, which represents the fair market value of the services provided on
the date of issuance.
 
 In
December 2008, the Company issued 250,000 shares of common stock in exchange for
consulting services related to capital raising efforts. The shares were valued
at $275,000, which represents the fair market value of the services provided on
the date of issuance.
 
 In
December 2008, the Company issued 101,500 shares of common stock in exchange for
consulting services related to technology development. The shares were valued at
$83,230, which represents the fair market value of the services provided on the
date of issuance.
 
 In
December 2008, the Company issued 50,000 shares of common stock in exchange for
sales consulting services. The shares were valued at $41,000, which represents
the fair market value of the services provided on the date of
issuance.
 
 In
January 2009, the Company issued 36,000 shares of common stock in exchange for
legal advisory services. The shares were valued at $33,157, which represents the
fair market value of the services provided on the date of issuance.
  F-29
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.        
    EQUITY(Continued)
 
 Common
Stock (Continued)
 
 In
January 2009, the Company issued 100,000 shares of common stock in exchange for
sales and business advisory services. The shares were valued at $107,000, which
represents the fair market value of the services provided on the date of
issuance.
 
 In
February 2009, the Company issued 30,000 shares of common stock in exchange for
legal advisory services. The shares were valued at $28,200, which represents the
fair market value of the services provided on the date of issuance.
 
 In
February 2009, the Company issued 100,000 shares of common stock in exchange for
consulting services related to capital raising efforts. The shares were valued
at $94,000, which represents the fair market value of the services provided on
the date of issuance.
 
 In
February 2009, the Company issued 100,000 shares of common stock in connection
with a debt issuance. The shares were valued at $94,000, which represents the
fair market value of the debt issuance costs on the date of
issuance.
 
 In
February 2009, the Company issued 100,000 shares of common stock in exchange for
business advisory services. The shares were valued at $94,000, which represents
the fair market value of the services provided on the date of
issuance.
 
 In April
2009, the Company issued 100,000 shares of common stock in connection with
promissory note extensions. The shares were valued at $64,000, which represents
the fair market value of the note extension costs on the date of
issuance.
 
 In April
2009, the Company issued 75,000 shares of common stock in exchange for
consulting services related to capital raising efforts. The shares were valued
at $48,000, which represents the fair market value of the services provided on
the date of issuance.
 
 In April
2009, the Company issued 160,000 shares of common stock in exchange for
marketing related advisory services. The shares were valued at $102,400, which
represents the fair market value of the services provided on the date of
issuance.
 
 In May
2009, the Company issued 40,000 shares of common stock in exchange for sales and
business advisory services. The shares were valued at $30,000, which represents
the fair market value of the services provided.
 
 F-30
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.           
 EQUITY(Continued)
 
 Common
Stock (Continued)
 
 In May
2009, the Company issued 50,305 shares of common stock in exchange for legal
advisory services. The shares were valued at $70,626, which represents the fair
market value of the services provided.
 
 In May
2009, the Company issued 14,900 shares of common stock in exchange for legal
advisory services. The shares were valued at $16,837, which represents the fair
market value of the services provided on the award date.
 
 In May
2009, the Company issued 95,310 shares of common stock in exchange for
consulting services related to technology development. The shares were valued at
$107,700, which represents the fair market value of the services provided on the
award date.
 
 In May
2009, the Company issued 80,586 shares of common stock in exchange for
accounting related advisory services. The shares were valued at $79,064, which
represents the fair market value of the services provided on the award
date.
 
 In May
2009, the Company issued 900,000 shares of common stock as officer compensation
as prescribed under the executive employment agreements for the achievement of
acquiring FCC approval for the PocketFinder® and PetFinder®
products.  The shares were valued at $1,296,000, which represents the
fair market value of the services provided on the award date.
 
 In May
2009, the Company issued 5,950,835 shares of common stock in exchange for the
conversion of $4,215,991 in related party notes payable, advances from officers
and accrued interest (see Note 3 and Note 6).
 
 In May
2009, the Company performed a private placement and issued 80,645 shares of
common stock and 20,161 warrants for cash proceeds of $108,750, net of offering
costs of $16,250 (see Note 8).
 
 In May
2009, the Company performed a private placement and agreed to issue 91,713
shares of common stock and 22,928 warrants for cash proceeds of $87,000, net of
offering costs of $13,000 (see Note 8).
  F-31
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.        
    EQUITY(Continued)
 
 Prepaid Services Paid In
Common Stock
 
 In April
2009, the Company issued 160,000 shares of common stock to consultants for
marketing related advisory services valued at $102,400 on the date of issuance,
which will be amortized over the performance period. Unamortized prepaid
services paid in common stock related to such issuance amounted to $92,480 at
May 31, 2009.
 
 In
January 2009, officers of the Company transferred 2,500,000 shares of their
personally owned LBT common stock to certain advisors in exchange for capital
raising services to be provided in 2009. The amount recorded as advances from
officers and related deferred financing costs totaled $2,850,000 to be amortized
over the performance period.  In May 2009, the $2,850,000 of advances
from officers was converted into shares of the Company’s common stock. At this
time, the unamortized deferred financing costs were reclassified as prepaid
services paid in common stock. Unamortized prepaid services paid in common stock
related to such issuance amounted to $1,662,500 at May 31, 2009.
 
 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
9).
 
 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 9).
 
 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 9).
  F-32
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 8.         
   EQUITY(Continued)
 
 Warrants
(Continued)
 
 In
November 2008, the Company issued “Series G” warrants to certain consultants to
purchase 81,724 common shares at $2.45 per share in exchange for consulting
services related to capital raising efforts. The fair value of the warrants
using the Black-Scholes option pricing model amounted to $160,939 (see Note
9).
 
 In
November 2008, the Company issued “Series H” warrants to certain consultants to
purchase 1,528,410 common shares at $0.88 per share in exchange for consulting
services related to capital raising efforts. The fair value of the warrants
using the Black-Scholes option pricing model amounted to $1,115,361 (see Note
9).
 
 In May
2009, the Company issued “Series I” warrants in connection with a private
placement to purchase 20,161 common shares at $1.76 per share. The fair value of
the warrants using the Black-Scholes option pricing model amounted to $23,030
(see Note 9).
 
 Stock Incentive
Plan
 
 On
September 10, 2007, the directors and shareholders adopted a 2007 Stock
Incentive Plan.  The plan reserves 2,250,000 shares of common stock of
the Company 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
385,152 shares of common stock granted under the plan for the nine months ended
May 31, 2009.
  9.           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
May 31, 2009.
  F-33
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 9.           
 STOCK
OPTIONS AND WARRANTS (Continued)
 
 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 May 31, 2009.
  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 May 31,
2009.
 
 On
November 3, 2008, the Company issued “Series G” warrants to certain consultants
to purchase 81,724 common shares at $2.45 per share in exchange for consulting
services related to capital raising efforts. The warrants expire November 3,
2011. The fair value of the warrants using the Black-Scholes option pricing
model amounted to $160,939. No warrants were exercised as of May 31,
2009.
 
 On
November 24, 2008, the Company issued “Series H” warrants to certain consultants
to purchase 1,528,410 common shares at $0.88 per share in exchange for
consulting services related to capital raising efforts. The warrants expire
November 24, 2011. The fair value of the warrants using the Black-Scholes option
pricing model amounted to $1,115,361. No warrants were exercised as of May 31,
2009.
 
 On May
21, 2009, the Company issued “Series I” warrants in connection with a private
placement to purchase 20,161 common shares at $1.76 per share. The warrants
expire May 21, 2012.  The fair value of the warrants using the
Black-Scholes option pricing model amounted to $23,030. No warrants were
exercised as of May 31, 2009.
  F-34
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 10.           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.
 
 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 May 31, 2009, are as
follows:
  Net
      operating loss carry forward
                  
                  $
                  5,525,000Valuation
      allowance
                  
                  
                  (5,525,000
                  )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 $2,077,000 for the nine months ended
May 31, 2009.
  F-35
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 10.           PROVISION
FOR INCOME TAXES (Continued)
 
 As of May
31, 2009, the Company had federal and state net operating loss carryforwards of
approximately $13,872,000 which can be used to offset future federal income tax.
The federal and state net operating loss carryforwards expire at various dates
through 2029. 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.
 
 
 11.           SUBSEQUENT
EVENTS
 
 Common Stock
Issuances
 
 On June
1, 2009, the Company issued 25,000 shares of common stock in exchange for legal
advisory services. The shares were valued at $25,000, which represents the fair
market value of the services provided.
 
 On June
5, 2009, the Company performed a private placement and issued 63,602 shares of
common stock and 15,901 warrants for cash proceeds of $65,250, net of offering
costs of $9,750.
 
 On June
11, 2009, the Company issued 150,000 shares of common stock in exchange for
consulting services related to technology development. The shares were valued at
$202,500, which represents the fair market value of the services provided on the
award date.
 
 On June
16, 2009, the Registrant issued 25,000 shares of its restricted common stock in
connection with a debt issuance.  The shares were valued at $31,000,
which represents the fair market value of the debt issuance costs on the award
date.
 
 On June
16, 2009, the Registrant issued 9,858 shares of its restricted common stock for
finder’s fee commissions.  The shares were valued at $14,625, which
represents the fair market value of the services provided.
 
 Warrants
Issuances
 
 On June
11, 2009, the Company issued “Series J” warrants in connection with a private
placement to purchase 22,936 common shares at $1.24 per share. The warrants
expire May 27, 2012.  The fair value of the warrants using the
Black-Scholes option pricing model amounted to $22,916. No warrants were
exercised as of May 31, 2009.
  F-36
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 11.           SUBSEQUENT
EVENTS (Continued)
 
 Warrants
Issuances (Continued)
 
 On June
16, 2009, the Company issued “Series K” warrants in connection with a private
placement to purchase 15,901 common shares at $1.34 per share. The warrants
expire June 5, 2012.  The fair value of the warrants using the
Black-Scholes option pricing model amounted to $17,168. No warrants were
exercised as of May 31, 2009.
 
 On May
16, 2009, the Company issued “Series L” warrants to certain consultants to
purchase 115,385 common shares at $0.65 per share in exchange for consulting
services related to capital raising efforts. The warrants expire on May 1,
2012.  The fair value of the warrants using the Black-Scholes option
pricing model amounted to $58,142.
 
 Settlement Agreement and
Release
 
 On June
11, 2009 Location Based Technologies, Inc. (the “Company”) issued an aggregate
of 487,500 shares of its common stock pursuant to the terms of a Settlement
Agreement and Release (the “Settlement Agreement”) with Jens Dalsgaard, Redwood
Consultants LLC (“Redwood”), Constellation Capital Management LLC, William
Gilliam, the Gilliam Exempt Family Trust, Angela Williams, Richard Pisano,
Amanda Schmieder, Giuliana Dalsgaard, Matthew Murawski  and Arron
Johnson (collectively the “Redwood Defendants”).
 
 In
connection with the Settlement Agreement, the Company’s officers, Dave Morse,
Joseph Scalisi and Desiree Mejia, have agreed collectively to return for
cancellation 500,000 shares of common stock previously issued to them so that
there is no impact to existing shareholders.
 
 As
previously reported, we entered into a series of three agreements with Redwood
(and affiliates) dated October 15 and 26, 2008 and November 7, 2008, for
investment banking and investor relations services.  Pursuant to the
October 15 agreement, on November 6, 2008, we issued 125,000 shares of our
registered common stock to a principal of Redwood.  Pursuant to the
October 26 agreement, on October 27, 2008, we issued to Redwood 1,500,000 shares
of our unregistered common stock in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act").  The October 26 agreement also called for the
issuance to Redwood of an additional 1.5 million shares of unregistered common
stock six months after the execution of the agreement.  The Company
did not issue those shares.  In addition, on October 27, 2008, we
issued to Redwood a five year warrant to purchase 300,000 shares of our common
stock (the “Warrant”).
  F-37
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2009 AND 2008
 11.           SUBSEQUENT
EVENTS (Continued)
 
 Settlement
Agreement and Release(Continued)
 
 On
November 26, 2008, we terminated all three agreements with Redwood and demanded
that Redwood return all issued share certificates and the
Warrant.  Redwood refused.  Further, without our knowledge
or consent, Redwood transferred all but 325,000 of the unregistered shares to
twelve affiliated entities or persons.  On April 13, 2009, we filed a
lawsuit in federal court (the “Suit”) against Redwood and its affiliates to,
among other things, recover the securities issued to them pursuant to the above
three agreements and cancel all obligations under the agreement, including any
obligation to issue an additional 1.5 million shares and to honor any exercise
of the Warrant.  During the pendency of an injunction application that
the Company filed in the Suit, which sought to enjoin the Redwood Defendants
from selling any of the issued shares, the parties reached a
settlement.
 
 Under the
terms of the Settlement Agreement, we dismissed the Suit and the Redwood
Defendants agreed among other things (i) to return 1,487,500 shares of the
Company’s common stock that had been issued to Redwood, (ii) that the Company
may cancel the Warrant, (iii) to cancel the three agreements with Redwood
described in a preceding paragraph, including any obligation to issue any
additional shares, and (iv) to a mutual release.  In addition, 252,000
of the 487,500 shares issued pursuant to the Settlement Agreement will be
subject to a lock-up that restricts the sale of the newly-issued shares to no
more than 3,000 shares per trading day, as more fully set forth in the
Settlement Agreement.


F-38




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS




General




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.




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





Overview.  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.





Our
Business.  Location Based Technologies, Inc. designs, develops,
and sells personal locator devices and services. We are the developer of the
PocketFinder® Family of Products and the PocketFinder NetworkTM.  The
PocketFinder® Family of Products currently includes the PocketFinder®,
PetFinder®, PocketFinder® Luggage, PocketFinder® Laptop and PocketFinder’s fleet
management system.  The PocketFinder® is a small location device that
enables a user to locate a device, person, or pet, at 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.





The
company has also developed a new User Interface designed for the trucking and
freight monitoring industry.  This opportunity represents a great way
to leverage a vast vertical market by applying the Company’s cutting edge
PocketFinder NetworkTM with its smartphone and hardware applications to enhance
the way commerce is moved, contain costs, and facilitate the delivery of goods
to stores throughout the U.S. cheaper, better, and faster.




LoadRack.comTM
(LRT) is positioning to be the premier provider of truck and load matching with
this industry first real-time asset tracking application.  Their advanced
application allows shippers, carriers, and truck brokers to optimize resources
and coordination by procuring available trucks and loads while ensuring load
integrity across the supply chain.  Accessed via Internet, cell phone, or
landline, the system allows users to determine load location and status,
designate safe and unsafe zones and lanes, monitor load temperatures, facilitate
route changes, and effectively manage equipment problems and
delays.  The Company assisted LoadRack.com in building a dynamic, real
time, internet-based system that will increase the efficiency of moving produce
and refrigerated items; ensure the safety of fresh and frozen foods during
transport; and will increase on-time deliveries of foods and perishable
products.




2




The
Company’s associated vehicle/asset tracking application uses similar advanced
technology to help businesses optimize their mobile resources (vehicles,
equipment, sales forces, etc.) by providing location information that enables
enhanced coordination and leveraging of assets.





Our
Company’s focus on sales has resulted in more than a 675% increase in revenue
from approximately $71,000 for the quarter ended February 28, 2009 to
approximately $553,000 for the quarter ended May 31, 2009 and we anticipate that
our marketing and delivery efforts in the United States (“US”), the United
Kingdom (“UK”), and selected parts of Europe will continue to show large
percentage increases given our small existing revenue base.  We have
generated consulting revenue from the LoadRack Professional Services Agreement
as well as sales from mobile and laptop application downloads.  Future
revenues will be based on new purchase orders, including the $3,000,024 purchase
order from LoadRack tracking devices signed on June 29, 2009, as well as from
our previously reported first purchase order of $3,700,000 for the PetFinder®
product.  Delivery of the first PetFinder® products in the US will
occur upon securing network approval from our wireless carrier.  We
have begun sales for mobile applications that allow the Android phone (Google,
T-Mobile), Apple’s iPhone, Blackberry’s Bold and Curve, and GPS enabled
smartphones using the Windows Mobile Professional 6.0 Operating System to
act as a PocketFinder® with all of the features and functionality of our
devices.  These mobile applications work world-wide as long as the
phone has access to a network.  Furthermore, as PocketFinder® and
PetFinder® devices enter the US market, the mobile applications will be able to
seamlessly add our devices.  These Global Positioning System (“GPS”)
mobile applications interact with our easy to use web-based interface from any
telecom network (GSM or Code Division Multiple Access (“CDMA”)).  We
continue to be hampered by an inability to collect monthly use fees via Apple’s
and Google’s billing systems. Both systems are being re-designed to allow for
recurring revenues but neither has delivered yet.  However, the
greatest value for these smartphone applications will not be realized until we
deliver PocketFinder® and PetFinder® products to our customers which will drive
value and enhance the way that families and businesses stay
connected.




In July 2009, we
completed the Professional Services Agreement with LoadRack, LLC, for
$1,250,000. The first order for the hardware components has been received with
additional orders anticipated in coming months. Furthermore, the Jabil facility
in Meung-sur-Loire, France, is ready for high quality, mass volume production
runs pursuant to  purchase orders we expect to receive now and to
expand during the remainder of the year. The Company has the option of opening
additional manufacturing lines at other Jabil plants as demand requires. Over
the past several weeks we have been working with our geospatial provider, u-Blox
of Switzerland, to ensure continued support and world class levels of
service.  U-blox is a well recognized location based company with a
great reputation for their quality delivery of specialized geospatial support.
The Company submitted its devices to RFI Labs in late February 2009 and received
Federal Communications Commission (“FCC”) certification during the month of May
(FCC #XCRLBPFK-140US) with PCS Type Certification Review Board (“PTCRB”) testing
underway. Before beginning sales in the US, we must also secure Carrier Network
approval from AT&T.




We have
continued to secure sufficient funds from revenues, short-term loans and private
placements that allow us to support operations for an additional 60 to 90 days
while we are in discussion with a small number of strategic
individuals/companies with interest in providing significant cash infusion as
debt or equity investments to fund inventory, support sales and marketing
initiatives, and for general operational expenses. However, there is no
assurance that we will be successful in the fundraising efforts. The desired
outcome is to form long-term relationships that deliver both immediate and
long-term mutual benefit to all parties.




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.




In spite
of the dramatic downturn in the economy and the financial markets, 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
and for products that allow companies to more efficiently utilize their vehicles
and their mobile workforce.  ABI Research reports that the North
American and worldwide personal navigation device (“PND”) market will remain
flat in 2009 as the impact of the economy and the narrow range of applications
has its effect.  The main offering of PNDs are real-time traffic or
Internet access.




3





At the
same time, navigation on cellular phones is gaining
momentum.  According to ABI Research, in the long-term, PNDs will face
increasing competition from new form factors such as mobile Internet devices
(“MID”), portable media players, and multipurpose, large-screen, connected
portable devices.




We
believe that the PocketFinder family of products represents the sought for
application that ABI recognizes is missing to stimulate the growth of personal
location or navigation devices.  By taking advantage of the latest in
GPS, GSM, and Internet technology, small and medium sized businesses will be
able to more effectively and efficiently manage their mobile assets and human
resources.  In addition, the PocketFinder® will optimize the ability
for families to stay connected.




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.  This research was conducted
prior to the substantial economic downturn that we are now
experiencing.  It is unclear how the finds will or will not be
affected by current economic conditions.




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 70 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 manufacturing 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;
  4
  ·
              Families
      with members who are Autistic or have Down 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 and have been testing our devices and our
systems for more than a year.  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.





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 registration for ‘Your
World Located’ in the United Kingdom; a new design patent D591,762 related to
the unique User Interface display of location information and data; PCT filings
for US2007072608, Apparatus & Method for Locating Individuals and Objects
Using Tracking Devices, from the European office in Germany and the Chinese
patent office in Beijing; and, Notice of Allowances for our User Interface
Associated with Location Tracking Devices for a Computer Display Screen as well
as for our Location Tracking Unit and Base Charging Unit.





We own
the Internet domain name www.pocketfinder.com
as well as the names of numerous other related domains that could have use in
future business and vertical marketing initiatives and for internet marketing
purposes.  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
– such as LoadRack’s trucking solution.  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 our first three products in the United
States, the PocketFinder® and PetFinder® as well as PocketFinder’s fleet
management system, while also involved in numerous other “white label” marketing
opportunities.  In addition, several licensing opportunities are being
explored on the international front.




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.




5




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.  In addition, we are finding significant interest in the
PetFinder® product in European countries.




Location
Based Technologies marketing initiatives will include:




·
              Licensing
      opportunities for the products in international 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.


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;
 
 ·
              Monthly
      re-occurring service fees; and
 
 ·
              GPS
      Smartphone mobile application sales (one-time or monthly fees as
      applicable)




Our Growth
Strategy.  Our objective is to become a major provider of
personal and asset location services in the Location Based Services
market.  Our strategy is to provide high quality devices that meet the
market’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 for Personal Location devices
      (customized trucking solutions with additional features and capabilities
      will be sold at a higher cost);
 
 ·
              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.




6




Our
competitors include Geospatial Platform Providers, Application Developers,
Zoombak, Snitch, Lo-Jack, 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.




Our Research and
Development.  We are in the final steps of the research and
development phase.  FCC certification was received in May 2009 while
IC, CE, and PTCRB are being finalized. We will move on to Carrier Network
certification for product coming into the United
States.  Our manufacturing will continue to work with our
company and 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 May 31, 2009, we are leveraging our
outsourcing model to world class partners and have three full-time employees and
approximately 70 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 have identified two to four
key employees to be brought in once significant revenues/funds have been
secured, with selective and controlled growth commensurate with significant
increases in our revenues over time.  Remaining true to our
“outsourced” model for growth and expansion, any large personnel increase will
be accomplished through sales and customer support outsourced organizations
contracted to provide respective services.  The company will remain
focused on its core competency of providing location devices and
services.




RESULTS
OF OPERATIONS.




For the
nine months ended May 31, 2009 as compared to the nine months ended May 31,
2008.




Revenue.




For the
nine months ended May 31, 2009, we generated $623,841 of consulting and service
revenue primarily from the Professional Services Agreement with LoadRack,
LLC.  For the nine months ended February 29, 2008, we generated $5,818
of consulting revenue.  The LoadRack consulting revenues were earned
pursuant to a development agreement for the design, construction and
implementation of a location tracking system for transportation fleets for
consulting revenue totaling $1,250,000.  We are recognizing this revenue
according to our estimate of our current progress to completion toward
identifiable project milestones.  We anticipate recognizing approximately
$800,000 during the design, construction and implementation phases and $450,000
for the hardware customization which will be fully earned upon product delivery
and client acceptance.




7




Cost
of Revenue.




For the
nine months ended May 31, 2009, cost of revenue totaled $224,320, resulting in a
64.0% gross profit margin.  There was no cost of revenue for the nine
months ended May 31, 2008.  As contract revenues are recognized using
management’s estimate of total costs to complete a project, it is at least
reasonably possible that the profit margin estimate could change in the near
term, although management is not aware of any factors which would have a
material bearing on its present revenue recognition.




Operating
Expenses.




For the
nine months ended May 31, 2009, our total operating expenses were $4,688,055 as
compared to total operating expenses of $3,959,939 for the nine months ended May
31, 2008.  The increase in operating expenses is attributed to the
following:




·
              An
      increase in officer compensation for the nine months ended May 31, 2009,
      to $1,569,750 as compared to $270,000 for the nine months ended May 31,
      2008, due to the recognition of $1,296,000 in stock compensation in
      accordance with executive employments agreements for receiving FCC
      approval on the devices;
 
 ·
              A
      decrease in professional fees to $1,265,395 for the nine months ended May
      31, 2009, as compared to $1,543,393 for the nine months ended May 31,
      2008.  The decrease in professional fees is primarily attributed
      to a decrease in stock based compensation for technology consulting
      fees;
 
 ·
              A
      decrease in research and development costs for the nine months ended May
      31, 2009, to $1,130,486 as compared to $1,464,281 for the nine months
      ended May 31, 2008, as the Company is finalizing its research and
      development phase and preparing for
production.




Other
Expenses.




For the
nine months ended May 31, 2009, we reported other expenses consisting of net
interest expense, financing costs and foreign currency gains and losses totaling
$3,841,839 as compared to $2,330,792 for the nine months ended May 31,
2008.  The increase at May 31, 2009, is primarily attributed to an
increase in stock based compensation paid to consultants providing capital
raising services.  In January 2009, the Company contracted for
professional capital raising services to be performed during 2009, at a total
cost to the Company of $2,850,000.




Net
Loss.




For the
nine months ended May 31, 2009, we reported a net loss of $8,131,173 as compared
to a net loss of $6,286,513 for the nine months ended May 31, 2008, due to an
increase in operating expenses and other expenses as previously
discussed.




Liquidity
and Capital Resources.




We had
cash and cash equivalents of $211,756 as of May 31, 2009, as compared to $20,569
as of August 31, 2008.  Costs and estimated earnings in excess of
billings on uncompleted contracts related to the LoadRack project amounted to
$72,050 as of May 31, 2009.  Prepaid expenses totaled $76,796 as of
May 31, 2009, as compared to $86,616 as of August 31, 2008, and primarily
consisted of advisor retainers and prepaid manufacturing and production
costs.  Deferred financing costs totaled $79,000 as of May 31, 2009,
and consisted of unamortized financing costs related to the issuance of common
stock in connection with debt issuances or extensions.




As of May
31, 2009, the total of our property and equipment, less accumulated
depreciation, was a net value of $1,236,496, compared to the net value of
$1,043,861 for our property and equipment, less accumulated depreciation, as of
August 31, 2008.  The increase is primarily due to the development of
the website and database during the nine months ended May 31,
2009.  Amortization of the website and database has not commenced, and
will begin when our product line is launched.  We continue to assess
these assets for potential impairment and none has been recorded to
date.




8




Other
assets, consisted of patents, trademarks and deposits, amounted to $1,241,506 as
of May 31, 2009, as compared to $1,141,186 as of August 31, 2008.  The
increase is the result of increased legal fees to obtain and secure additional
international patents and trademarks.  We periodically assess our
patents and intellectual property for impairment; none has been recorded to
date.




Our total
assets as of May 31, 2009, were $2,917,604 as compared to our total assets as of
August 31, 2008, which were $2,292,232.  The increase in our total
assets as between the two periods was due primarily to an overall increase in
cash, costs and estimated earnings in excess of billings on uncompleted
contracts, deferred financing costs, fixed assets and intellectual
property.




As of May
31, 2009, our accounts payable and accrued expenses, including accrued officer
compensation, were $1,473,896 as compared to $903,225 as of August 31,
2008.  The increase in accounts payable and accrued expenses,
including accrued officer compensation, is primarily a result of cash flow
management that has resulted in extending payables and accruing officer
compensation.




There
were no outstanding advances from officers including accrued interest as of May
31, 2009, as compared to $159,409 as of August 31, 2008 as outstanding advances
and related accrued interest were converted into shares of the Company’s common
stock.




Notes
payable and accrued interest totaled $1,125,000 and $56,737, respectively, as of
May 31, 2009, whereby there was no such notes payable at August 31,
2008.  The $1,125,000 in promissory notes are short term, to be repaid
out of potential future permanent financing.




In 2007,
we sold $5,242,000 in convertible notes that were subsequently converted into
5,242,000 shares of common stock.  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 form filings or other notice filing provisions
of safe-harbor exemptions for such sales offered by rules promulgated under the
Securities Act by the SEC and applicable state laws.  Thus, it is
possible that the sale of the convertible notes may have violated the
registration requirements of the Securities Act and applicable state
laws.  As to those sales, a right of rescission may exist on which the
statute of limitations has not run.  The Company performed an analysis
under FAS 5, Accounting for
Contingencies, and has concluded that the likelihood of a right of
rescission being successfully enforced on the convertible note sales is
remote.




We had no
other long term liabilities, commitments or contingencies.




Other
than the proposed increases in revenue and cost of revenue upon launching our
products into the market, we are not aware of any other known trends, events or
uncertainties, which may affect our future liquidity.




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 May 31, 2009,
we had an accumulated deficit of $18,155,018 and we expect to incur continual
losses until sometime in calendar year 2010.




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 May
31, 2009, we had $211,756 in cash, cash equivalents and short-term
investments.  During the nine months ended May 31, 2009, we received
loans totaling $2,425,000 of which $1,300,000 were related party loans, to fund
operations.  In addition, we also received equity investments totaling
$225,000 for the purchase of our common stock and warrants.  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.




9




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 customer service and
  support.
 
 ·
              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 current and 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 fourth 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 fourth 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 May
31, 2009, we had no off-balance sheet arrangements.




ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.




10




ITEM
4T.  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.




PART
II – OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS




None.





ITEM
1.A.  RISK FACTORS





Not
applicable.





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




None.




ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





None.





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




The
Company held its annual shareholder meeting on May 22, 2009. The record date for
the meeting was April 3, 2009, on which date there were 88,744,270 Shares of
Common Stock issued and outstanding and were the only class of voting securities
outstanding.




The
shareholders voted on the following matters:




11




1.
            To
      elect directors, David M. Morse, Joseph F. Scalisi and Desiree Mejia, to
      serve until the 2010 Annual Meeting of Shareholders;
  and




2.
            To
      ratify the appointment of Comiskey & Company, P.C., as independent
      registered auditors of the Company for the year ending August 31,
      2009.




The first
item voted upon at the meeting was the election of directors, David M. Morse,
Joseph F. Scalisi and Desiree Mejia, to serve until the 2010 Annual Meeting of
Shareholders.  The results of the voting were 52,875,844 shares in
favor, 0 shares against, and 37,920 shares abstaining.




The
second item voted upon at the meeting was to ratify the appointment of Comiskey
& Company, P.C., as independent registered auditors of the Company for the
year ending August 31, 2009.  The results of the voting were
52,912,924 shares in favor, 840 shares against, and 0 shares
abstaining.




ITEM
5.  OTHER INFORMATION





(a)
              We
      have no procedure in place for shareholders to nominate persons to serve
      on our Board of Directors other than nominations for the position of
      Director will be accepted from the floor as long as the person nominated
      has given written consent to his/her nomination and has agreed to serve if
      elected.




12




ITEM
6.  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 (15)3.2
                                    Amended
      and Restated By-Laws of Location Based Technologies, Inc.
    (2)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
                                    Finder’s
      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)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)                                     13
  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, 2008. (15)10.30
                                      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, 2008. (15)10.32
                                      Consent
      of Independent Registered Accounting Firm (15)10.33
                                      Loan
      Promissory Note in the amount of $625,000, dated November 18, 2008, with
      the Company as maker and Gemini Master Fund, Ltd. as payee. (19)10.34
                                      Loan
      Promissory Note in the amount of $300,000, dated December 24, 2008, with
      the Company as maker and Steve Finley as payee. (19)10.35
                                      Loan
      Promissory Note in the amount of $350,000, dated January 26, 2009, with
      the Company as maker and Joseph Scalisi as payee. (19)10.36
                                      Professional
      Services Agreement between the Company and LoadRack, LLC, dated January
      28, 2009. (19)10.37
                                      Loan
      Extension Agreement between the Company and Gemini Master Fund, Ltd. dated
      January 30, 2009. (19)10.38
                                      Endorsement
      Agreement between the Company and John Riegger, dated February 12, 2009.
      (19)10.39
                                      Senior
      Secured Promissory Note between the Company and Gemini Master Fund, Ltd.,
      dated May 7, 2009. (16)10.40
                                      Loan
      Extension Agreement between the Company and Gemini Master Fund, Ltd.,
      dated May 7, 2009. (16)10.41
                                      Stock
      Purchase Agreement between the Company and Aaron Taylor dated May 15,
      2009. (17)10.42
                                      Stock
      Purchase Agreement between the Company and ORI Services Corp. dated May
      27, 2009. (18)10.43
                                      Promissory
      Note in the amount of $100,000 between the Company and Netgain Financial,
      Inc., dated May 27, 2009. (18)10.44
                                      Consulting
      Agreement between the Company and Tina Florance, CPA, dated May 1,
      2009.31.1
                                      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)




14




(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)
                (11)
                (12)
                (13)
                (14)
                (15)
              Filed
      as Exhibit 99.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on June 4, 2008.
                Filed
      as Exhibit 99.1 to registrants’ Current Report on Form 8-K filed with the
      SEC on September 12, 2008.
                Filed
      as Exhibit 3.01 to registrants’ Current Report on Form 8-K filed with the
      SEC on October 22, 2008.
                Filed
      as like-numbered exhibits to registrant’s Form 10-QSB filed with the SEC
      on April 10, 2008.
                Filed
      as like-numbered exhibits to registrant’s Form 10-QSB filed with the SEC
      on July 14, 2008.
                Filed
      as like-numbered exhibits to registrant’s Form 10-KSB filed with the SEC
      on December 12, 2008.(16)
              Filed
      as like-numbered exhibits to registrant’s Current Report on Form 8-K filed
      with the SEC on May 13, 2009.(17)
              Filed
      as like-numbered exhibit to registrant’s Current Report on Form 8-K filed
      with the SEC on May 22, 2009.(18)
              Filed
      as like-numbered exhibits to registrant’s Current Report on Form 8-K filed
      with the SEC on June 1, 2009.(19)
              Filed
      as like-numbered exhibits to registrant's Form 10-Q filed with the SEC on
      April 14, 2009.*
              Exhibit
      numbers follow the numbering pattern for exhibits set forth in Item 601 of
      Regulation S-K





15




SIGNATURE




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Issuer has duly caused this Quarterly Report on Form 10-Q to be signed
on its behalf by the undersigned, thereunto duly authorized.




LOCATION
      BASED TECHNOLOGIES, INC.Date:
      July 13, 2009
            By:
            /s/ David
      M. MorseDavid
      M. Morse

                Co-
      President and Chief Executive Officer






16