UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-QSB





(Mark
One)




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




For the
quarter ended February 29, 2008




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




Commission
File Number 333-139395




LOCATION
BASED TECHNOLOGIES, INC.


(Name
of small business issuer in its charter)




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




4989
E. La Palma Avenue, Anaheim, California 92807


(Address
of principal executive offices)




800-615-0869


(Issuer’s
telephone number)






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 is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yeso NoQ




There are
28,980,638 shares outstanding of the issuer’s common stock, as
of  April 10, 2008.




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







TABLE
OF CONTENTS


PagePART
      I.
              FINANCIAL
      INFORMATION
              1ITEM
      1.
              FINANCIAL
      STATEMENTS
              1ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
              24ITEM
      3A(T).
              CONTROLS
      AND PROCEDURES
              31PART
      II
              OTHER
      INFORMATION
              31ITEM
      1
              LEGAL
      PROCEEDINGS
              31ITEM
      2
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              32ITEM
      3
              DEFAULTS
      UPON SENIOR SECURITIES
              32ITEM
      4
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              32ITEM
      5
              OTHER
      INFORMATION
              32ITEM
      6
              EXHIBITS
              33SIGNATURE
              
              35




PART
I. FINANCIAL
INFORMATION






LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
  CONSOLIDATED
FINANCIAL STATEMENTS
  FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 AND
FOR THE PERIOD FROM INCEPTION
 (SEPTEMBER
16, 2005) THROUGH FEBRUARY 29, 2008


ITEM
1. FINANCIAL
STATEMENTS


TABLE
OF CONTENTS
  Financial
      StatementsPageConsolidated
      Balance Sheets
                2Consolidated
      Statements of Operations
                3Consolidated
      Statements of Changes in Stockholders’ Equity
    (Deficit)
                4Consolidated Statements of Cash
      Flows
                7Notes
      to Financial Statements
                9
 1




Location
Based Technologies, Inc.


(A
Development Stage Company)


CONSOLIDATED
BALANCE SHEETS


February
29, 2008 and August 31, 2007


February
      28,
              
              
              August
      31,2008
              
              
              2007(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              1,657,223
              
              
              $
              3,671,900Accounts
      receivable
              
              
              5,818
              
              
              
              -Prepaid
      expenses
              
              
              39,534
              
              
              
              53,526Debt
      issuance costs
              
              
              -
              
              
              
              446,776Total
      current assets
              
              
              1,702,575
              
              
              
              4,172,202Property
      and equipment, net of accumulated depreciation
              
              
              704,534
              
              
              
              371,566OTHER
      ASSETSPatents
      and trademarks
              
              
              1,096,295
              
              
              
              994,297Deposits
              
              
              20,458
              
              
              
              7,060Total
      other assets
              
              
              1,116,753
              
              
              
              1,001,357TOTAL
      ASSETS
              
              $
              3,523,862
              
              
              $
              5,545,125LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
              
              $
              52,835
              
              
              $
              680,000Accrued
      officer compensation
              
              
              223,500
              
              
              
              453,975Advances
      from officer
              
              
              -
              
              
              
              25,020Notes
      payable, related party
              
              
              -
              
              
              
              803,500Accrued interest, related party notes payable
              
              
              -
              
              
              
              120,599Convertible
      notes payable
              
              
              -
              
              
              
              4,892,000Accrued interest, convertible notes payable
              
              
              -
              
              
              
              58,206Total
      current liabilities
              
              
              276,335
              
              
              
              7,033,300TOTAL
      LIABILITIES
              
              
              276,335
              
              
              
              7,033,300Commitments
      and contingencies
              
              
              -
              
              
              
              -STOCKHOLDERS'
      EQUITY (DEFICIT)Preferred stock, $0.001 par value, 10,000,000 sharesauthorized; no shares issued or outstanding
              
              
              -
              
              
              
              -Common stock, $.001 par value; 100,000,000 shares
    authorized;28,980,638
      shares and 17,575,000 shares issued and outstandingat February 29, 2008 and August 31, 2007, respectively
              
              
              24,643
              
              
              
              176Additional
      paid-in capital
              
              
              10,446,873
              
              
              
              800,992Deficit accumulated during the development stage
              
              
              (7,223,989
              )
              
              
              (2,289,343
              )Total
      stockholders' equity (deficit)
              
              
              3,247,527
              
              
              
              (1,488,175
              )TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              3,523,862
              
              
              $
              5,545,125






See
accompanying notes to unaudited financial statements. 
 2
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For the
three and six months ended February 29, 2008 and February 28, 2007
 and for the period
from Inception (September 16, 2005) to February 29, 2008
 (Unaudited)
 
 For
      the three months ended
                
                
                For
      the six months ended
                
                
                (Sept
      16, 2005)February
      29,
                
                
                February
      28,
                
                
                February
      29,
                
                
                February
      28,
                
                
                to
      February 29,2008
                
                
                2007
                
                
                2008
                
                
                2007
                
                
                2008Net
      revenue
                
                $
                5,818
                
                
                $
                -
                
                
                $
                5,818
                
                
                $
                -
                
                
                $
                5,818Operating
      expensesGeneral
      and administrative
                
                
                239,946
                
                
                
                34,240
                
                
                
                404,948
                
                
                
                63,227
                
                
                
                615,290Officer
      compensation
                
                
                90,000
                
                
                
                90,000
                
                
                
                180,000
                
                
                
                180,000
                
                
                
                1,035,000Professional
      fees
                
                
                318,548
                
                
                
                -
                
                
                
                1,416,327
                
                
                
                80
                
                
                
                1,650,359Rent
                
                
                28,693
                
                
                
                24,315
                
                
                
                46,971
                
                
                
                36,146
                
                
                
                146,205Research
      and development
                
                
                262,749
                
                
                
                25,136
                
                
                
                548,441
                
                
                
                83,391
                
                
                
                1,062,027Total
      operating expenses
                
                
                939,936
                
                
                
                173,691
                
                
                
                2,596,687
                
                
                
                362,844
                
                
                
                4,508,881Net
      operating loss
                
                
                (934,118
                )
                
                
                (173,691
                )
                
                
                (2,590,869
                )
                
                
                (362,844
                )
                
                
                (4,503,063
                )Other
      income (expense)Interest
      income (expense), net
                
                
                18,940
                
                
                
                (5,000
                )
                
                
                63,556
                
                
                
                (10,000
                )
                
                
                (63,003
                )Interest
      forgiven, net
                
                
                125,008
                
                
                
                -
                
                
                
                58,206
                
                
                
                -
                
                
                
                -Debt
      issuance costs - commissions
                
                
                (173,006
                )
                
                
                -
                
                
                
                (491,775
                )
                
                
                -
                
                
                
                (680,959
                )Debt
      issuance costs - warrants
                
                
                (1,141,998
                )
                
                
                -
                
                
                
                (1,971,791
                )
                
                
                -
                
                
                
                (1,971,791
                )Loss
      on asset disposal
                
                
                (373
                )
                
                
                -
                
                
                
                (373
                )
                
                
                -
                
                
                
                (373
                )Total
      other income (expense)
                
                
                (1,171,429
                )
                
                
                (5,000
                )
                
                
                (2,342,177
                )
                
                
                (10,000
                )
                
                
                (2,716,126
                )Net
      loss before income taxes
                
                
                (2,105,547
                )
                
                
                (178,691
                )
                
                
                (4,933,046
                )
                
                
                (372,844
                )
                
                
                (7,219,189
                )Provision
      for income taxes
                
                
                -
                
                
                
                -
                
                
                
                1,600
                
                
                
                1,600
                
                
                
                4,800Net
      Loss
                
                
                (2,105,547
                )
                
                
                (178,691
                )
                
                
                (4,934,646
                )
                
                
                (374,444
                )
                
                
                (7,223,989
                )Accumulated
      DeficitBalance,
      beginning of period
                
                
                (5,118,442
                )
                
                
                (979,349
                )
                
                
                (2,289,343
                )
                
                
                (783,596
                )
                
                
                -Balance,
      end of period
                
                $
                (7,223,989
                )
                
                $
                (1,158,040
                )
                
                $
                (7,223,989
                )
                
                $
                (1,158,040
                )
                
                $
                (7,223,989
                )Basic
      - Earnings (loss) per share
                
                $
                (0.07
                )
                
                $
                (0.61
                )
                
                $
                (0.20
                )
                
                $
                (0.88
                )Basic
      - Weighted Average Numberof
      Shares Outstanding
                
                
                28,206,464
                
                
                
                293,889
                
                
                
                24,346,449
                
                
                
                424,833
 
 See accompanying
notes to unaudited financial statements.
  3
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For theperiod from
Inception (September 16, 2005) to February 29, 2008
 (Unaudited)
 
  DeficitAccumulated
              
              
              TotalPreferred
      Stock
              
              
              Common
      Stock
              
              
              Additional
              
              
              During
      the
              
              
              StockholdersNumber
              
              
              
              
              
              Number
              
              
              To
      be
              
              
              
              
              
              Paid-In
              
              
              Development
              
              
              Equityof
      Shares
              
              
              Amount
              
              
              of
      Shares
              
              
              issued
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              (Deficit)Balance,
      September 16, 2005
              
              
              -
              
              
              $
              -
              
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Cash
      received for 20,000 shares of common stock to be issued, November 30,
      2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20
              
              
              
              19,980
              
              
              
              -
              
              
              
              20,000Cash
      received for 30,000 shares of common stock to be issued, November 30,
      2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30
              
              
              
              29,970
              
              
              
              -
              
              
              
              30,000Cash
      received for 25,000 shares of common stock to be issued, March 14,
      2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              25
              
              
              
              24,975
              
              
              
              -
              
              
              
              25,000Cash
      received for 50,000 shares of common stock to be issued, August 4, 2006,
      net of offering costs
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50
              
              
              
              -
              
              
              
              46,950
              
              
              
              -
              
              
              
              47,000Cash
      received for 50,000 shares of common stock to be issued, August 18,
      2006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50
              
              
              
              -
              
              
              
              49,950
              
              
              
              -
              
              
              
              50,000Issuance
      of common stock for services, July 2006
              
              
              -
              
              
              
              -
              
              
              
              75,000
              
              
              
              -
              
              
              
              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
              
              
              -
              
              
              
              -
              
              
              
              75,000
              
              
              
              100
              
              
              
              150
              
              
              
              396,750
              
              
              
              (783,596
              )
              
              
              (386,596
              )Issuance
      of common stock, net of offering costs, for cash, September
      2006
              
              
              -
              
              
              
              -
              
              
              
              150,000
              
              
              
              -
              
              
              
              150
              
              
              
              110,600
              
              
              
              -
              
              
              
              110,750Issuance
      of common stock, net of offering costs, for cash, November
      2006
              
              
              -
              
              
              
              -
              
              
              
              30,000
              
              
              
              -
              
              
              
              30
              
              
              
              22,470
              
              
              
              -
              
              
              
              22,500Issuance
      of common stock, net of offering costs, for cash, February
      2007
              
              
              -
              
              
              
              -
              
              
              
              250,000
              
              
              
              -
              
              
              
              250
              
              
              
              181,750
              
              
              
              -
              
              
              
              182,000Issuance
      of common stock, net of offering costs, for cash, March
    2007
              
              
              -
              
              
              
              -
              
              
              
              25,000
              
              
              
              -
              
              
              
              25
              
              
              
              18,725
              
              
              
              -
              
              
              
              18,750
  (Continued)
  See accompanying
notes to unaudited financial statements.
  4
 Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For theperiod from
Inception (September 16, 2005) to February 29, 2008
 (Unaudited)
 (Continued)
 DeficitAccumulated
              
              
              TotalPreferred
Stock
              
              
              Common Stock
              
              
              Additional
              
              
              During the
              
              
              StockholdersNumber
              
              
              
              
              
              Number
              
              
              To be
              
              
              
              
              
              Paid-In
              
              
              Development
              
              
              Equityof
      Shares
              
              
              Amount
              
              
              of
Shares
              
              
              issued
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              (Deficit)Issuance
      of 175,000 shares of common stock, June 2007
              
              
              -
              
              
              
              -
              
              
              
              175,000
              
              
              
              (100
              )
              
              
              100
              
              
              
              -
              
              
              
              -
              
              
              
              -Issuance
      of 55,000 shares of common stock for cash proceeds of $55,000, June
      2007
              
              
              -
              
              
              
              -
              
              
              
              55,000
              
              
              
              -
              
              
              
              55
              
              
              
              54,945
              
              
              
              -
              
              
              
              55,000Issuance
      of 16,800,000 shares of common stock for cash proceeds of $168, June
      2007
              
              
              -
              
              
              
              -
              
              
              
              #######
              
              
              
              -
              
              
              
              16,800
              
              
              
              (16,632
              )
              
              
              -
              
              
              
              168Issuance
      of common stock for conversion of note payable, August
2007
              
              
              -
              
              
              
              -
              
              
              
              15,000
              
              
              
              -
              
              
              
              15
              
              
              
              14,985
              
              
              
              -
              
              
              
              15,000Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,505,747
              )
              
              
              (1,505,747
              )Balance,
      August 31, 2007
              
              
              -
              
              
              
              -
              
              
              
              17,575,000
              
              
              
              -
              
              
              
              17,575
              
              
              
              783,593
              
              
              
              (2,289,343
              )
              
              
              (1,488,175
              )Issuance
      of Series A warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,408,167
              
              
              
              -
              
              
              
              1,408,167Issuance
      of Series B warrants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              563,624
              
              
              
              -
              
              
              
              563,624Issuance
      of common stock for services, October 2007
              
              
              -
              
              
              
              -
              
              
              
              6,000
              
              
              
              -
              
              
              
              6
              
              
              
              5,994
              
              
              
              -
              
              
              
              6,000Issuance
      of common stock for conversion of related party note payable, October
      2007
              
              
              -
              
              
              
              -
              
              
              
              803,500
              
              
              
              -
              
              
              
              804
              
              
              
              802,696
              
              
              
              -
              
              
              
              803,500Share
      exchange with Springbank Resources resulting in recapitalization, October
      2007
              
              
              -
              
              
              
              -
              
              
              
              4,337,500
              
              
              
              -
              
              
              
              -
              
              
              
              419
              
              
              
              -
              
              
              
              419Issuance
      of common stock for services, November 2007
              
              
              -
              
              
              
              -
              
              
              
              425,544
              
              
              
              -
              
              
              
              426
              
              
              
              425,118
              
              
              
              -
              
              
              
              425,544Issuance
      of common stock for services, November 2007
              
              
              -
              
              
              
              -
              
              
              
              200,000
              
              
              
              -
              
              
              
              200
              
              
              
              829,800
              
              
              
              -
              
              
              
              830,000
  (Continued)
  See accompanying
notes to unaudited financial statements.
  5


Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For theperiod from
Inception (September 16, 2005) to February 29, 2008
 (Unaudited)
 (Continued)
 
 DeficitAccumulated
              
              
              TotalPreferred
      Stock
              
              
              Common
    Stock
              
              
              Additional
              
              
              During the
              
              
              StockholdersNumber
              
              
              
              
              
              Number
              
              
              To be
              
              
              
              
              
              Paid-In
              
              
              Development
              
              
              Equityof
      Shares
              
              
              Amount
              
              
              of
Shares
              
              
              issued
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              (Deficit)Issuance
      of common stock for conversion of notes payable, November and December
      2007
              
              
              -
              
              
              
              -
              
              
              
              5,242,000
              
              
              
              -
              
              
              
              5,242
              
              
              
              5,236,758
              
              
              
              -
              
              
              
              5,242,000Issuance
      of common stock for conversion of accrued interest on related party note
      payable, February 2008
              
              
              
              
              
              
              
              
              
              
              120,599
              
              
              
              
              
              
              
              120
              
              
              
              120,479
              
              
              
              -
              
              
              
              120,599Issuance
      of common stock for conversion of accrued officer compensation, February
      2008
              
              
              
              
              
              
              
              
              
              
              270,495
              
              
              
              
              
              
              
              270
              
              
              
              270,225
              
              
              
              -
              
              
              
              270,495Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4,934,646
              )
              
              
              (4,934,646
              )Balance,
      February 29, 2008
              
              
              -
              
              
              $
              -
              
              
              
              #######
              
              
              $
              -
              
              
              $
              24,643
              
              
              
              #######
              
              
              $
              (7,223,989
              )
              
              $
              3,247,527
 
 See accompanying notes
to unaudited financial statements.
 
 6
 Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For the
three and six months ended February 29, 2008 and February 28, 2007
 and for the period
from Inception (September 16, 2005) to February 29, 2008
 (Unaudited)
 InceptionFor
      the six months ended
                
                
                (Sept
      16, 2005)February
      29,
                
                
                February
      28,
                
                
                to
      February 29,2008
                
                
                2007
                
                
                2008Cash
      Flows from Operating ActivitiesNet
      loss
                
                $
                (4,934,646
                )
                
                $
                (374,444
                )
                
                $
                (7,223,989
                )Adjustment to reconcile net loss to net cashprovided
      by (used in) operating activitiesDepreciation
                
                
                4,381
                
                
                
                150
                
                
                
                6,482Common
      stock issued for services
                
                
                1,261,544
                
                
                
                -
                
                
                
                1,516,544Warrants
      issued for services
                
                
                1,971,791
                
                
                
                -
                
                
                
                1,971,791Recapitalization
      adjustment
                
                
                419
                
                
                
                -
                
                
                
                419Changes
      in operating assets and liabilities(Increase)
      decrease in accounts receivable
                
                
                (5,818
                )
                
                
                
                
                
                
                (5,818
                )(Increase)
      decrease in prepaid expenses
                
                
                13,992
                
                
                
                -
                
                
                
                (39,534
                )(Increase)
      decrease in debt issuance costs
                
                
                446,776
                
                
                
                -
                
                
                
                -(Increase)
      decrease in deposits
                
                
                (13,398
                )
                
                
                -
                
                
                
                (20,458
                )Increase
      (decrease) in accounts payable and accrued expenses
                
                
                (627,165
                )
                
                
                (9,783
                )
                
                
                52,835Increase
      (decrease) in accrued officer compensation
                
                
                40,020
                
                
                
                129,000
                
                
                
                493,995Increase
      (decrease) in accrued interest
                
                
                (58,206
                )
                
                
                5,000
                
                
                
                120,599Net
      cash used in operating activities
                
                
                (1,900,310
                )
                
                
                (250,077
                )
                
                
                (3,127,134
                )Cash
      Flows from Investing ActivitiesPurchase
      of property and equipment
                
                
                (337,349
                )
                
                
                (55,566
                )
                
                
                (711,016
                )Additions
      to patents and trademarks
                
                
                (101,998
                )
                
                
                (21,000
                )
                
                
                (196,295
                )Net
      cash used in investing activities
                
                
                (439,347
                )
                
                
                (76,566
                )
                
                
                (907,311
                )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of common stock, net of offering costs
                
                
                -
                
                
                
                370,000
                
                
                
                404,168Proceeds
      from common stock be to issued
                
                
                -
                
                
                
                -
                
                
                
                142,000(Repayments)
      / advances from officer
                
                
                (25,020
                )
                
                
                6,485
                
                
                
                -Proceeds
      from convertible notes payable
                
                
                350,000
                
                
                
                -
                
                
                
                5,242,000Proceeds
      from notes payable, related party
                
                
                -
                
                
                
                -
                
                
                
                50,000Repayment
      on notes payable, related party
                
                
                -
                
                
                
                (23,000
                )
                
                
                (146,500
                )Net
      cash provided by financing activities
                
                
                324,980
                
                
                
                353,485
                
                
                
                5,691,668Net
      (decrease) increase in cash and cash equivalents
                
                
                (2,014,677
                )
                
                
                26,842
                
                
                
                1,657,223Cash
      and cash equivalents, beginning of period
                
                
                3,671,900
                
                
                
                3,568
                
                
                
                -Cash
      and cash equivalents, end of period
                
                $
                1,657,223
                
                
                $
                30,410
                
                
                $
                1,657,223
  (Continued)
 See accompanying
notes to unaudited financial statements.
  7
 Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For the
three and six months ended February 29, 2008 and February 28, 2007
 and for the period
from Inception (September 16, 2005) to February 29, 2008
 (Unaudited)
 (Continued)
   InceptionFor
      the six months ended
                
                
                (Sept
      16, 2005)February
      29,
                
                
                February
      28,
                
                
                to
      February 29,2008
                
                
                2007
                
                
                2008Supplemental
      disclosure of cash flow information:Income
      taxes paid
                
                $
                -
                
                
                $
                800
                
                
                $
                800Interest
      paid
                
                $
                -
                
                
                $
                -
                
                
                $
                -Supplemental
      disclosure of noncash financing and investing activities:Issuance
      of shares of common stock for services
                
                $
                1,261,544
                
                
                $
                -
                
                
                $
                1,516,544Issuance
      of warrants for services
                
                $
                1,971,791
                
                
                $
                -
                
                
                $
                1,971,791Acquisition
      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 note
    payable
                
                $
                803,500
                
                
                $
                -
                
                
                $
                803,500Issuance
      of common stock for conversion of accrued interest on related party note
      payable
                
                $
                120,599
                
                
                $
                -
                
                
                $
                -Issuance
      of common stock for conversion of accrued officer
    compensation
                
                $
                270,495
                
                
                $
                -
                
                
                $
                -
 See accompanying
notes to unaudited financial statements.
  8
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE OF OPERATIONS
      AND SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
 
 Organization
 
 Location Based Technologies, Inc. (the
“Company” “LBT”) was incorporated under the laws of the State of California on
September 16, 2005. On July 7, 2006, the Company 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. (formerly PocketFinder, Inc.)
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 50,000 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 545,000 shares of common stock
of the Company.
 
 Stock Exchange
Agreement
 
 On
October 11, 2007, the Company effected the 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 the Company in exchange
for shares of SRI’s common stock.
 
 Subject
to the terms and conditions of the Agreement, SRI issued, and the stockholders
of the Company accepted 18,384,500 shares of SRI’s common stock in consideration
for all of the issued and outstanding shares of the Company.  The
shares of SRI’s common stock were allocated to the shareholders of the Company
in accordance with the Agreement.
  9
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Stock
Exchange Agreement (Continued)
 
 The
former shareholders of LBT acquired control of the Company upon the closing of
the stock exchange transaction. The exchange was accounted for as a reverse
acquisition. Accordingly, for financial statement purposes, LBT was considered
the accounting acquiror, and the related business combination was considered a
recapitalization of LBT rather than an acquisition by SRI. The historical
financial statements prior to the agreement will be those of LBT, and the name
of the consolidated company going forward will be Location Based Technologies,
Inc.
 
 Nature of
Business
 
 The
Company is in the development stage of creating PocketFinderTM
personal locators. PocketFindersTM are
small personal location devices designed to give parents, guardians, and pet
owners peace of mind. Utilizing the U.S. Department of Defense’s multi-billon
dollar Global Positioning System (GPS) satellites and existing wireless
technology, our team of engineers have developed technology which allows our
network of members to locate anyone carrying our device, whether that person is
inside of a building/structure or in the great outdoors (Systems and Method
Patent pending). PocketFindersTM 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.
 
 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-QSB and Item 310(b)
of Regulation S-B.  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, 2007.  In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
February 29, 2008, 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, 2007, included in the Company’s report on Form
10-KSB.
  10
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Use of
Estimates
 
 The
preparation of combined financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reported periods.  Actual results could materially
differ from those estimates.
 
 Cash and Cash
Equivalents
 
 For
purposes of the balance sheets and statements of cash flows, the Company
considers all highly liquid debt instruments purchased with maturity of three
months or less to be cash equivalents.
 
 Concentration of Credit
Risk
 
 Cash and cash equivalents –
The cash and cash equivalent balances at February 29, 2008, are principally held
by one institution which insures our aggregated accounts with the Federal
Deposit Insurance Corporation ("FDIC") up to $100,000.  At February
29, 2008, the Company had uninsured cash deposits in excess of the FDIC
insurance limit totaling $1,571,795.
 
 Revenues and Accounts
Receivable – Revenue generated during the six months ended February 29,
2008, consisted of sales to a single customer.  Total revenues from
this customer were $5,818 for the six months ended February 29,
2008.  Total accounts receivable due from this customer at February
29, 2008 were $5,818.
 
 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 February 29, 2008, there was no allowance
for doubtful accounts recorded, as all of the Company’s receivables were
considered collectible.
  11
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 Fair Value of Financial
Instruments
 
 Pursuant
to SFAS 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.
 
 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. As of February 29,
2008 and August 31, 2007, the Company has capitalized $1,061,331 and $990,572
for patent related expenditures, respectively. As of February 29, 2008 and
August 31, 2007, the Company has capitalized $34,964 and $3,725 for trademark
related expenditures, respectively. The Company has not yet recorded
amortization expense related to the patents because the patents are not subject
to amortization until issued by the United States Patent Office and placed in
service by the Company.  Intangible assets will be amortized in
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill
and Other Intangible Assets,” ("SFAS 142") using the straight-line method over
the shorter of their estimated useful lives or remaining legal life. The
intangible assets acquired from other enterprises or individuals in an “arms
length” transaction are recorded at cost.
 
 Property and
Equipment
 
 Property
and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are calculated using the straight-line method and
with useful lives used in computing depreciation ranging from 3 to 5 years. When
property and equipment are retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the respective accounts, and any
gain or loss is included in operations. Expenditures for maintenance and repairs
are charged to operations as incurred; additions, renewals and betterments are
capitalized.
  12
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Internal Website Development
Costs
 
 Under
FASB Emerging Issues Task Force Statement 00-2, Accounting for Web Site
Development Costs ("EITF 00-2"), 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
February 29, 2008, the Company had capitalized costs of $675,475 related to its
website development.  The website development costs will be
depreciated when the website is completed and ready for use.
 
 Long-Lived
Assets
 
 The
Company accounts for its long-lived assets in accordance with 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 February 29, 2008, the Company did not deem any
of its long-term assets to be impaired.
 
 Revenue
Recognition
 
 Revenues
are recognized in accordance with Staff Accounting Bulletin
(SAB) No. 101, “Revenue Recognition in Financial Statements,” as
amended by SAB No. 104, “Revenue Recognition” when (a) persuasive
evidence of an arrangement exists, (b) the products or services have been
provided to the customer, (c) the fee is fixed or determinable, and (d)
collectibility is reasonably assured. In instances where the customer, at its
discretion, has the right to reject the product or services prior to final
acceptance, revenue is deferred until such acceptance occurs.
  13
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28,
2007
 
 1
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANTACCOUNTINGPOLICIES (Continued)
 
 Research and
Development
 
 Research
and development costs are clearly identified and are expensed as incurred in
accordance with FASB statement No. 2, "Accounting for Research and Development
Costs."  For the six months ended February 29, 2008 and February 28,
2007, the Company incurred $548,441 and $83,391 of research and development
costs, respectively.
 
 Provision for Income
Taxes
 
 The
Company accounts for income taxes under SFAS 109, “Accounting for Income
Taxes”.  Under the asset and liability method of SFAS 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 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period the enactment occurs.  A
valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets through future
operations.  The Company has included its $800 franchise fee in its
provision for income taxes for each of the six months ended February 29, 2008
and February 28, 2007.
 
 Earnings/ Loss Per
Share
 
 The
Company computes basic earnings (loss) per share using the weighted average
number of common shares outstanding during the period in accordance with
Statement of Financial Standards No. 128, Earnings Per Share ("SFAS 128") which
specifies the compilation, presentation, and disclosure requirements for income
per share for entities with publicly held common stock or instruments which are
potentially common stock. Under SFAS No. 128, diluted earnings (loss) per share
are computed using the weighted average number of common shares outstanding and
the dilutive potential common shares outstanding during the period. Dilutive
potential common shares primarily consist of stock options and warrants issued
by the Company. These potential common shares are excluded from diluted loss per
share as their effect would be anti-dilutive.
  14
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent Accounting
Pronouncements
 
 FASB Interpretation No.
48 – In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes” (FIN 48), 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 is currently assessing the potential effect of FIN 48 on its financial
statements.
 
 SFAS No. 157 – In
September 2006, the FASB issued Statement 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.  This Statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years.  Earlier application is encouraged, provided that the reporting
entity has not yet issued financial statements for that fiscal year, including
financial statements for an interim period within that fiscal
year.  The Company is currently assessing the potential effect of SFAS
157 on its financials statements.
  15
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent
Accounting Pronouncements (Continued)
 
 SFAS No. 158 – In
September 2006, the FASB issued Statement 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 believes that the adoption of this
standard will not a have a material impact on its financial
statements.
 
 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.
  16
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 1.
              NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent
Accounting Pronouncements (Continued)
 
 SFAS No. 159 – In
February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.This
Statement permits entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. This Statement is
expected to expand the use of fair value measurement, which is consistent with
the Board’s long-term measurement objectives for accounting for financial
instruments. This Statement applies to all entities, including not-for-profit
organizations. Most of the provisions of this Statement apply only to entities
that elect the fair value option.
 
 2.
              PROPERTY AND
      EQUIPMENT
 
 Property
and equipment at February 29, 2008 and August 31, 2007 consists of the
following:
 
 February
      29,
              
              
              August
      31,2008
              
              
              2007Website
      development costs
              
              $
              675,475
              
              
              $
              361,825Computer
      and video equipment
              
              
              21,216
              
              
              
              10,076Office
      furniture
              
              
              11,546
              
              
              
              1,766Leasehold
      improvements
              
              
              2,445710,682
              
              
              
              373,667Less:
      accumulated depreciation
              
              
              (6,148
              )
              
              
              (2,101
              )Total
      property and equipment
              
              $
              704,534
              
              
              $
              371,566
  Depreciation
expense for the six months ended February 29, 2008 amounted to
$4,381.
  17
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 3.             
CONVERTIBLE NOTES
PAYABLE
 
 From
March 2007 through October 2007, the Company entered into convertible note
agreements totaling $5,242,000.  Under the terms of the agreements,
amounts borrowed must be repaid by March 31, 2008 and accrue interest at the
rate of 8% per annum.  At the option of the Company or the convertible
note holder, the notes plus any accrued and unpaid interest may be converted
into shares of the Company’s common stock on the basis of $1.00 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 2008 through December 2008, all of the convertible notes payable
totaling $5,242,000 were converted into 5,242,000 shares of the Company’s common
stock on the basis of $1.00 per share.  In connection with the note
payable conversions, each note holder agreed to forgive accrued interest on the
notes totaling $168,989.
 
 4.             
NOTES PAYABLE –
RELATED PARTY
 
 On
November 28, 2005, the Company entered into a promissory note agreement with the
Company’s CEO and stockholder for $900,000 in exchange for the assignment of
certain intellectual property and trademark rights. Under the terms of the
promissory note agreement, the principal and any unpaid interest shall not
become due until the Company attains financial stability, defined as strong
revenue generation and cash flow.  Up to twelve quarterly payments may
be made to fulfill payment of this note.  The note may be prepaid
without premium or penalty. The note bears interest at 8% per annum and is
payable at any time before the repayment date. The note is secured by all
intellectual property, trademarks, ongoing research and development and all
other assets owned by the Company. On October 29, 2007, the CEO elected to
convert the outstanding balance on the promissory note agreement into common
stock of the Company.  The note payable balance totaling $803,500 was
converted into 803,500 shares of the Company’s common stock on the basis of
$1.00 per share.  In February 2008, accrued interest on the note
payable totaling $120,599 was converted into 120,599 shares of the Company’s
common stock on basis of $1.00 per share.
  18
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 5.           
  COMMITMENTS AND
CONTINGENCIES
 
 Consulting
Agreements
 
 In July
2007, the Company entered into a financial consulting agreement whereby the
consultant will be compensated 2% of the Company’s first ten million dollars of
sales and 1% of the second ten million dollars of sales.  The
agreement expires July 16, 2010.
 
 In
January 2008, the Company entered into a consulting and sales representative
agreement whereby the consultant will be compensated 5% of certain product
sales.  In addition, the consultant may earn warrants to purchase up
to 200,000 shares of the Company’s common stock upon meeting certain sales
targets.  The agreement expires December 31, 2008 and shall
automatically renew from year to year until terminated by either
party.
 
 In
February 2008, the Company entered into a framework, platform development and
assistance services agreement related to technological developments of the
database and website. Under the terms of the agreements, the Company is
obligated to pay approximately $270,000 from March 2008 through January
2009.  The agreements expire February 2011.
  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 six months ended February 29, 2008,
and February 28, 2007 was $46,971 and $36,146, respectively.
 
 As of
February 29, 2008 the future minimum lease payments are as follows:
  For the Years Ending February
      28,2009
              
              $
              136,2782010
              
              
              116,390Total
              
              $
              252,668
  19
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 6.              EQUITY
  Common Stock
 
 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
20,000 shares of common stock at $1.00 per share for an aggregate total of
$20,000.
 
 In
November 2005, the Company agreed to issue 30,000 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 25,000
shares of common stock at $1.00 per share for an aggregate total of
$25,000.
 
 In August
2006, the Company performed a private placement and agreed to issue 100,000
shares of common stock at $1.00 per share for an aggregate total of
$100,000.  The Company received cash proceeds totaling
$97,000.
 
 In July
2006, the Company issued 75,000 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 150,000 shares of common stock for net cash
of $110,850 which is net of offering costs of $39,250, in cash
proceeds.
 
 In
November 2006, the Company issued 30,000 shares of common stock for net cash of
$22,500, which is net of offering costs of $7,500, in cash
proceeds.
 
 In
February 2007, the Company issued 250,000 shares of common stock in exchange for
net cash of $182,000, which is net of offering costs of $68,000, in cash
proceeds.
 
 In March
2007, the Company issued 25,000 shares of common stock in exchange for net cash
of $18,750, which is net of offering costs of $6,250 in cash
proceeds.
  20
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
   6.             
EQUITY
(Continued)
  Common Stock(Continued)
 
 In June
2007, the Company issued 55,000 shares of common stock for $55,000 in cash
proceeds.
 
 In June
2007, the Company issued 16,800,000 shares of its common stock for cash proceeds
of $168.
 
 In August
2007, the Company issued 15,000 shares of common stock in exchange for the
conversion of a $15,000 note payable.
 
 In
October 2007, the Company issued 6,000 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 803,500 shares of common stock in exchange for
the conversion of a $803,500 related party note payable (see Note
4).
 
 In
November 2007, the Company issued 425,544 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 200,000 shares of common stock in exchange for
$200,000 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 1,067,500 shares of common stock in exchange
for the conversion of $1,067,500 in notes payable (see Note 3).
 
 In
December 2007, the Company issued 4,174,500 shares of common stock in exchange
for the conversion of $4,174,500 in notes payable (see Note 3).
 
 In
February 2008, the Company issued 120,599 shares of common stock in exchange for
the conversion of $120,599 in accrued interest on a related party note payable
(see Note 4).
 
 In
February 2008, the Company issued 270,495 shares of common stock in exchange for
the conversion of $270,495 in accrued officer compensation.
  21
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
   6.             
EQUITY
(Continued)
  Warrants
 
 In August
2007, the Company issued a “Series A” warrant to purchase 500,000 common shares
at $1.00 per share and a “Series B” warrant to purchase 250,000 common shares at
$2.00 per share, in exchange for consulting services related to the sale of the
Company’s convertible promissory notes.  The fair value of the
warrants using the Black-Scholes option pricing model amounted to $1,408,167 and
$563,624 for the “Series A” and “Series B” warrants, respectively (see Note
7).
  Stock Incentive
Plan
  On
September 10, 2007, the directors and shareholders adopted a 2007 Stock
Incentive Plan.  The plan reserves 750,000 shares for issuance
pursuant to options, grants of restricted stock or other stock-based
awards.  The plan is administered by the board of directors which has
the power, pursuant to the plan, to delegate the administration of the plan to a
committee of the board.  There were no distributions made under the
plan for the three months ended February 29, 2008.
  7.   STOCK OPTIONS AND
WARRANTS
  On August
15, 2007, the Company issued a “Series A” warrant to a consultant to purchase
500,000 shares of the Company’s common stock at $1 per share and a “Series B”
warrant to purchase 250,000 shares of the Company’s common stock at $2 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 six months ended
February 29, 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 February 29,
2008.
  22
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007
 8.             
PROVISION FOR INCOME
TAXES
 
 Deferred
income taxes are reported using the liability method.  Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary
differences.  Temporary differences arise from the difference between
the reported amounts of assets and liabilities and their tax
basis.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
 
 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 February 29, 2008, are as
follows:
  Net
      operating loss carry forward
              
              $
              2,877,000Valuation
      allowance
              
              
              (2,877,000
              )Net
      deferred tax asset
              
              $
              -
  A
reconciliation of the combined federal and state statutory income taxes rate and
the effective rate is as follows:
  Tax
      at statutory rate
              
              $
              39.83
              %Valuation
      allowance
              
              
              (39.83
              %)$
              -
 
 8.             
PROVISION
FOR INCOME TAXES
 
 As of
February 29, 2008, the Company had federal and state net operating loss
carryforwards of approximately $7,223,000 which can be used to offset future
federal income tax.  The federal and state net operating loss
carryforwards expire at various dates through 2027.  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.
  23




ITEM
2.MANAGEMENT’S DISCUSSION
AND ANALYSIS OR PLAN 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 require 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.
  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.”
  Our
Business.  We are in a solid financial position to transition
from a company that is primarily focused on design and development to being a
company fully engaged with sales, marketing, and product
delivery.  Our financial condition has greatly benefited from the
conversion of 100% of our outstanding investor notes into company
common stock.  The impact of this conversion has strengthened our
balance sheet.  The final development stage of the PocketFinder®
personal locators has taken longer than we expected due to advancements in the
GPS technology and in preparation of our printed circuit
boards.  PocketFinder® devices are technologically advanced and
utilize a highly developed eight (8) layer printed circuit board.  The
fabrication of the boards, although not a challenge in mass production, is
delicate when produced in small quantities by “boutique” manufacturers who make
the initial devices that are submitted to the government
approved laboratories for certification testing. Our boutique manufacturers
have had to run several batches of the boards in order to get them right (just
accomplished on April 8th 2008).  With the boards completed, we will now be able to
submit devices to the labs for certification testing.
  The
PocketFinder® Personal Locator family of devices meets the growing demand for
location-based services that will allow family members to keep in touch with one
another in an increasingly busy world.  By taking advantage of the
latest in GPS and GSM technology, our locator devices will optimize the ability
for families to stay connected.  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 PetFinder will
come with a form fitting neoprene pouch that is easily slid onto a belt or a
pet’s collar.
  24
 
 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 47 full time contractors working on our endeavor.  It
allows us to tightly control our overhead so, as we now shift our primary focus
from being a development company to being a sales and marketing company, we have
the right resources in place.  The infrastructure and critical
organizations for success are in place. We have a very talented senior
management team with partners who bring the right knowledge, skills and
abilities to deliver world-class products and services. We have recruited a
master of distribution with specific knowledge and experience in the location
based services arena as well as a seasoned expert in customer service to ensure
that our customers experience the best level of service from day
one.  As shown in one of our earlier SEC filings, we have a signed
contract with “24/7 INtouch” and they will handle our call-center customer
services. They are a high quality, award-winning, mass-market customer-focused
support organization.
  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 are beginning the manufacturing process of the
PocketFinder Personal Locator or PocketFinder®.  We plan to have
the PocketFinder® device manufactured by an original equipment manufacturer
(OEM) with facilities in China, Mexico and Europe although we have not yet
entered into any manufacturing contracts.  We will provide end-user
customer service and support through 24-7 INtouch headquartered in Toronto,
Ontario.  We anticipate exploring multiple vertical markets including
the following:
  Ÿ
              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.
 Ÿ
              Families
      with members who are Autistic or have Downs Syndrome, Alzheimer’s,
      etc.
 Ÿ
              Elder
      Care support and applications.
 Ÿ
              Pet
      care and location capability.
 Ÿ
              Asset
      tracking and location capability:  cars, trucks, fleet
      management, luggage, and other personal
assets.
  We signed
a contract with KORE Telematics on November 26, 2007.  Our products
will offer wide network coverage throughout North America  via KORE
Telematics (an provider of “Machine-to-Machine” or M2M protocol access)
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 290 wireless providers in over 130
countries.  In addition, our locators have the ability to work on any
GSM network in the world.
  Our Target Markets and Marketing
Strategy.  We have invested significantly 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 personal locator, its operating system and user
interface.  We have received Trademark approvals for the following:
PetFinder; PocketFinder and the associated service mark; Your World Located;
iTalk; and the avatars (or stylized heads) found on our website and on the
product’s box.
  We
provide wireless location based solutions for global positioning products and
its proprietary “friendly user interface” software system.  Our
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.  We have 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.
  25
  We
are preparing for the launch of our first two products, the PocketFinder®
and PetFinderTM, while also involved in numerous other “white label” marketing
opportunities. In addition, several licensing opportunities are being
explored.
  For the
PocketFinder® family of products, we believe that the primary target market
will consist of parents with school-aged children from ages five to
thirteen.  Secondary markets may include medical and elder care
providers, campers, hikers, backpackers, adventure seekers, extreme sports
enthusiasts, freight and cargo carriers, delivery services, pet owners, vehicle
finance companies, auto dealerships, law enforcement agencies, military
organizations and individuals wishing to track valuable personal
items.
  Based on
census information, there are over 37,000,000 children in the 5 to 13 year old
market segment in the United States with an additional 4,000,000 in the prime
focus areas in Canada.  The European Community has an additional
42,500,000 children in this primary age group.  Adding in the elder
care market this represents a target market of more than 109,200,000 potential
customers in our focus age group.
  Closely
related to family/personal locators is the desire for pet locators.  A
locator device will give the owner the ability to locate their pet if it were to
become lost or be missing in the neighborhood 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.
  Our marketing
initiatives will include:
  ·
              Licensing
      opportunities for the products in other areas or
  regions.
 ·
              Self
      branded or “white label” opportunities for niche market or vertical market
      sales.
 ·
              Affinity
      group marketing and outreach
opportunities.
 ·
              Utilization
      of direct response sales due to public relations outreach in special
      interest magazines and newsletters.
 ·
              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.
  Growth
Strategy.  Our objective is to become one of the major
providers of personal and asset location services on the market.  Our
strategy is to provide high quality devices that meet the mass market’s
requirements whether it be for their children, their pets, or asset tracking
(luggage, vehicles, boats, etc.).  Key elements of our strategy
include:
  ·
              A
      mass market retail price of under
$150.00;
 ·
              A
      basic monthly service fee of under $20.00 with multiple convenient access
      points (mobile phone, land line, or via the
  internet);
 ·
              Ease
      of use at the location interface point as well as with the
      device;
 ·
              Rugged
      design that meets the rigors of an active child or pet.  It is
      waterproof and handles weather extremes of heat and
  cold.
  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, ordering
capability, frequently asked questions and access to corporate investor
relations information.  Information contained on our website is not a
part of this report.
  26
  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.
  Competitors
include Geospatial Platform Providers, Application Developers, Wherify Wireless,
Inc., Zoombak, Inc., and Global Pet Finder.  These 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 PDA location devices are gaining significant
market acceptance and commercialization.  Prices range from $350.00 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, IC and CE
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 currently finalizing our development stage
of the company.  Preparation for the government approved laboratory
Certification processes  began in the first calendar quarter of 2008
(initial certifications will include Federal Communications Commission, Industry
Canada, Conformite Europeenne, PCS Type Certification Review Board, and Carrier
certification).  Engineer prototype testing began in October of
2007.  We will continue to work with several other entities that are
conducting research on key aspects of the device itself (including expanded
antennae capability, battery capacity, and enhanced location reliability and
accuracy) in an ongoing effort to provide the best quality product at the very
best size and value on the market.  We anticipate ongoing involvement
with some level of developmental activities throughout the foreseeable
future.
  Employees and Outsourced
Assistance.  As of April 1, 2008 we are fully leveraging our
outsourcing model to world class partners and have three full-time employees and
approximately 47 contracted employees engaged in hardware and software
development and early marketing and sales preparation.  Mr. Scalisi,
our Co-President and Chief Development Officer, Mr. Morse, our Co-President and
Chief Executive Officer, and Ms. Mejia, our Chief Operating Officer, currently
devote 100% of their business time to our operations.  We anticipate
that we will hire two to four key employees in the next six months, with
selective and controlled growth commensurate with significant increases in our
revenues.  Remaining true to our “outsourced” model for growth and
expansion, any large personnel increases will be accomplished through sales and
customer support organizations contracted to provide respective
services.
  In
furtherance of our company’s efforts to prepare to move into the marketplace, we
have entered into the following contracts with independent service providers
during our second fiscal quarter of 2008:
  Ÿ
              Consulting
      Agreement, dated December 10, 2007, with Brooks Secrest for the analysis
      and evaluation of shipping and kitting needs of PocketFinder®
      products.  The agreement remains in effect until the assigned
      tasks are completed, but in any event no longer than three
      years.  The contractor is entitled to payments totaling $200,000
      payable in two increments with the final payment in March
      2008.
 Ÿ
              Consulting
      and Sales Representative Agreement, dated January 2, 2008, with WhizBiz,
      LLC, to act as the Company’s consultant and sales
      representative.  The agreement expires December 31, 2008, and
      shall automatically renew from year to year until terminated by either
      party.  The consultant will be compensated for certain product
      sales and is entitled to earn up to 200,000 warrants to purchase shares of
      our common stock upon reaching certain benchmarks.  Shares
      issued to consultant will be issued in reliance on the exemption provided
      by Section 4(2) of the Securities Act of 1933.  Such shares will
      be “restricted” securities as defined in SEC Rule
  144.
  27
  Ÿ
              Consulting
      Agreement, dated January 2, 2008, with Tina Florance, CPA, for services to
      serve as the Company’s Controller.  The agreement remains in
      effect until the assigned tasks are completed, but in any event no longer
      than three years.  Ms. Florance receives an hourly amount for
      her services and is entitled to earn up to 20,000 warrants to purchase
      shares of our common stock upon reaching certain
      benchmarks.  Shares issued to Ms. Florance will be issued in
      reliance on the exemption provided by Section 4(2) of the Securities Act
      of 1933.  Such shares will be “restricted” securities as defined
      in SEC Rule 144.
 Ÿ
              A
      series of professional services agreements, dated February 27,
      2008,  was entered into with NXP Software B.V., a company
      incorporated under the laws of the Netherlands (“NXP”) wherein NXP agreed
      to (i) license to the Company software capable of processing GPS satellite
      signals to provide location positioning information; (ii) provide a
      technology platform utilizing that software on which the Company can build
      its PocketFinder® products; and (iii) provide the Internet based services
      required for the PocketFinder® products to perform GPS location processing
      using NXP’s software technology.  The agreements include a
      Framework Agreement (a form of master agreement), a Technology License and
      Distribution Agreement, a Platform Development Agreement, and an
      Assistance Services Agreement. The agreements have three year terms,
      extendable for one additional year, and have standard termination
      provisions.  They are not assignable by the Company without
      NXP’s consent.  The Company will not be charged a license fee
      for the technology but will pay negotiated fees for NXP’s work in
      development the technology platform and NXP’s service
      assistance.
  PLAN
OF OPERATIONS
  Cash
Requirements.
  We are a
wireless technology company focused on the marketing and sales of a new personal
location device system (the PocketFinder®  Personal Locator or
PocketFinder®) for retail distribution.  We are an early stage
marketing and sales company, and we expect the initial launch of the
PocketFinder® during second quarter of 2008.  Since our inception, we
have generated significant losses.  As of February 29, 2008, we had an
accumulated deficit of $7,223,989.  We expect to incur continual
losses until sometime in calendar year 2009, although we expect to begin
generating revenues sometime during the first six months of calendar
2008.
  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
February 29, 2008, we had $1,657,223 in cash, cash equivalents and short-term
investments.  We believe that our available cash and cash equivalents
will be sufficient to fund anticipated levels of basic operations until we
achieve cash flow from sales.  Over the next two months, we expect to
expend approximately $331,000 (exclusive of 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®.  We expect to fund
additional inventory and any necessary general overhead requirements through
capital raised through the sale of debt or equity securities starting sometime
in the next three months of calendar 2008 although there is no assurance that we
will be successful in that regard.
  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:
  Ÿ
              Costs
      involved in the completion of the hardware, software and interface
      customization, and website necessary to commence the commercialization of
      the PocketFinder® Personal Locator;
 Ÿ
              The
      costs of outsourced manufacturing;
 Ÿ
              The
      costs of commercialization activities, including product marketing, sales
      and distribution; andŸ
              Our
      revenues, if any, from successful commercialization of the PocketFinder®
      Personal Locator.
  28
  As noted
above, based on budgeted expenditures, we believe that we will have sufficient
liquidity to satisfy our cash requirements until sales are
achieved.  If our existing resources prove to be insufficient to
satisfy our liquidity requirements during that timeframe, we will need to raise
additional external funds through the sale of additional equity or debt
securities.  In any event, as noted above, we will need to raise
additional funds during the next three months to finance the inventory necessary
to meet anticipated demand and to support related marketing, sales, and
distribution expenses.  The sale of additional equity securities will
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
  The
management team made a strategic decision to delay the completion of production
ready units due to access to newly developed GPS software and technology that
significantly enhanced the accuracy and response speed of our GPS solution. It
will be the first application of this new technology in the personal location
space in the world.  We plan to complete all readiness activities for
the initial market launch of the PocketFinder® including manufacturing in the
second calendar quarter of 2008.  We are currently using
pre-production locator units for testing of our “back office” systems and
pre-sales and marketing efforts have already begun.  We expect that
our first purchase orders will be secured in second calendar quarter 2008 and
that we will be prepared to begin delivery of product to retailers in the same
time period, 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.
  RESULTS
OF OPERATIONS
  For
the six months ended February 29, 2008 as compared to the six months ended
February 28, 2007.
 
 Revenues.
 
 We
generated $5,818 of consulting revenue for the six months ended February 29,
2008.   There was no revenue generated for the six months ended
February 28, 2007.
 
 Operating
Expenses.
 
 For the
six months ended February 29, 2008, our total operating expenses were $2,596,687
as compared to total operating expenses of $362,844 for the six months ended
February 28, 2007.  The increase in operating expenses is attributed
to the following:
 
 ·
              An
      increase in general and administrative costs to $404,948 for the six
      months ended February 29, 2008, as compared to $63,227 for the six months
      ended February 28, 2007.  The increase in general and
      administrative costs is the result of increases in the
      following:
 o
              Advertising,
      marketing and promotional costs in preparation for the initial launch of
      the PocketFinder®products;
 o
              Corporate
      filing fees, stock transfer agent fees and Edgar filing fees as a result
      of being a public company;
 o
              Computer
      expenses due to technological advances;
and
 ·
              Travel
      expenses to secure international technology, manufacturing and sales
      contracts.
  29
  ·
              A
      significant increase in professional fees to $1,416,327 for the six months
      ended February 29, 2008, as compared to $80 for the six months ended
      February 28, 2007.  The increase in professional fees is the
      result of the following:
 o
              The
      recognition of $830,000 in stock based compensation issued to consultants
      for technology services rendered;
 o
              Incurring
      sales consulting fees in preparation for the initial launch of the
      PocketFinder®products.
 o
              A
      significant increase in legal and accounting fees as a result of the
      reporting requirements of being a public
  company.
 ·
              An
      increase in research and development costs for the six months ended
      February 29, 2008, to $548,441 as compared to $83,391 for the six months
      ended February 28, 2007, as significant efforts were made to develop and
      build the first prototypes and development of the website and mapping
      interface services.
 
 Other
Income.
 
 For the
six months ended February 29, 2008, we reported net interest income of $63,556
as compared to net interest expense of $10,000 for the six months ended February
28, 2007.  The increase in interest income is attributed to the
recognition of interest on bank deposits during the six months ended February
29, 2008, while there was no such interest income during the six months ended
February 28, 2007.
 
 For the
six months ended February 29, 2008, we reported debt issuance costs for
commissions and warrants totaling $491,775 and $1,971,791,
respectively.  There were no such debt issuance costs during the six
months ended February 28, 2007.
 
 Net
Loss.
 
 For the
six months ended February 29, 2008, we reported a net loss of $4,934,646 as
compared to a net loss of $374,444 for the six months ended February 28, 2007,
due to an increase in operating expenses as discussed above.
  Liquidity and Capital
Resources.
 
 We had
cash and cash equivalents of $1,657,223 as of February 29, 2008, as compared to
cash and cash equivalents of $3,671,900 as of August 31, 2007.  The
decrease in cash and cash equivalents is the result of funding the operating
loss for the six months ended February 29, 2008.  Prepaid expenses
totaled $39,534 as of February 29, 2008, and primarily consisted of prepaid
insurance and software license agreements.  There were no debt
issuance costs capitalized as of February 29, 2008, as compared to $446,776 as
of August 31, 2007.  The decrease in debt issuance costs is the result
of fully amortizing these debt issuance costs.
 
 As of
February 29, 2008, the total of our property and equipment, less accumulated
depreciation, was a net value of $704,534, compared to the net value of $371,566
for our property and equipment, less accumulated depreciation, as of August 31,
2007.  The increase is primarily due to the development of the website
and database during the six months ended February 29, 2008.
 
 Other
assets, consisted of patents, trademarks and deposits, amounted to $1,116,753 as
of February 29, 2008, as compared to $1,001,357 as of August 31,
2007.  The increase is the result of legal fees to obtain and secure
additional patents and trademarks.
 
 Our total
assets as of February 29, 2008, were $3,523,862 as compared to our total assets
as of August 31, 2007, which were $5,545,125.  The decrease in our
total assets as between the two periods was due primarily to a decrease in cash
and cash equivalents and debt issuance costs.
 
 As of
February 29, 2008, our accounts payable and accrued expenses, including accrued
officer compensation, were $276,335 as compared to $1,133,975 as of August 31,
2007.  The decrease in accounts payable and accrued expenses,
including accrued officer compensation, as of February 29, 2008, is primarily
due to the payment of accrued financing commissions and the conversion of
accrued officer compensation into the Company’s common stock.
  30
 
 Notes
payable and convertible notes payable, including related accrued interest,
totaled $0 as of February 29, 2008, as compared to $ 5,874,305 as of August 31,
2007.  The decrease is primarily due to the conversion of $5,242,000
in notes payable into the Company’s common stock.  In addition,
$924,099 of related party notes payable and accrued interest was also converted
into the Company’s common stock.  We had no other long term
liabilities, commitments or contingencies.
 
 Other
than the proposed increases in inventory costs, research and development
expenses and the increases in legal and accounting costs we expect due to the
reporting requirements of being a reporting company, we are not aware of any
other known trends, events or uncertainties, which may affect our future
liquidity.
  ITEM
3A(T).   CONTROLS AND PROCEDURES
  Evaluation
of Disclosure Controls and Procedures
  Management
is responsible for establishing adequate internal controls and procedures
designed to ensure that information required to be disclosed in the reports that
we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.
 
 As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and the Company's Chief
Operating Officer and Principal Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended). Based on this evaluation, the Company's Chief Executive
Officer and Principal Financial Officer concluded that the Company's disclosure
controls and procedures were effective in ensuring that (i) information required
to be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
Securities and Exchange Commission and (ii) information required to be disclosed
in the reports the Company files or submits under the Securities Exchange Act of
1934, as amended, is accumulated and communicated to management, including the
Company's Chief Executive Officer and Principal Financial Officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
  Changes
In Internal Controls Over Financial Reporting
  There
were no changes in our internal controls over financial reporting during or that
could significantly affect these controls subsequent to the date of the
evaluation of those controls by the chief executive officer and principal
financial officer.
   PART
II OTHER
INFORMATION
  ITEM
1.LEGAL
PROCEEDINGS
  We have
no litigation against us that we expect will have a material adverse effect on
our business, financial condition, liquidity, or operating results. However,
legal claims are inherently uncertain and we cannot assure you that we will not
be adversely affected in the future by legal proceedings.
  31
  ITEM
2.UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS
  Sales
within this fiscal quarter were reported on current reports on Form 8-K filed on
December 5, 2007 and January 4, 2008.
  ITEM
3.DEFAULTS
UPON SENIOR SECURITIES
  None.
  ITEM
4.SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
  At our
annual meeting of shareholders, which was held at our offices on February 19,
2008, David M. Morse, Joseph F. Scalisi, and Desiree Mejia were elected as
directors for the next year and until their successors are qualified and
elected. In addition, the selection of the independent registered accounting
firm to act as auditors for the fiscal year ending August 31, 2008 was
ratified.  The votes were cast as follows:
  FOR
              AGAINST
              WITHHOLD
                FOR
                DIRECTOR
              ABSTENTIONS
              BROKER
                NON-VOTEMORSE
              21,908,509
              0
              50,891
              0
              0SCALISI
              21,908,509
              0
              50,891
              0
              0MEJIA
              21,908,509
              0
              50,891
              0
              0COMISKEY
      ANDCOMPANY
              21,921,709
              0
              0
              0
              0
  ITEM
5.OTHER
INFORMATION
  (a)           
We have entered into the following contracts with independent service providers
during our second fiscal quarter of 2008:
  Ÿ
              Consulting
      Agreement, dated December 10, 2007, with Brooks Secrest for the analysis
      and evaluation of shipping and kitting needs of PocketFinder®
      products.  The agreement remains in effect until the assigned
      tasks are completed, but in any event no longer than three
      years.  The contractor is entitles to payments totaling $200,000
      payable in two increments with the final payment in March
      2008.
 Ÿ
              Consulting
      and Sales Representative Agreement, dated January 2, 2008, with WhizBiz,
      LLC, to act as the Company’s consultant and sales
      representative.  The agreement expires December 31, 2008, and
      shall automatically renew from year to year until terminated by either
      party.  The consultant will be compensated for certain product
      sales and is entitled to earn up to 200,000warrants to purchase shares of
      our common stock upon reaching certain benchmarks.  Shares
      issued to consultant will be issued in reliance on the exemption provided
      by Section 4(2) of the Securities Act of 1933.  Such shares will
      be “restricted” securities as defined in SEC Rule
  144.
 Ÿ
              Consulting
      Agreement, dated January 2, 2008, with Tina Florance, CPA, for services to
      serve as the Company’s Controller.  The agreement remains in
      effect until the assigned tasks are completed, but in any event no longer
      than three years.  Ms. Florance receives an hourly amount for
      her services and is entitled to earn up to 20,000 warrants to purchase
      shares of our common stock upon reaching certain
      benchmarks.  Shares issued to Ms. Florance will be issued in
      reliance on the exemption provided by Section 4(2) of the Securities Act
      of 1933.  Such shares will be “restricted” securities as defined
      in SEC Rule 144.
 Ÿ
                A
      series of professional services agreements, dated February 27,
      2008,  was entered into with NXP Software B.V., a company
      incorporated under the laws of the Netherlands (“NXP”) wherein NXP agreed
      to (i) license to the Company software capable of processing GPS satellite
      signals to provide location positioning information; (ii) provide a
      technology platform utilizing that software on which the Company can build
      its PocketFinder® products; and (iii) provide the Internet based services
      required for the PocketFinder® products to perform GPS location processing
      using NXP’s software technology.  The agreements include a
      Framework Agreement (a form of master agreement), a Technology License and
      Distribution Agreement, a Platform Development Agreement, and an
      Assistance Services Agreement. The agreements have three year terms,
      extendable for one additional year, and have standard termination
      provisions.  They are not assignable by the Company without
      NXP’s consent.  The Company will not be charged a license fee
      for the technology but will pay negotiated fees for NXP’s work in
      development the technology platform and NXP’s service
      assistance.
 32
 (b)           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.
  ITEM
6. EXHIBITS
  ExhibitNo.*
              DocumentDescription3.1
              Articles of
      Incorporation of Springbank Resources, Inc. (now known as Location Based
      Technologies, Inc.) (3)3.2
              Amended and Restated
      By-Laws of Location Based Technologies, Inc. (3)4.1
              Form of Convertible
      Note (convertible at the option of the company) issued by PocketFinder,
      LLC, a company the liabilities of which were assumed by the registrant
      ($3,175,000 represented by six of such notes, were issued)
      (3)4.2
              Form of Convertible
      Note (convertible at the option of the noteholder) issued by PocketFinder,
      LLC, a company the liabilities of which were assumed by the registrant
      ($2,067,000 represented by 26 of such notes, were issued)
      (3)10.1
              Executive Employment
      Agreement, dated October 11, 2007, between New LBT and David Morse
      (3)10.2
              Executive Employment
      Agreement, dated October 11, 2007, between New LBT and Joseph Scalisi
      (3)10.3
              Executive Employment
      Agreement, dated October 11, 2007, between New LBT 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 New
      LBT)(3)10.5
              Stock Option Award
      Agreement between Location Based Technologies, Corp. and Joseph Scalisi,
      dated August 30, 2007 (obligation assumed by New LBT)
      (3)10.6
              Stock Option Award
      Agreement between Location Based Technologies, Corp. and Desiree Mejia,
      dated August 30, 2007 (obligation assumed by New
      LBT)(3)10.7
              Series A Warrant,
      dated August 15, 2007, in favor of Northstar Investments, Inc., issued by
      Location Based Technologies, Corp. (obligation assumed by New LBT)
      (3)10.8
              Series B Warrant
      dated August 15, 2007, in favor of Northstar Investments, Inc. (obligation
      assumed by New LBT) (3)10.9
              Finders Fee
      Agreement, dated March 9, 2007, between Northstar Investments, Inc. and
      PocketFinder, LLC (obligation assumed by New LBT)
    (3)10.10
              Consulting
      Agreement, dated July 16, 2007, between Northstar Investments, Inc. and
      PocketFinder, LLC (obligation assumed by New LBT)
    (3)10.11
              2007 Stock Incentive
      Plan of Location Based Technologies, Corp., adopted September 10, 2007
      (obligation assumed by New LBT) (3)10.12
              Product Design
      Agreement, dated May 1, 2007, between Location Based Technologies and Aero
      Technology UK, Ltd. (obligation assumed by New LBT)
    (3)10.13
              PocketFinder
      Branding and Website – Control Agreement, dated September 20, 2006,
      between Coregenic LLC and PocketFinder, LLC (obligation assumed by New
      LBT(3)10.14
              Coregenic
      Professional Services Contract, dated September 27, 2006, between
      Coregenic LLC and PocketFinder, LLC (obligation assumed by New LBT)
      (3)10.15
              Consulting
      Agreement, dated October 3, between Location Based Technologies and
      Michael Beydler (obligation assumed by New LBT)
  (3)10.16
              Consulting
      Agreement, dated July 10, 2006, between Location Based Technologies and
      Roger Anderson (obligation assumed by New LBT)
  (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 New LBT)
    (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 filed with the Commission)
    (4)
  33
  10.19
              Consulting
      Agreement, dated December 10, 2007, with Brooks Secrest.10.20
              Consulting
      and Sales Representative Agreement, dated January 2, 2008, with WhizBiz,
      LLC, to act as the Company’s consultant and sales
  representative.10.21
              Consulting
      Agreement, dated January 2, 2008, with Tina Florance, CPA, for services to
      serve as the Company’s Controller.10.22
              Framework Agreement
      between the company and NXP Software, B.V. (“NXP”), dated February 27,
      2008. (4)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
              Commercial
      Lease Agreement between Cinvest LLC and the Company, commencing January 1,
      2008 and ending December 31,2009, for the offices occupied by the Company
      in Anaheim, CA.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)
 
 (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 3.2 to registrant's Current Report on Form 8-K filed with the
      SEC on January 4, 2008 ("01/04/08 8-K") 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 Exhibits 14.1 and 14.2 to the 01/04/08 8-K and incorporated herein by
      this reference.
 (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”) and incorporated herein
      by this reference.
 (7)
              Filed
      as Exhibit 10.2 to registrant’s February 29, 2008 8-K and incorporated
      herein by this reference.
 (8)
              Filed
      as Exhibit 10.3 to registrant’s February 29, 2008 8-K and incorporated
      herein by this reference.
 (9)
              Filed
      as Exhibit 10.4 to registrant’s February 29, 2008 8-K and incorporated
      herein by this reference.
 *
              Exhibit
      numbers follow the numbering pattern for exhibits set forth in Item 601 of
      Regulation S-B
  34
  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-QSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
  LOCATION
      BASED TECHNOLOGIES, INC.Dated:  April
      10, 2008
                By:
                /s/ David
      M. MorseDavid
      M. Morse
                  Co-President and Chief Executive Officer
    35