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 May 31, 2008
  o
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  Commission
File Number 333-139395
  LOCATION
BASED TECHNOLOGIES, INC.
 (Name of
small business issuer in its charter)
  Nevada
              
              20-4854758(State
      ofincorporation)
              
              (I.R.S.
      EmployerIdentification
      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).  Yes oNoQ
  There are
29,030,638 shares outstanding of the issuer’s common stock, as of June 30,
2008.
  Transitional
Small Business Disclosure Format (Check
one):    Yes o  No Q
  1
  TABLE
OF CONTENTS
  PagePART
      I.
              FINANCIAL
      INFORMATION
              3
  ITEM
      1.
              FINANCIAL
      STATEMENTS
              3
  ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
              4
  ITEM
      3A(T).CONTROLS AND PROCEDURES
              11
  PART
      II
              OTHER
      INFORMATION
              11
  ITEM
      1
              LEGAL
      PROCEEDINGS
              11
  ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              11
  ITEM
      3.
              DEFAULTS
      UPON SENIOR SECURITIES
              11
  ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              12
  ITEM
      5.
              OTHER
      INFORMATION
              12
  ITEM
      6.
              EXHIBITS
              12
  SIGNATURE
              
              14
  2
 
 PART
I.-FINANCIAL INFORMATION
   LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 
 CONSOLIDATED
FINANCIAL STATEMENTS
  FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 AND
FOR THE PERIOD FROM INCEPTION
 (SEPTEMBER
16, 2005) THROUGH MAY 31, 2008
   ITEM
1.-FINANCIAL STATEMENTS
  TABLE
OF CONTENTS
  Financial
      Statements
                PageConsolidated
      Balance Sheets
                F-1Consolidated
      Statements of Operations
                F-2Consolidated
      Statements of Changes in Stockholders’ Equity (Deficit)
                F-3Consolidated
      Statements of Cash Flows
                F-6Notes to
      Financial Statements
                F-8 to
  F-22
  3
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
BALANCE SHEETS
 May 31,
2008 and August 31, 2007
  May
      31,
                  
                  
                  August
      31,2008
                  
                  
                  2007(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  361,970
                  
                  
                  $
                  3,671,900Prepaid
      expenses
                  
                  
                  22,565
                  
                  
                  
                  53,526Other
      receivable
                  
                  
                  14,424
                  
                  
                  
                  -Debt
      issuance costs
                  
                  
                  -
                  
                  
                  
                  446,776Total
      current assets
                  
                  
                  398,959
                  
                  
                  
                  4,172,202Property and equipment, net of accumulated depreciation
                  
                  
                  701,985
                  
                  
                  
                  371,566OTHER
      ASSETSPatents
      and trademarks
                  
                  
                  1,121,709
                  
                  
                  
                  994,297Deposits
                  
                  
                  20,458
                  
                  
                  
                  7,060Total
      other assets
                  
                  
                  1,142,167
                  
                  
                  
                  1,001,357TOTAL
      ASSETS
                  
                  $
                  2,243,111
                  
                  
                  $
                  5,545,125LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                  
                  $
                  137,451
                  
                  
                  $
                  680,000Accrued
      officer compensation
                  
                  
                  210,000
                  
                  
                  
                  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
                  
                  
                  347,451
                  
                  
                  
                  7,033,300TOTAL
      LIABILITIES
                  
                  
                  347,451
                  
                  
                  
                  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
      May 31, 2008 and August 31, 2007, respectively
                  
                  
                  24,643
                  
                  
                  
                  176Additional
      paid-in capital
                  
                  
                  10,446,873
                  
                  
                  
                  800,992Deficit accumulated during the development stage
                  
                  
                  (8,575,856
                  )
                  
                  
                  (2,289,343
                  )Total
      stockholders' equity (deficit)
                  
                  
                  1,895,660
                  
                  
                  
                  (1,488,175
                  )TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  2,243,111
                  
                  
                  $
                  5,545,125
  See accompanying notes to
unaudited financial statements.
  F-1
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For
the three and nine months endedMay 31,
2008 and August 31, 2007
 and for the period from
Inception (September 16, 2005) to May 31, 2008
 (Unaudited)
  InceptionFor
      the three months ended
                  
                  
                  For
      the nine months ended
                  
                  
                  (Sept
      16, 2005)May
      31,
                  
                  
                  May
      31,
                  
                  
                  May
      31,
                  
                  
                  May
      31,
                  
                  
                  to
      May 31,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008Net
      revenue
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  5,818
                  
                  
                  $
                  -
                  
                  
                  $
                  5,818Operating
      expensesGeneral
      and administrative
                  
                  
                  196,446
                  
                  
                  
                  158,743
                  
                  
                  
                  601,394
                  
                  
                  
                  119,944
                  
                  
                  
                  811,736Officer
      compensation
                  
                  
                  90,000
                  
                  
                  
                  90,000
                  
                  
                  
                  270,000
                  
                  
                  
                  270,000
                  
                  
                  
                  1,125,000Professional
      fees
                  
                  
                  127,066
                  
                  
                  
                  5,175
                  
                  
                  
                  1,543,393
                  
                  
                  
                  5,255
                  
                  
                  
                  1,777,425Rent
                  
                  
                  33,900
                  
                  
                  
                  17,746
                  
                  
                  
                  80,871
                  
                  
                  
                  53,891
                  
                  
                  
                  180,105Research
      and development
                  
                  
                  915,840
                  
                  
                  
                  75,865
                  
                  
                  
                  1,464,281
                  
                  
                  
                  261,284
                  
                  
                  
                  1,977,867Total
      operating expenses
                  
                  
                  1,363,252
                  
                  
                  
                  347,529
                  
                  
                  
                  3,959,939
                  
                  
                  
                  710,374
                  
                  
                  
                  5,872,133Net
      operating loss
                  
                  
                  (1,363,252
                  )
                  
                  
                  (347,529
                  )
                  
                  
                  (3,954,121
                  )
                  
                  
                  (710,374
                  )
                  
                  
                  (5,866,315
                  )Other
      income (expense)Interest
      income (expense), net
                  
                  
                  11,385
                  
                  
                  
                  (50,856
                  )
                  
                  
                  74,941
                  
                  
                  
                  (60,856
                  )
                  
                  
                  (51,618
                  )Interest
      forgiven, net
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  58,206
                  
                  
                  
                  -
                  
                  
                  
                  -Debt
      issuance costs - commissions
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (491,775
                  )
                  
                  
                  -
                  
                  
                  
                  (680,959
                  )Debt
      issuance costs - warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,971,791
                  )
                  
                  
                  -
                  
                  
                  
                  (1,971,791
                  )Loss
      on asset disposal
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (373
                  )
                  
                  
                  -
                  
                  
                  
                  (373
                  )Total
      other income (expense)
                  
                  
                  11,385
                  
                  
                  
                  (50,856
                  )
                  
                  
                  (2,330,792
                  )
                  
                  
                  (60,856
                  )
                  
                  
                  (2,704,741
                  )Net
      loss before income taxes
                  
                  
                  (1,351,867
                  )
                  
                  
                  (398,385
                  )
                  
                  
                  (6,284,913
                  )
                  
                  
                  (771,230
                  )
                  
                  
                  (8,571,056
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,600
                  
                  
                  
                  1,600
                  
                  
                  
                  4,800Net
      Loss
                  
                  
                  (1,351,867
                  )
                  
                  
                  (398,385
                  )
                  
                  
                  (6,286,513
                  )
                  
                  
                  (772,830
                  )
                  
                  
                  (8,575,856
                  )Accumulated
      DeficitBalance,
      beginning of period
                  
                  
                  (7,223,989
                  )
                  
                  
                  (1,158,041
                  )
                  
                  
                  (2,289,343
                  )
                  
                  
                  (783,596
                  )
                  
                  
                  -Balance,
      end of period
                  
                  $
                  (8,575,856
                  )
                  
                  $
                  (1,556,426
                  )
                  
                  $
                  (8,575,856
                  )
                  
                  $
                  (1,556,426
                  )
                  
                  $
                  (8,575,856
                  )Basic
      - Earnings (loss) per share
                  
                  $
                  (0.05
                  )
                  
                  $
                  (0.76
                  )
                  
                  $
                  (0.24
                  )
                  
                  $
                  (2.25
                  )Basic
      - Weighted Average Numberof
      Shares Outstanding
                  
                  
                  28,980,638
                  
                  
                  
                  526,196
                  
                  
                  
                  25,902,454
                  
                  
                  
                  343,278
  See accompanying notes to
unaudited financial statements.
  F-2
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For the period from
Inception (September 16, 2005) to May 31, 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
  See accompanying notes to
unaudited financial statements.
  F-3
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For the period from
Inception (September 16, 2005) to May 31, 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)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
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  16,800,000
                  
                  
                  
                  -
                  
                  
                  
                  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
    F-4
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
 For the period from
Inception (September 16, 2005) to May 31, 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)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
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (6,286,513
                    )
                    
                    
                    (6,286,513
                    )Balance,
      May 31, 2008
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    28,980,638
                    
                    
                    $
                    -
                    
                    
                    $
                    24,643
                    
                    
                    $
                    10,446,873
                    
                    
                    $
                    (8,575,856
                    )
                    
                    $
                    1,895,660
 
 See accompanying notes to
unaudited financial statements.
 F-5
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 For
the three and nine months endedMay 31,
2008 and 2007
 and for the period from
Inception (September 16, 2005) to May 31, 2008
 (Unaudited)
  InceptionFor
      the nine months ended
                  
                  
                  (Sept
      16, 2005)May
      31,
                  
                  
                  May
      31,
                  
                  
                  to
      May 31,2008
                  
                  
                  2007
                  
                  
                  2008Cash
      Flows from Operating ActivitiesNet
      loss
                  
                  $
                  (6,286,513
                  )
                  
                  $
                  (772,830
                  )
                  
                  $
                  (8,575,856
                  )Adjustment to reconcile net loss to net cash provided by (used in)
      operating activitiesDepreciation
                  
                  
                  6,930
                  
                  
                  
                  1,071
                  
                  
                  
                  9,031Common
      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
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -(Increase)
      decrease in prepaid expenses
                  
                  
                  30,961
                  
                  
                  
                  -
                  
                  
                  
                  (22,565
                  )(Increase)
      decrease in other receivables
                  
                  
                  (14,424
                  )
                  
                  
                  
                  
                  
                  
                  (14,424
                  )(Increase)
      decrease in debt issuance costs
                  
                  
                  446,776
                  
                  
                  
                  -
                  
                  
                  
                  -(Increase)
      decrease in deposits
                  
                  
                  (13,398
                  )
                  
                  
                  -
                  
                  
                  
                  (20,458
                  )Increase
      (decrease) in accounts payable and accrued expenses
                  
                  
                  (542,549
                  )
                  
                  
                  130,531
                  
                  
                  
                  137,451Increase
      (decrease) in accrued officer compensation
                  
                  
                  26,520
                  
                  
                  
                  169,550
                  
                  
                  
                  480,495Increase
      (decrease) in accrued interest
                  
                  
                  (58,206
                  )
                  
                  
                  55,856
                  
                  
                  
                  120,599Net
      cash used in operating activities
                  
                  
                  (3,170,149
                  )
                  
                  
                  (415,822
                  )
                  
                  
                  (4,396,973
                  )Cash
      Flows from Investing ActivitiesPurchase
      of property and equipment
                  
                  
                  (337,349
                  )
                  
                  
                  (189,717
                  )
                  
                  
                  (711,016
                  )Additions
      to patents and trademarks
                  
                  
                  (127,412
                  )
                  
                  
                  (52,486
                  )
                  
                  
                  (221,709
                  )Net
      cash used in investing activities
                  
                  
                  (464,761
                  )
                  
                  
                  (242,203
                  )
                  
                  
                  (932,725
                  )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of common stock, net of offering costs
                  
                  
                  -
                  
                  
                  
                  390,000
                  
                  
                  
                  404,168Proceeds
      from common stock be to issued
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  142,000(Repayments)
      / advances from officer
                  
                  
                  (25,020
                  )
                  
                  
                  5,935
                  
                  
                  
                  -Proceeds
      from convertible notes payable
                  
                  
                  350,000
                  
                  
                  
                  1,008,000
                  
                  
                  
                  5,242,000Proceeds
      from notes payable, related party
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50,000Repayment
      on notes payable, related party
                  
                  
                  -
                  
                  
                  
                  (58,000
                  )
                  
                  
                  (146,500
                  )Net
      cash provided by financing activities
                  
                  
                  324,980
                  
                  
                  
                  1,345,935
                  
                  
                  
                  5,691,668Net
      (decrease) increase in cash and cash equivalents
                  
                  
                  (3,309,930
                  )
                  
                  
                  687,910
                  
                  
                  
                  361,970Cash
      and cash equivalents, beginning of period
                  
                  
                  3,671,900
                  
                  
                  
                  3,568
                  
                  
                  
                  -Cash
      and cash equivalents, end of period
                  
                  $
                  361,970
                  
                  
                  $
                  691,478
                  
                  
                  $
                  361,970
  See accompanying notes to
unaudited financial statements.
  F-6
  Location
Based Technologies, Inc.
 (A
Development Stage Company)
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 For
the three and nine months endedMay 31,
2008 and 2007
 and for the period from
Inception (September 16, 2005) to May 31, 2008
 (Unaudited)
  InceptionFor
      the nine months ended
                  
                  
                  (Sept
      16, 2005)May
      31,
                  
                  
                  May
      31,
                  
                  
                  to
      May 31,2008
                  
                  
                  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
                  
                  
                  $
                  -
                  
                  
                  $
                  5,257,000Issuance
      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.
  F-7
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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.
  F-8
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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 PocketFinder® personal
locators. PocketFinders® are small
personal location devices designed to give parents, guardians, and pet owners
peace of mind. Utilizing the U.S. Department of Defense’s multi-billon dollar
Global Positioning System (GPS) satellites and existing wireless technology, our
team of engineers have developed technology which allows our network of members
to locate anyone carrying our device, whether that person is inside of a
building/structure or in the great outdoors (Systems and Method Patent pending).
PocketFinders® are
small, rugged, and water tight. The devices can be used to locate children,
elderly or disabled persons and pets as well as for the tracking of valued
personal property.
 
 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 nine months ended May
31, 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.
  F-9
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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 May 31, 2008, are principally held by
one institution which insures our aggregated accounts with the Federal Deposit
Insurance Corporation ("FDIC") up to $100,000.  At May 31, 2008, the
Company had uninsured cash deposits in excess of the FDIC insurance limit
totaling $279,553.
 
 Revenues – Revenue generated
during the nine months ended May 31, 2008, consisted of sales to a single
customer.  Total revenues from this customer were $5,818 for the nine
months ended May 31, 2008.
 
 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.
  F-10
 
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 1.
                NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Intangible Assets – Patents
and Trademarks
 
 The
Company capitalizes internally developed assets related to certain costs
associated with patents and trademarks. These costs include legal and
registration fees needed to apply for and secure patents. As of May 31, 2008 and
August 31, 2007, the Company has capitalized $1,072,518 and $990,572 for patent
related expenditures, respectively. As of May 31, 2008 and August 31, 2007, the
Company has capitalized $49,191 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.
 
 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
May 31, 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.
  F-11
 
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 1.
                NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Long-Lived
Assets
 
 The
Company accounts for its long-lived assets in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the historical cost carrying value of an
asset may no longer be appropriate. The Company assesses recoverability of the
carrying value of an asset by estimating the future net cash flows expected to
result from the asset, including eventual disposition. If the future net cash
flows are less than the carrying value of the asset, an impairment loss is
recorded equal to the difference between the asset's carrying value and fair
value or disposable value. As of May 31, 2008, the Company did not deem any of
its long-term assets to be impaired.
 
 Revenue
Recognition
 
 Revenues
are recognized in accordance with Staff Accounting Bulletin
(SAB) No. 101, “Revenue Recognition in Financial Statements,” as
amended by SAB No. 104, “Revenue Recognition” when (a) persuasive
evidence of an arrangement exists, (b) the products or services have been
provided to the customer, (c) the fee is fixed or determinable, and (d)
collectibility is reasonably assured. In instances where the customer, at its
discretion, has the right to reject the product or services prior to final
acceptance, revenue is deferred until such acceptance occurs.
 
 Research and
Development
 
 Research
and development costs are clearly identified and are expensed as incurred in
accordance with FASB statement No. 2, "Accounting for Research and Development
Costs."  For the nine months ended May 31, 2008 and 2007, the Company
incurred $1,464,281 and $261,284 of research and development costs,
respectively.
  F-12
 
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 1
                NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANTACCOUNTINGPOLICIES (Continued)
 
 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 nine months ended May 31, 2008 and
2007.
 
 Earnings/ Loss Per
Share
 
 The
Company computes basic earnings (loss) per share using the weighted average
number of common shares outstanding during the period in accordance with
Statement of Financial Standards No. 128, 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.
  F-13
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 1.
                NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent Accounting
Pronouncements
 
 FASB Interpretation No.
48 – In July 2006, the FASB issued Interpretation No. 48, “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.
  F-14
 
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 1.
                NATURE
      OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
 
 Recent
Accounting Pronouncements (Continued)
 
 SFAS No. 158 – In
September 2006, the FASB issued Statement 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.
  F-15
 LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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 May 31, 2008 and August 31, 2007 consists of the
following:
 
 May
      31,
                
                
                August
      31,2008
                
                
                2007Website
      development costs
                
                $
                675,475
                
                
                $
                361,825Computer
      and video equipment
                
                
                21,216
                
                
                
                10,076Office
      furniture
                
                
                11,546
                
                
                
                1,766Leasehold
      improvements
                
                
                2,445
                
                
                
                -710,682
                
                
                
                373,667Less:
      accumulated depreciation
                
                
                (8,697
                )
                
                
                (2,101
                )Total
      property and equipment
                
                $
                701,985
                
                
                $
                371,566
  Depreciation
expense for the nine months ended May 31, 2008 amounted to $6,930.
  F-16
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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 2007 through December 2007, 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.
 
 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.
  F-17
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 5.           COMMITMENTS
AND CONTINGENCIES (Continued)
 
 Consulting
Agreements (Continued)
 
 In
January 2008, the Company entered into a consulting and sales representative
agreement whereby the consultant will be compensated 5% of certain product
sales.  In addition, the consultant may earn warrants to purchase up
to 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.
 
 In March
2008, the Company entered into a consulting services agreement for business
development and capital raising services.  Under the agreement, the
consultant will be compensated $10,000 per month in cash or in the form of
warrants.  In addition, the consultant will be paid a 7% commission
for capital raised and sales commissions ranging from 3% to 7% of net revenue
from certain customers.  The agreement expires August 1, 2008 and may
be extended for an additional six-month period.
 
 Operating
Leases
 
 The
Company leases approximately 7,000 square feet of general office space in
Anaheim, California, for base rent of $11,300.  The Company is also
responsible for its share of lease related operating expenses approximating
$1,500 per month.  The lease expires on December 31,
2009.
 
 Total
rental expense on operating leases for the nine months ended May 31, 2008, and
2007 was $80,871 and $53,891, respectively.
 
 As of May
31, 2008, the future minimum lease payments are as follows:
  For the Years Ending May
      31,2009
                
                $
                137,2952010
                
                
                81,473Total
                
                $
                218,768
  F-18
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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.
 
 F-19
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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.
  F-20
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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 nine months ended May 31, 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 nine months
ended May 31, 2008, the Company recognized debt issuance cost amortization
totaling $1,971,791 for the Series A and Series B warrants.  The
Company calculated the fair value of the warrants by using the Black-Scholes
option pricing model.  No warrants were exercised as of May 31,
2008.
  F-21
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 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 May 31, 2008, are as
follows:
  Net
      operating loss carry forward
                
                $
                3,385,000Valuation
      allowance
                
                
                (3,385,000
                )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%
                )$
                -
  F-22
  LOCATION
BASED TECHNOLOGIES, INC.
 (A
Development Stage Company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE NINE MONTHS ENDED MAY 31, 2008 AND 2007
 8.           PROVISION
FOR INCOME TAXES (Continued)
 
 As of May
31, 2008, the Company had federal and state net operating loss carryforwards of
approximately $8,500,000 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.
 
 9.           SUBSEQUENT
EVENTS
 
 On
      June 11, 2008, the Company issued “Series C” warrants to purchase 60,000
      common shares at $6.00 per share.  The warrants were issued to
      certain consultants and advisors for technological and legal services
      provided to the Company.  The warrants expire on June 2,
      2013.
 
 On June
13, 2008, the Company issued 50,000 shares of common stock in exchange for
consulting services related to research and development.  The shares
were valued at $374,000, which represents the fair market value of the services
provided on the date of issuance.
 F-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
now a company fully engaging with sales, marketing, and product delivery issues
with initial focus in the UK and selected parts of Europe.  GSM
testing concluded on June 30, 2008 allowing us to now begin to sell product
throughout Europe.Consequently,the
companyis at the
final step prior to formalagreement
witha
leading strategic distribution partner inEurope.  We
anticipate that the agreement will be finalized within the next few
weeks. The Jabil facility in Meung-Sur-Loire, France, has been
engaged to produce the “initial pilot production run” that will set the stage
for the following mass production runs.  We are still in the process
of securing FCC, IC, CE, and PTCRB approvals.  Although we have begun
sales in Europe, before beginning sales in the United States we must also secure
Carrier Network approval.  Although no assurances can be given, we are
anticipating that all listed approvals will be secured within 60 to 90
days.  Securing the manufacturing contract with Jabil was an essential
and strategic accomplishment for the company.  We are committed to
providing a robust and dependable high quality product and that requires a
manufacturing partner that can produce, in volume, great product with high value
price points.  Although the final development stage of the
PocketFinder® personal locators took longer than we expected, it was necessary
to slow down the process and ensure that the software was properly de-bugged and
performing up to our customer’s expectations.  We will continue to
enhance the functioning capability of our products on an ongoing basis and have
built in the ability to continuously upgrade or update the device through either
an internet connection or via “over-the-air” updating
capability.
  4
 
 The
company is also in discussion with a small number of strategic
individuals/companies with interest in providing significant cash infusion to
fund inventory, support sales and marketing initiatives, and for general
operational expenses. The desired outcome is to form long-term relationships
that deliver both immediate and long-term mutual benefit to all
parties.
 
 We
continue to see evidence of the market demand for location-based services that
will allow family members to keep in touch with one another in an increasingly
busy world. “GPS World” on February 12, 2008 projected that location based
devices will increase by 168% this year and that revenue will grow by 169%
according to market research group, Gartner, Inc.  They further
projected that subscribers worldwide will rise from 16 million in 2007 to 43.2
million in 2008.  They also forecast that the number of subscribers
will reach nearly 300 million in 2011 with revenue to top $8 billion in
2011.
 
 By taking
advantage of the latest in GPS and GSM technology, our small 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 silicone pouch that can easily slide onto a belt or a pet’s
collar.
 
 We
operate with an “outsourced” model of highly selected individuals and
organizations that have quick growth capacity to keep pace with our anticipated
fast growth.  We have a small number of employees, yet have
approximately 50 full and part 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.
Distribution opportunities are expanding and we are carefully analyzing each
market opportunity against potential growth, economic value, and support
capability metrics.  Our contract with “24/7 INtouch” will handle our
call-center customer services demand in the US and Canada.  We are
developing a business model for international market opportunities.
  The
government-owned global positioning satellite, or GPS, system is neither
patentable nor exclusive in source.  As a result, other entrants may
utilize the same capability as well as existing wireless
technologies.  However, it is not GPS and wireless technologies that
differentiate our product from the competition.  Rather, it is the
proprietary software that transforms available technologies into an intuitive
and user-friendly interface that offers greater value, capabilities, and
convenience to the customer.
  Our Personal Locator
Services.  We have begun the manufacturing process of the
PocketFinder Personal Locator or PocketFinder®.  We have signed
a manufacturing agreement with Jabil to produce the PocketFinder® devices
initially in France.  Jabil is one of the world’s largest original
equipment manufacturer (OEM) of electronics with facilities in China, Mexico,
the US and Europe.  We will provide end-user customer service and
support in the US and Canada through 24-7 INtouch, headquartered in Toronto,
Ontario.  We anticipate exploring multiple vertical markets including
the following:
  ·
              Parents
      of young children (primarily 5 to 12 years of age) who seek the peace of
      mind of being able to know that their children are where they are supposed
      to be when they are supposed to be
there;
 ·
              Families
      with members who are Autistic or have Downs Syndrome, Alzheimer’s,
      etc.;
 ·
              Elder
      Care support and applications;
 ·
              Pet
      care and location capability; and
 ·
              Asset
      tracking and location capability:  cars, trucks, fleet
      management, luggage, and other personal
assets.
  Location
Based Technologies 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 400 wireless providers in
over 220 countries.  In addition, our locators have the ability to
work on any GSM network in the world.
  5
  Our Target Markets and Marketing
Strategy.  We have invested significantly, and continue to
invest, in intellectual properties, which consist of apparatus patents and
applications and system and method patents and applications.  We have
expanded and filed additional claims this quarter that cover new aspects of the
personal locator, its operating system and user
interface.  Previously, we 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.  On June 17, 2008 the PocketFinder Service Mark
Registration was issued.
  Location
Based Technologies provides wireless location based solutions for global
positioning products and its proprietary “friendly user interface” software
system.  Its PocketFinder® family of products delivers rugged, compact
products with real-time location-based information over its proprietary server
architecture.  Our products simplify the ability for families to stay
connected with one another, for pet owners to know where their pets are on
demand, and solutions for asset tracking.  The company has the ability
to provide platform support for the integration of other location-based GPS
services within its applications in order to simplify the customers need to
locate all location-based devices in one easy tool.
  The
company is preparing for the launch of their first two products, the
PocketFinder® and 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, the company believes that the primary target
market will consist of parents with school-aged children from ages five to
thirteen.  Secondary markets may include medical and elder care
providers, campers, hikers, backpackers, adventure seekers, extreme sports
enthusiasts, freight and cargo carriers, delivery services, pet owners, vehicle
finance companies, auto dealerships, law enforcement agencies, military
organizations and individuals wishing to track valuable personal
items.
  Based on
census information, there are over 37,000,000 children in the 5 to 13 year old
market segment in the United States with an additional 4,000,000 in the prime
focus areas in Canada.  The European Community has an additional
42,500,000 children in this primary age group.  Adding in the elder
care market this represents a target market of more than 109,200,000 potential
customers in our focus age group.
  Closely
related to 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.
  Location
Based Technologies marketing initiatives will include:
  ·
              Licensing
      opportunities for the products in other areas or
  regions;
 ·
              Self
      branded or “white label” opportunities for niche market or vertical market
      sales;
 ·
              Affinity
      group marketing and outreach
opportunities;
 ·
              Utilization
      of direct response sales due to public relations outreach in special
      interest magazines and newsletters;
and
 ·
              Retail
      distribution initiatives.
  Our Revenue
Sources.  We expect our revenues to be based on the following
sales and revenue sources:
  ·
              Potential
      licensing fees;
 ·
              Organizations
      that will self-brand the PocketFinder® for specialized niche markets
      (“white label”);
 ·
              Personal
      Locator device sales to Retailers;
 ·
              Personal
      Locator device sales through Affinity groups and through our web
      site;
 ·
              Personal
      Locator device accessory sales; and
 ·
              Monthly
      re-occurring service fees.
  6
 
 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;
      and
 ·
              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,
pre-ordering capability, frequently asked questions and access to corporate
investor relations information.  Information contained on our website
is not a part of this report.
  Our
Competition.  Personal location and property tracking devices
are just beginning to significantly penetrate the marketplace.  We
believe this condition represents a tremendous opportunity as customers will be
attracted in large numbers once the intrinsic value of such devices is
recognized and mass market adoption begins.
  Competitors
include Geospatial Platform Providers, Application Developers, Wherify Wireless,
Inc., Zoombak, Inc., and Global Pet Finder.  These competitors may be
better financed, or have greater marketing and scientific resources than we
do.
  In
related markets, GPS devices have become widely used for automotive and marine
applications where line-of-sight to GPS satellites is not a significant
issue.  Manufacturers such as Garmin, Navman, Magellan, TomTom,
Pharos, NovAtel and DeLorne are finding a market interested in using these
products for both business and leisure purposes.  As a result, use of
GPS technology in devices such as chart plotters, fitness and training devices,
fish finders, laptop computers, and 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 in the final steps of the
initial R&D phase of the company.  Preparation for the
Certification processes  began in the first calendar quarter of 2008
(initial certifications will include FCC, IC, CE, PTCRB, 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 June 30, 2008 we are fully leveraging our
outsourcing model to world class partners and have three full-time employees and
approximately 50 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.
  7
  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 third fiscal quarter of 2008:
  ·
              Manufacturing
      Service Agreement, dated May 30, 2008, with Jabil Circuit, Inc., of St.
      Petersburg, Florida. Pursuant to this Agreement, Jabil will manufacture,
      test, configure and assemble electronic assemblies and systems for the
      PocketFinder® and PetFinder®
devices.
 ·
              Business
      Development Consulting Agreement, dated March 1, 2008, with The Scigliano
      Group, to assist and advise the Company on corporate governance and to
      establish contact with key strategic partners, investors, and technical
      service providers that will quickly integrate the Company’s products into
      their sales channels.  The agreement expires August 1, 2008, and
      shall automatically renew for an additional 6 months if not terminated by
      either party.  The consultant will be compensated for certain
      product sales and is entitled to earn warrants in lieu of monthly
      pay.  Shares issued to consultant will be issued in reliance on
      the exemption provided by Section 4(2) of the Securities Act of
      1933.  Such shares will be “restricted” securities as defined in
      SEC Rule 144.
  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 third
calendar quarter of 2008.  Since our inception, we have generated
significant losses.  As of May 31, 2008, we had an accumulated deficit
of $8,575,856 and we expect to incur continual losses until sometime in calendar
year 2009.
  We have a
limited history of operations.  To date, we have funded our operations
primarily through personal loans by the founders and the private placement of
our common stock and convertible notes.
  As of May
31, 2008, we had $361,970 in cash, cash equivalents and short-term investments
which we expect will fund our operations over the next several
months.  Growth capital required to fund inventory and continue
operations has been arranged and is pending our first product run and the
securing of our first purchase order; both of which we anticipate finalizing in
the next several weeks.  Over the next several quarters we expect to
invest significant amounts of funds (in addition to cooperative advertising
costs of approximately five percent which costs are included in the cost of
goods sold) to develop our sales, marketing and manufacturing programs
associated with the commercialization and launch of the PocketFinder® family of
products.  We expect to fund additional inventory and any necessary
general overhead requirements through capital raised through the sale of debt or
equity securities although there is no assurance that we will be successful in
that regard.
  We expect
to have to raise additional funds in the coming months to purchase and maintain
inventory and for related purposes such as packaging, shipping, and direct sales
and marketing costs.  We are not able to estimate the amount of funds
necessary as it will be determined by the volume represented by purchase orders
from targeted retailers who desire to sell our product.
  Our
funding requirements will depend on numerous factors, including:
  ·
              Costs
      involved in the completion of the hardware, software and interface
      customization, and website necessary to commence the commercialization of
      the PocketFinder® Personal Locator;
 ·
              The
      costs of outsourced manufacturing;
 ·
              The
      costs of commercialization activities, including product marketing, sales
      and distribution; and·
              Our
      revenues, if any, from successful commercialization of the PocketFinder®
      Personal Locator.
  8
  As noted
above, we will need to raise additional external funds through the sale of
additional equity or debt securities.  We will need to raise
additional funds during the next three months to finance the inventory necessary
to meet anticipated demand and to support related marketing, sales, and
distribution expenses.  The sale of additional equity securities 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 but will add a few selected and strategic employees.
  RESULTS
OF OPERATIONS
  For
the nine months ended May 31, 2008 as compared to the nine months ended May 31,
2007.
 
 Revenues.
 
 We
generated $5,818 of consulting revenue for the nine months ended May 31,
2008.   There was no revenue generated for the nine months ended
May 31, 2007.
 
 Operating
Expenses.
 
 For the
nine months ended May 31, 2008, our total operating expenses were $3,959,939 as
compared to total operating expenses of $710,374 for the nine months ended May
31, 2007.  The increase in operating expenses is attributed to the
following:
 
 ·
              An
      increase in general and administrative costs to $601,394 for the nine
      months ended May 31, 2008, as compared to $119,944 for the nine months
      ended May 31, 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
 o
              Travel
      expenses to secure international technology, manufacturing and sales
      contracts.
 ·
              A
      significant increase in professional fees to $1,543,393 for the nine
      months ended May 31, 2008, as compared to $5,255 for the nine months ended
      May 31, 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 and technology consulting fees in preparation for the initial launch
      of the PocketFinder®products;
      and
 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 nine months ended May
      31, 2008, to $1,464,281 as compared to $261,284 for the nine months ended
      May 31, 2007, as significant efforts were made to develop and build the
      first prototypes and development of the website and mapping interface
      services.
 
 9
  Other
Income.
 
 For the
nine months ended May 31, 2008, we reported net interest expense, debt issuance
costs and asset disposal losses totaling $2,330,792 as compared to $60,856 for
the nine months ended May 31, 2007.  The increase is attributed to the
recognition of interest on convertible notes payable and the amortization of
debt issuance costs during the nine months ended May 31, 2007, while there was
no such interest or amortization expense during the nine months ended May 31,
2008.
 
 Net
Loss.
 
 For the
nine months ended May 31, 2008, we reported a net loss of $6,286,513 as compared
to a net loss of $772,830 for the nine months ended May 31, 2007, due to an
increase in operating expenses as previously discussed.
  Liquidity and Capital
Resources.
 
 We had
cash and cash equivalents of $361,970 as of May 31, 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 nine months ended May 31, 2008.  Prepaid expenses totaled
$22,565 as of May 31, 2008, and primarily consisted of prepaid insurance and
software license agreements.  There were no debt issuance costs
recognized as of May 31, 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 May
31, 2008, the total of our property and equipment, less accumulated
depreciation, was a net value of $701,985, 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 nine months ended May 31, 2008.
 
 Other
assets, consisted of patents, trademarks and deposits, amounted to $1,142,167 as
of May 31, 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 May 31, 2008, were $2,243,111 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 May
31, 2008, our accounts payable and accrued expenses, including accrued officer
compensation, were $347,451 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 May 31, 2008, is primarily due to
the payment of accrued financing commissions and the conversion of accrued
officer compensation into the Company’s common stock.
 
 Notes
payable and convertible notes payable, including related accrued interest,
totaled $0 as of May 31, 2008, as compared to $5,874,305 as of August 31,
2007.  The decrease is primarily due to the conversion of $5,242,000
in notes payable into the Company’s common stock.  In addition,
$924,099 of related party notes payable and accrued interest was also converted
into the Company’s common stock.  We had no other long term
liabilities, commitments or contingencies.
 
 Other
than the proposed increases in 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.
  10
  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.
  ITEM
2.-UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  None.
  ITEM
3.-DEFAULTS UPON SENIOR SECURITIES
  None.
  11
  ITEM
4.-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  None
  ITEM
5.-OTHER INFORMATION
  (a)
                We
      have entered into the following contracts with independent service
      providers during our third fiscal quarter of
  2008:
 ·
              Manufacturing
      Service Agreement, dated May 30, 2008, with Jabil Circuit, Inc., of St.
      Petersburg, Florida. Pursuant to this Agreement, Jabil will manufacture,
      test, configure and assemble electronic assemblies and systems for the
      PocketFinder® and PetFinder®
devices.
 
 ·
              Business
      Development Consulting Agreement, dated March 1, 2008, with The Scigliano
      Group, to assist and advise the Company on corporate governance and to
      establish contact with key strategic partners, investors, and technical
      service providers that will quickly integrate the Company’s products into
      their sales channels.  The agreement is in effect for 6 months
      and expires August 1, 2008, and shall automatically renew for an
      additional 6 months if not terminated by either
  party.
  (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.*
              Document
      Description3.1
              Articles
      of Incorporation of Springbank Resources, Inc. (now known as Location
      Based Technologies, Inc.)(1)3.2
              Amended
      and Restated By-Laws of Location Based Technologies,
    Inc.(2)4.1
              Form
      of Convertible Note (convertible at the option of the company) issued by
      PocketFinder, LLC, a company the liabilities of which were assumed by the
      registrant ($3,175,000 represented by six of such notes, were
      issued)(3)4.2
              Form
      of Convertible Note (convertible at the option of the noteholder) issued
      by PocketFinder, LLC, a company the liabilities of which were assumed by
      the registrant ($2,067,000 represented by 26 of such notes, were
      issued)(3)10.1
              Executive
      Employment Agreement, dated October 11, 2007, between 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)
  12
  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 approved by the
Commission)(4)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(6)10.23
              Technology License
      and Distribution Agreement between the company and NXP, dated February 27,
      2008(7)10.24
              Platform Development
      Agreement between the company and NXP, dated February 27,
      2008(8)10.25
              Assistance Services
      Agreement between the company and NXP, dated February 27,
      2008(9)10.26
              Call
      Center Services Contract between the company and 24/7 INtouch, dated
      September 25, 200710.27
              Manufacturing
      Services Agreement between the company and Jabil Circuit, Inc., dated May
      30, 2008(10)10.28
              Business
      Development Consulting Agreement between the company and The Scigliano
      Group, dated March 1, 2008.31.1
              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.(II) to the SRI SB-2 and incorporated herein by this
      reference.
 (3)
              Filed
      as like-numbered exhibits to the registrant’s Current Report on Form 8-K
      filed with the SEC on October 12, 2007 (the “October 12, 2007 8-K”) and
      incorporated herein by this
reference.
 (4)
              Filed
      as Exhibit 99.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on December 5, 2007 and incorporated herein by this
      reference.
 (5)
              Filed
      as Exhibit 99.4 to the October 12, 2007
8-K.
 (6)
              Filed
      as Exhibit 10.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on February 29, 2008 (“February 29, 2008
  8-K”).
 (7)
              Filed
      as Exhibit 10.2 to registrant’s February 29, 2008
  8-K.
 (8)
              Filed
      as Exhibit 10.3 to registrant’s February 29, 2008
  8-K.
 (9)
              Filed
      as Exhibit 10.4 to registrant’s February 29, 2008
  8-K.
 (10)
              Filed
      as Exhibit 99.1 to registrant’s Current Report on Form 8-K filed with the
      SEC on June 4, 2008 (“June 4, 2008
8-K”).
 *
              Exhibit
      numbers follow the numbering pattern for exhibits set forth in Item 601 of
      Regulation S-B
  13
  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:  July
      14, 2008
                By:
                /s/ David
      M. MorseDavid
      M. Morse, Co-President and Chief Executive Officer
    14