10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended November 30, 2013.

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from      to 

Commission File Number 333-139395

LOCATION BASED TECHNOLOGIES, INC.

(Name of registrant as specified in its charter)

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

49 Discovery, Suite 260, Irvine, California 92618

(Address of principal executive offices)

888-600-1044

(Registrant’s telephone number)

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

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

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

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

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

As of January 10, 2014, there were 213,810,220 shares of the registrant’s $.001 par value common stock issued and outstanding.

TABLE OF CONTENTS

		PAGE
PART I	FINANCIAL INFORMATION	3
ITEM 1.	CONDENSED FINANCIAL STATEMENTS (UNAUDITED)	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
ITEM 4.	CONTROLS AND PROCEDURES	37
PART II	OTHER INFORMATION	38
ITEM 1.	LEGAL PROCEEDINGS	38
ITEM 1.A.	RISK FACTORS	38
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	38
ITEM 5.	OTHER INFORMATION	39
ITEM 6.	EXHIBITS	39
SIGNATURES		40

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Location Based Technologies, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

November 30, 2013 and August 31, 2013

(Unaudited)

 

	November 30,		August 31,
	2013		2013
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	97,211	$	680,914
Accounts receivable, net of allowances		128,134		77,584
Inventory, net of reserves		800,900		788,470
Prepaid expenses and other assets		73,338		47,976
Deferred financing costs		8,000		25,827
Total current assets		1,107,583		1,620,771
Property and equipment, net of accumulated depreciation		114,587		110,813
OTHER ASSETS
Intangible assets, net of accumulated amortization		692,065		715,732
Inventory, net of reserves		893,401		893,401
Deposits		30,000		30,000
Total other assets		1,615,466		1,639,133
TOTAL ASSETS	$	2,837,636	$	3,370,717

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

3

Location Based Technologies, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

November 30, 2013 and August 31, 2013

(Unaudited)

	November 30,			August 31,
	2013			2013
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,840,252		$	1,699,114
Deferred compensation		146,231			267,730
Deferred revenue		22,472			25,371
Line of credit and accrued interest		-			1,009,042
Advances from officer and accrued interest		176			29,219
Convertible notes payable and accrued interest, net of unamortized discounts		1,384,310			3,585,225
Related party convertible notes payable and accrued interest, net of unamortized discounts		1,118,568			1,049,590
Current portion of term loans		633,667			-
Derivative liabilities		-			745,148
Total current liabilities		5,145,676			8,410,439
Convertible notes payable		1,077,775			-
Related party convertible notes payable and accrued interest, net of unamortized discounts		2,584,449			1,719,036
Term loans		1,462,533			-
TOTAL LIABILITIES		10,270,433			10,129,475
Commitments and contingencies		-			-
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued or outstanding		-			-
Common stock, $0.001 par value; 300,000,000 shares authorized; 212,050,845 and 211,917,511 shares issued and outstanding at November 30, 2013 and August 31, 2013, respectively		212,051			211,917
Additional paid-in capital		49,592,293			49,388,375
Prepaid services paid in common stock		(127,086	)		(294,585	)
Accumulated deficit		(57,110,055	)		(56,064,465	)
Total stockholders' deficit		(7,432,797	)		(6,758,758	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	2,837,636		$	3,370,717

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

4

Location Based Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended November 30, 2013 and 2012

(Unaudited)

	For the three months ended
	November 30,			November 30,
	2013			2012
Net revenue
Devices	$	243,391		$	127,856
Services		165,413			80,699
Total net revenue		408,804			208,555
Cost of revenue
Devices		143,817			131,259
Services		237,990			177,781
Total cost of revenue		381,807			309,040
Gross loss		26,997			(100,485	)
Operating expenses
General and administrative		728,634			607,360
Officer compensation		246,687			229,670
Professional fees		374,493			404,928
Rent		19,203			19,527
Research and development		89,758			42,364
Salaries and wages		48,579			150,720
Loss on asset impairment		-			455,916
Total operating expenses		1,507,354			1,910,485
Net operating loss		(1,480,357	)		(2,010,970	)
Other income (expense)
Financing costs		(148,880	)		(81,000	)
Amortization of beneficial conversion feature		(32,647	)		(61,233	)
Amortization of deferred financing costs		(17,827	)		(81,966	)
Amortization of debt discount		(98,906	)		-
Loss on change in fair value of derivative liabilities		-			(1,144,647	)
Interest expense, net		(153,290	)		(44,872	)
Gain on debt settlement		886,548			-
Gain on asset disposal		569			-
Foreign currency loss, net		-			(16	)
Total other income (expense)		435,567			(1,413,734	)
Net loss before income taxes		(1,044,790	)		(3,424,704	)
Provision for income taxes		800			800
Net Loss	$	(1,045,590	)	$	(3,425,504	)

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

5

Location Based Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended November 30, 2013 and 2012

(Unaudited)

	For the three months ended
	November 30,			November 30,
	2013			2012
Basic and Diluted - Earnings (loss) Per Share	$	(0.00	)	$	(0.02	)
Basic and Diluted - Weighted Average Number of Shares Outstanding		212,015,680			199,734,700

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

6

Location Based Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended November 30, 2013 and 2012

(Unaudited) 

	For the three months ended
	November 30,			November 30,
	2013			2012
Cash Flows from Operating Activities
Net loss	$	(1,045,590	)	$	(3,425,504	)
Adjustment to reconcile net loss to net cash used in operating activities:
Loss on change in fair value of derivative liabilities		-			1,144,647
Gain on sale of trademark		(569	)		-
Gain on debt settlement		(886,548	)		-
Loss on asset impairment		-			455,916
Provision for doubtful accounts and sales returns		8,000			(15,875	)
Depreciation and amortization		30,927			26,640
Amortization of beneficial conversion feature		32,647			61,233
Amortization of deferred financing costs		17,827			81,966
Amortization of prepaid services paid in common stock		167,499			153,125
Amortization of debt discount		98,905			-
Common stock issued for services and financing costs		17,500			49,500
Warrants issued for services and financing costs		-			99,873
Stock options issued for services		20,630			81,855
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(58,550	)		112,349
(Increase) decrease in inventory		(12,430	)		57,164
(Increase) decrease in prepaid expenses and other assets		(25,362	)		(10,664	)
Increase (decrease) in accounts payable and accrued expenses		141,138			290,608
Increase (decrease) in accrued officer compensation		(65,999	)		93,950
Increase (decrease) in deferred revenue		(2,899	)		(5,163	)
Increase (decrease) in accrued interest		118,461			28,261
Net cash used in operating activities		(1,444,413	)		(720,119	)
Cash Flows from Investing Activities
Purchase of property and equipment		(17,965	)		(120,000	)
Proceeds from sale of trademark		7,500			-
Net cash used in investing activities		(10,465	)		(120,000	)
Cash Flows from Financing Activities
Advances / (repayments) from officers, net		(28,825	)		-
Payments for deferred financing costs		-			(6,000	)
Proceeds from convertible notes payable		-			250,000
Proceeds from related party convertible notes payable		900,000			350,000
Net cash provided by financing activities		871,175			594,000
Net decrease in cash and cash equivalents		(583,703	)		(246,119	)
Cash and cash equivalents, beginning of year		680,914			376,554
Cash and cash equivalents, end of year	$	97,211		$	130,435
Non-Cash Financing Activities:
Conversion of accrued compensation into convertible notes payable	$	55,500		$	-
Issuance of warrants for financing costs classified as debt discount	$	165,922		$	-

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

7

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company designs, develops, and sells personal, pet, and vehicle locator devices and services including PocketFinder® People, PocketFinder® Pets and PocketFinder® Vehicles. The PocketFinder® is a small, completely wireless, location device that enables a user to locate a person, pet, vehicle or valuable item at any time from almost anywhere using Global Positioning System (“GPS”) and General Packet Radio Service (“GPRS”) technologies. The Company is located in Irvine, California.

Organization

Location Based Technologies, Inc. (formerly known as Springbank Resources, Inc.) (the “Company,” “our,” “we” or “LBT”) was incorporated under the laws of the State of Nevada on April 10, 2006.

Location Based Technologies, Corp. (formerly known as PocketFinder, Inc.) was incorporated under the laws of the State of California on September 16, 2005. On July 7, 2006, it established PocketFinder, LLC (“LLC”), a California Limited Liability Company. On May 29, 2007, PocketFinder, Inc. filed amended articles with the Secretary of State to change its name to Location Based Technologies, Corp., and in October 2007 was merged into LBT.

On September 30, 2009, the Company formed Location Based Technologies, Ltd. (“LBT, Ltd.”), an England and Wales private limited company, to establish a presence in Europe. LBT, Ltd. is a wholly owned subsidiary of the Company.

Consolidation Policy

The accompanying consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiary, Location Based Technologies, Ltd. Intercompany balances and transactions have been eliminated in consolidation. 

8

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to financial statements included in the annual report on Form 10-K of Location Based Technologies, Inc. for the year ended August 31, 2013. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended November 30, 2013, 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 consolidated financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended August 31, 2013, included in the Company’s report on Form 10-K.

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred net losses since inception, and as of November 30, 2013, had an accumulated deficit of $57,110,055 and negative working capital of $4,038,093. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management recognizes that the Company must generate additional resources to enable it to continue operations. Management intends to raise additional financing through debt and equity financing or through other means that it deems necessary, with a view to moving forward and sustaining prolonged growth in its strategy phases. However, no assurance can be given that the Company will be successful in raising additional capital. Further, even if the Company raises additional capital, there can be no assurance that the Company will achieve profitability or positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive cash flow, the Company will not be able to meet its obligations and may have to cease operations.

9

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.            NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.

Reclassifications

Certain reclassifications have been made to prior period amounts or balances to conform to the presentation adopted in the current period.

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 November 30, 2013 and August 31, 2013 were principally held by two institutions which insured our aggregated accounts with the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per insured banking institution. At times, the Company has maintained bank balances which have exceeded FDIC limits. The Company has not experienced any losses with respect to its cash balances.

Revenue and Accounts Receivable – For the three months ended November 30, 2013, revenue from the Company’s largest customer amounted to $111,577 or 27% of total net revenue. Accounts receivable from this customer amounted to $82,439 or 56% of total accounts receivable at November 30, 2013.

For the three months ended November 30, 2012, revenue from two of the Company’s largest customers amounted to $43,011 or 21% of total net revenue. Accounts receivable from these customers amounted to $100,957 or 94% of total accounts receivable at November 30, 2012.

10

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Doubtful Accounts

The allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of November 30, 2013 and August 31, 2013, the allowance for doubtful accounts amounted to $3,000.

Allowance for Sales returns

An allowance for sales returns is recorded as a reduction to revenue and based on management’s judgment using historical experience and expectation of future conditions. As of November 30, 2013 and August 31, 2013, the allowance for sales returns amounted to $16,500 and $8,500, respectively.

Inventory

Inventories are valued at the lower of cost (first-in, first-out) or market and primarily consisted of components and finished goods for the Company’s PocketFinder® products. Packaging costs are expensed as incurred. The Company provides for a lower-of-cost-or-market ("LCM") adjustment against gross inventory values. The Company recorded an inventory valuation reserve for LCM inventory adjustments amounting to $1,076,486 as of November 30, 2013. In addition, the components inventory, net of the LCM valuation reserve, totaling $893,401 is classified as a noncurrent asset at November 30, 2013 (see Note 2).

Fair Value of Financial Instruments

Pursuant to FASB ASC 820 – Fair Value Measurement and Disclosures, 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, inventory, accounts payable and notes payable approximate their fair value due to the short period to maturity of these instruments.

11

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 1 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.

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with FASB ASC 360 – Impairment or Disposal of Long-Lived Assets that requires 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. During the three months ended November 30, 2012, the Company recorded an impairment of certain patents amounting to $455,916. There was no such impairment recognized during the three months ended November 30, 2013.

Intangible Assets – Patents and Trademarks

The Company capitalizes internally developed assets related to certain costs associated with patents and trademarks. These costs include legal and registration fees needed to apply for and secure patents. The intangible assets acquired from other enterprises or individuals in an “arms length” transaction are recorded at cost. As of November 30, 2013 and August 31, 2013, the Company capitalized $742,945 for patent related expenditures. As of November 30, 2013 and August 31, 2013, the Company capitalized $52,539 and $59,470 for trademark related expenditures, respectively. Accumulated amortization of intangible assets was $103,420 and $86,683 at November 30, 2013 and August 31, 2013, respectively.

12

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets – Patents and Trademarks (Continued)

Patents are subject to amortization upon issuance by the United States Patent and Trademark Office. Intangible assets are amortized in accordance with FASB ASC 350 – Intangibles – Goodwill and Other, using the straight-line method over the shorter of their estimated useful lives or remaining legal life. Amortization expense totaled $16,737 and $16,792 for the three months ended November 30, 2013 and 2012, respectively.

Deferred Revenue

Deferred revenue is a liability related to revenue producing activity for which revenue has not yet been recognized. As of November 30, 2013 and August 31, 2013, deferred revenue amounted to $22,472 and $25,371, respectively, and consisted of prepaid service revenue from subscribers.

Beneficial Conversion Feature of Convertible Notes Payable

The Company accounts for the beneficial conversion feature of convertible notes payable when the conversion rate is below market value. Pursuant to FASB ASC 470-20 – Debt With Conversion and Other Options, the estimated fair value of the beneficial conversion feature is recorded in the financial statements as a discount from the face amount of the notes. Such discounts are amortized over the term of the notes or conversion of the notes, if sooner. The Company recognized amortization expense related to the beneficial conversion features on convertible notes payable totaling $32,647 and $61,233 during the three months ended November 30, 2013 and 2012, respectively.

Derivative Liabilities

The Company accounts for its warrants and embedded conversion features in its convertible debentures in accordance FASB ASC 815-10 – Derivatives and Hedging, which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40 – Contracts in Entity’s Own Equity. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Gain (Loss) on Change in Fair Value of Derivative Liability” in other income (expense).

13

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Liabilities (Continued)

The Company determined that the conversion feature of two promissory notes met the criteria of an embedded derivative, and therefore the conversion feature of these notes needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion feature was estimated at the default date when the notes became convertible using the Black-Scholes model. In connection with the JMJ debt settlement, the derivative liabilities were eliminated and included in the gain on debt settlement. For the three months ended November 30, 2012, the Company recorded a loss for the change in fair value of the derivative liabilities in the amount of $1,144,647 due to the fluctuation in the current market prices.

Revenue Recognition

Revenues are recognized in accordance with FASB ASC 605 – 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) collectability 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.

Device Sales Revenue – Revenue from the sales of PocketFinder® products is recognized upon shipment to website customers and upon delivery to distributors net of an allowance for estimated returns. The allowance for sales returns is estimated based on management’s judgment using historical experience and expectation of future conditions.

Service Revenue – Service revenue consists of monthly service fees initiated by the customer upon activation of a PocketFinder® device. Services fees are billed and collected in advance of the service provided for that month. Service revenue is recognized upon billing the customer.

Shipping Costs

Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are included in cost of sales.

14

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising Costs

Advertising costs are expensed as incurred. For the three months ended November 30, 2013 and 2012, the Company incurred $485,391 and $268,025 of advertising costs, respectively.

Research and Development

Research and development costs are clearly identified and are expensed as incurred in accordance with FASB ASC 730 – Research and Development.

Stock Based Compensation

The Company measures and recognizes compensation expense associated with its grant of equity-based awards in accordance with FASB ASC 718, Compensation – Stock Compensation. ASC 718 requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting period.

In accordance with ASC 718, the Company estimates the grant-date fair value of its stock options using the Black-Scholes option-pricing model, which takes into account assumptions regarding an expected dividend yield, a risk-free interest rate, an expected volatility factor for the market price of the Company’s common stock and an expected term of the stock options. The fair value of stock options granted is amortized on a straight-line basis over the vesting periods. For the three months ended November 30, 2013 and 2012, stock-based compensation expense associated with stock options totaled $20,630 and $81,855, respectively.

15

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company accounts for income taxes under FASB ASC 740 – Income Taxes. 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. 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 minimum California state income tax in its provision for income taxes for the three months ended November 30, 2013 and 2012.

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 FASB ASC 260 – Earnings Per Share, which specifies the compilation, presentation, and disclosure requirements for income per share for entities with publicly held common stock or instruments which are potentially common stock.

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. The following potential common shares are excluded from diluted loss per share as their effect would be anti-dilutive.

	November 30, 2013		August 31, 2013
Warrants		17,256,715		15,456,715
Stock options		3,525,000		3,475,000
Convertible notes payable		30,252,642		25,300,352
Dilutive potential common shares		51,034,357		44,232,067

16

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

2.             INVENTORY

Inventory at November 30, 2013 and August 31, 2013 consisted of the following:

	November 30, 2013			August 31, 2013
Current:
Finished goods	$	1,299,383		$	1,286,953
Inventory valuation reserve for finished goods		(498,483	)		(498,483	)
Inventories, current	$	800,900		$	788,470
Noncurrent:
Device components	$	1,471,404		$	1,471,404
Inventory valuation reserve for components		(578,003	)		(578,003	)
Inventories, noncurrent	$	893,401		$	893,401

In the first quarter of 2012, the Company purchased a substantial amount of inventory components to produce PocketFinder® devices. Management analyzed its inventories based on existing purchase orders and current potential orders for future delivery and determined we may not realize all of the inventory components within the next year. Inventories totaling $893,401 which may not be realized within a 12-month period have been reclassified as long-term as of November 30, 2013 and August 31, 2013.

 

3.             PROPERTY AND EQUIPMENT

Property and equipment at November 30, 2013 and August 31, 2013 consisted of the following:

	November 30, 2013			August 31, 2013
Machinery and equipment	$	108,319		$	106,354
Computer software (mobile apps)		82,999			66,999
Computer software (internal)		51,263			51,263
Computer and video equipment		19,756			19,756
Office furniture		24,526			24,526
		286,863			268,898
Less: accumulated depreciation		(172,276	)		(158,085	)
Total property and equipment	$	114,587		$	110,813

17

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

3.             PROPERTY AND EQUIPMENT (Continued)

Depreciation expense for the three months ended November 30, 2013 and 2012 amounted to $14,191 and $9,848, respectively.

4.             INTANGIBLE ASSETS

Intangible assets at November 30, 2013 and August 31, 2013 consisted of the following:

	November 30, 2013			August 31, 2013
Patents	$	742,945		$	742,945
Trademarks		52,539			59,470
		795,484			802,415
Less: accumulated amortization		(103,420	)		(86,683	)
Total intangible assets	$	692,064		$	715,732

Amortization expense for the three months ended November 30, 2013 and 2012 amounted to $16,737 and $16,792, respectively.

As of November 30, 2013, Company estimates amortization expense approximating $67,000 each year for the next five years and $364,000 thereafter. 

18

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

5.             RELATED PARTY TRANSACTIONS

Advances from Officer

From time to time, the Company’s officers advance funding to the Company to cover operating expenses. Cash advances from officers accrue interest at the rate of 8% per annum and have no formal repayment terms.

During the three months ended November 30, 2013, there were advances from our Co-President totaling $100,000 and $128,825 of repayments. There were no outstanding advances and related accrued interest amounted to $176 as of November 30, 2013.

Accounts Payable

Amounts payable to related parties totaled $175,000 and $100,000 as of November 30, 2013 and August 31, 2013, respectively.

West Coast Customs

In July 2012, an officer of the Company entered into a Subscription Agreement with West Coast Customs ("WCC") to acquire an approximate 1.5% ownership of WCC. The Company and WCC are under a Manufacturing and Trademark License Agreement for co-branding of the PocketFinder® products.

19

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

6.             CONVERTIBLE NOTES PAYABLE

	November 30, 2013		August 31, 2013
Convertible Notes Payable
Note payable to JMJ Financial in the amount of $555,000 due on September 16, 2012. “V warrants” to purchase 869,565 shares of the Company’s common stock valued at $200,000 were issued in connection with the note. The note was converted into a term loan. See Note 7.	$	_	$	555,000
Note payable to JMJ Financial in the amount of $550,000 due on November 1, 2012. “W warrants” to purchase 1,086,957 shares of the Company’s common stock and valued at $250,000 were issued in connection with the note. The note was converted into a term loan. See Note 7.		_		550,000
Note payable in the amount of $300,000 due on December 28, 2013 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share.		300,000		300,000
Note payable in the amount of $1,000,000 due on December 30, 2014 at an interest rate of 8% per annum and convertible into shares of the Company’s common stock at $0.20 per share. In connection with the extension of the due date on December 10, 2013, 4,000,000 shares of the Company’s stock valued at $240,000 were awarded.		1,000,000		1,000,000
Three notes payable in the amount of $102,500 due on January 9, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share. In connection with the extension of the due date, 205,000 shares of the Company’s stock valued at $30,750 were awarded in July 2013.		102,500		102,500

20

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

6.             CONVERTIBLE NOTES PAYABLE (Continued)

	November 30, 2013		August 31, 2013
Convertible Notes Payable (Continued)
Two notes payable in the amount of $150,000 due on January 13, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share. In connection with the extension of the due date, 300,000 shares of the Company’s stock valued at $45,000 were awarded during 2013.	$	150,000	$	150,000
Note payable in the amount of $41,000 due on February 5, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share.		41,000		41,000
Note payable in the amount of $75,000 due on March 19, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 150,000 shares of the Company’s common stock valued at $24,617 were issued in connection with the note.		75,000		75,000
Note payable in the amount of $500,000 due on March 25, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 1,000,000 shares of the Company’s common stock valued at $164,022 were issued in connection with the note.		500,000		500,000
Two notes payable in the amount of $50,000 due on April 10, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share.		50,000		50,000

21

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

6.             CONVERTIBLE NOTES PAYABLE (Continued)

	November 30, 2013			August 31, 2013
Convertible Notes Payable (Continued)
Note payable in the amount of $100,000 due on April 15, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 200,000 shares of the Company’s common stock valued at $30,731 were issued in connection with the note.	$	100,000		$	100,000
Total convertible notes payable		2,318,500			3,423,500
Unamortized debt and beneficial conversion feature discounts		(64,460	)		(126,102	)
Accrued interest		208,045			287,827
Total convertible notes payable, net and accrued interest		2,462,085			3,585,225
Less current portion		(1,384,310	)		(3,585,225	)
Long-term convertible notes payable, net and accrued interest	$	1,077,775		$	-

22

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

6.            CONVERTIBLE NOTES PAYABLE (Continued)

	November 30, 2013			August 31, 2013
Related Party Convertible Notes Payable
Six notes payable in the amount of $996,987 due on March 13, 2014 at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.20 per share.	$	996,987		$	996,987
Four notes payable in the amount of $28,750 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.17 per share.		28,750			28,750
Four notes payable in the amount of $55,500 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.13 per share.		55,500			-
Seven notes payable in the amount of $2,500,000 due on September 30, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 400,000 and “BB warrants” to purchase 2,000,000 shares of the Company’s common stock valued at $324,585 were issued in connection with the extension of the notes during 2013.		2,500,000			1,900,000
Note payable in the amount of $300,000 due on November 6, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “CC warrants” to purchase 600,000 shares of the Company’s common stock valued at $118,757 were issued in connection with the note.		300,000			-
Total related party convertible notes payable		3,881,237			2,925,737
Unamortized debt and beneficial conversion feature discounts		(350,839	)		(254,827	)
Accrued interest		172,619			97,716
Total related party convertible notes payable, net and accrued interest		3,703,017			2,768,626

23

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

6.             CONVERTIBLE NOTES PAYABLE (Continued)                

	November 30, 2013			August 31, 2013
Related Party Convertible Notes Payable (Continued)
Less current portion		(1,118,568	)		(1,049,590	)
Long-term related party convertible notes payable, net and accrued interest	$	2,584,449		$	1,719,036

As of November 30, 2013, the principal maturities of the convertible notes payable and related party convertible notes payable are as follows:

For the Years Ending:
November 30, 2014	$	3,399,737
November 30, 2015		2,800,000
Total	$	6,199,737

7.             LINE OF CREDIT AND TERM LOANS

SVB Line of Credit

On January 5, 2011, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank for a $1,000,000 non-formula line of credit. The principal amount outstanding under the credit line accrues interest at a floating per annum rate equal to the greater of (i) the Prime Rate, plus 2.5% or (ii) 6.5% and is to be paid monthly. The Company must maintain certain financial covenants under the Loan Agreement. The personal guarantor for the credit line is a director and stockholder of the Company.

On November 20, 2013, the Company entered into a Fifth Amendment to Loan and Security Agreement with Silicon Valley Bank to convert the line of credit into a term loan to be repaid by April 1, 2016 with interest only payments from December 2013 to April 2014, followed by twenty-four equal installments of principal plus monthly accrued interest.

As of November 30, 2013, the outstanding balance on the term loan and accrued interest totaled $1,000,000 and $0, respectively. As of August 31, 2013, the outstanding balance on the line of credit and accrued interest totaled $1,000,000 and $9,042, respectively.  

24

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

7.             LINE OF CREDIT AND TERM LOAN (Continued)

JMJ Notes Payable

On December 12, 2013 the Company and JMJ executed a comprehensive Release and Settlement Agreement (“Settlement”) which pertains to all claims and counter-claims previously filed by both Parties. The Settlement will require the company to repay $1,096,200 principal and interest on the outstanding notes to be $324,000 in cash payments and $772,200 in common stock. Under the payment terms of the Settlement, $1,105,000 previously classified as convertible notes were reclassified as a term loan as of November 30, 2013. As a result, the Company recorded a gain on debt settlement consisting of $132,600 of abated interest, $8,800 in principal reduction and $745,148 from the elimination of derivative liabilities associated with the conversion features.

As of November 30, 2013, the principal maturities of the SVB and JMJ term loans are as follows:

For the Years Ending:
November 30, 2014	$	633,667
November 30, 2015		1,254,200
November 30, 2016		208,333
Total term loans		2,096,200
Less current portion of term loans		(633,667	)
Long-term term loans	$	1,462,533

8.             COMMITMENTS AND CONTINGENCIES

Operating Leases 

On May 11, 2011, the Company entered into a lease agreement to lease approximately 4,700 square feet of general office space in Irvine, California, for base rent ranging from $6,199 to $7,193 per month over the 48 month lease term. The lease term is from July 1, 2011 through June 30, 2015.

Total rental expense on operating leases for the three months ended November 30, 2013 and 2012 totaled $19,203 and $19,527, respectively.

As of November 30, 2013, the future minimum lease payments are as follows:

For the Years Ending:
November 30, 2014	$	83,663
November 30, 2015		50,351
Total	$	134,014

25

 LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

9.             EQUITY

Common Stock 

The Company issued 83,334 shares of common stock to consultants in exchange for various advisory services during the three months ended November 30, 2013. The shares were valued at $10,000, which represents the fair market value of the shares provided on the award date.

The Company issued 50,000 shares of common stock in connection with a note payable extension during the three months ended November 30, 2013. The shares were valued at $7,500, which represents the fair market value of the note payable extension costs on the award date.

Warrants

Warrants to purchase up to 17,256,715 shares of the Company’s common stock are outstanding at November 30, 2013.

	Number of Shares		Exercise Price		Expiration
Outstanding warrants as of August 31, 2013		15,456,715
Warrants granted:
BB warrants		1,200,000	$	0.20	August 29, 2016
CC warrants		600,000	$	0.20	November 6, 2016
Outstanding warrants as of November 30, 2013		17,256,715

The weighted average exercise price of outstanding warrants was $0.21 at November 30, 2013, with expiration dates ranging from December 16, 2014 to November 6, 2016.

26

 LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

9.             EQUITY (Continued)

Stock Options

On January 12, 2012, the board of directors adopted the Amended and Restated 2007 Stock Incentive Plan (the “2007 Plan”). The aggregate number of shares of common stock that may be issued under the 2007 Plan is 20,000,000 and such shares are reserved for issuance out of the authorized but previously unissued shares. Employees, service providers and non-employee directors of the Company and its affiliates are eligible to receive non-statutory stock options, incentive stock options, restricted stock and stock appreciation rights. The 2007 Plan will continue until the earlier of the termination of the 2007 Plan by the board of directors or ten years after the effective date. There were 18,500,000 incentive stock options granted under the 2007 Plan as of November 30, 2013.

On August 30, 2007, the Company granted options outside of the 2007 Plan to three of the Company’s officers to purchase 6,000,000 common shares each for a total of 18,000,000 common shares at $0.33 per share that vest upon the achievement of certain milestones. The options expire 10 years from the vested date. As of November 30, 2013, there were no options that were vested and presently exercisable.

On January 12, 2012, the Company granted options under the 2007 Plan to three of the Company’s officers to purchase 4,000,000 common shares each for a total of 12,000,000 common shares at $0.31 per share that vest upon the achievement of certain milestones. The options expire on January 12, 2017. As of November 30, 2013, there were 1,500,000 options that were vested and presently exercisable. No options were exercised as of November 30, 2013.

On March 15, 2012, the Company granted options under the 2007 Plan to three officers and one employee of the Company to purchase 6,500,000 common shares at $0.31 per share per share that vest upon the achievement of certain milestones. The options expire on March 15, 2017. As of November 30, 2013, there were 2,025,000 options that were vested and presently exercisable. No options were exercised as of November 30, 2013.

27

 LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

10.          PROVISION FOR INCOME TAXES

Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences arise from the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and tax rates on the date of enactment.

The Company did not provide any current or deferred U.S. federal income taxes or benefits for any of the periods presented because the Company has experienced operating losses since inception. The Company provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn sufficient income to realize the deferred tax assets during the carry forward period.

The components of the Company’s deferred tax asset as of November 30, 2013 and August 31, 2013 are as follows:

	November 30, 2013		August 31, 2013
Net operating loss carry forward and deductible temporary differences	$	18,794,000	$	19,904,000
Valuation allowance		(18,794,000)		(19,904,000)
Net deferred tax asset	$	-	$	-

A reconciliation of the combined federal and state statutory income taxes rate and the effective rate is as follows:  

	November 30, 2013		August 31, 2013
Federal tax at statutory rate		34.00%		34.00%
State income tax net of federal benefit		5.83%		5.83%
Valuation allowance		(39.83%)		(39.83%)
		-		-

28

 LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2013

10.           PROVISION FOR INCOME TAXES (Continued)

As of November 30, 2013 and August 31, 2013, the Company had federal and state net operating loss carryforwards of approximately $47,186,000 and $48,074,000, respectively, which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2032. 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.

As of November 30, 2013 and 2012, no accrued interest and penalties are recorded relating to uncertain tax positions. Any such interest and penalties would be included in interest expense as a component of pre-tax net income or loss. The Company's tax filings are no longer open to examination by the Internal Revenue Service for tax years prior to 2009 and by state taxing authorities for tax years prior to 2008.

11.           SUBSEQUENT EVENTS

On December 5, 2013, the Company issued 1,759,375 shares of common stock to consultants in exchange for various advisory services during the three months ended November 30, 2013. The shares were valued at $143,670, which represents the fair market value of the shares provided on the award date.

On December 20, 2013, the Company entered into an unsecured promissory note agreement with a board member for $100,000 due on March 31, 2014. The note bears interest at 10% per annum and may be converted into common stock of the Company at the rate of $0.15 per share. In addition, the note holder will receive 100,000 shares of common stock.

On December 20, 2013, the Company entered into a secured promissory note agreement with a board member for $100,000 due on December 20, 2015. The note bears interest at 10% per annum and may be converted into common stock of the Company at the rate of $0.15 per share. In addition, each note holder will receive a three year warrant to purchase 200,000 shares of common stock at $0.15.

On December 10, 2013, the Company entered into an Amendment to extend the due date on a $1,000,000 promissory note to December 30, 2014. In connection with the note extension, 4,000,000 shares of common stock valued at $240,000 were awarded and 500,000 shares of common stock valued at $30,000 were awarded under the related incentive organizer agreement. 

29

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

FORWARD LOOKING STATEMENTS

This report contains certain forward-looking statements of our intentions, hopes, beliefs, expectations, strategies, and predictions with respect to future activities or other future events or conditions within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are usually identified by the use of words such as “believe,” “will,” “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “should,” “could,” or similar expressions. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under Part I, Item 1A. “Risk Factors” and other sections of this report, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements, express or implied by these forward-looking statements.

Although we believe that the assumptions underlying the forward-looking statements contained in this report are reasonable, any of the assumptions could be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report and any amendments to this report. We will not update these statements unless the securities laws require us to do so. Accordingly, you should not rely on forward-looking statements because they are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those contemplated by the forward-looking statements.

Overview.  We were incorporated under the laws of the State of Nevada in April 2006 as Springbank Resources, Inc. (“SRI”).  SRI was formed to engage in the exploration and development of oil and gas, and by 2007 had disposed of all of its assets and satisfied its liabilities.  In October 2007, SRI acquired all of the outstanding stock of Location Based Technologies, Corp. (“Old LBT”), following which SRI merged Old LBT into itself and, in the process, SRI’s name was changed to Location Based Technologies, Inc.  Old LBT was incorporated in September 2005 by David Morse, Joseph Scalisi and Desiree Mejia, who became our officers and directors, in order to develop the PocketFinder personal locators.

Our principal executive offices are located at 49 Discovery, Suite 260, Irvine, California 92618, and our telephone number is 888-600-1044.

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.”

Unless otherwise stated, all references to “we,” “us,” “our,” the “company” and similar designations refer to Location Based Technologies, Inc.

Location Based Technologies®, PocketFinder® and PocketFinder Pets® are registered trademarks, and PocketFinder Network™, PocketFinder People™, PocketFinder Vehicle™, PocketFinder Luggage™, PocketFinder Mobile™, LBT-886™, “Powered by LBT”™ and VehicleFleetFinder™ are trademarks, of the company.  With respect to this report, we reserve all rights to the foregoing trademarks regardless of whether they carry the “®” or “™” designation.

Our Business.  The Company designs, develops, and sells Consumer and Commercial GPS tracking solutions based on the worldwide GSM network. Consumer products are primarily intended to be used by people who need to locate portable assets, vehicles, pets, and other people who are unable to use a cell phone to communicate their location (such as children, seniors or people with special needs).  Commercial products are marketed to businesses of all sizes and governmental organizations that need to track vehicles, mobile equipment, portable assets and workers.

Consumer products are sold under the PocketFinder brand and include: PocketFinder, PocketFinder Pet and PocketFinder Vehicle.  All PocketFinder products deliver information to users regarding device location, longitude, latitude, altitude, heading or direction, speed and 60 days of location history.  Users can also set alerts that will trigger an email, text or push notification to notify them when their device exceeds a pre-determined parameter such as speed, battery life or geo-fence.  

PocketFinder and PocketFinder Pet are small (roughly 2 inches in diameter), rugged and waterproof location devices that are ideal for tracking or locating any mobile asset, person, pet or valuable item at any time from almost anywhere. These devices use the Assisted Global Positioning System (“A-GPS”) network to acquire location data and transmit that data through the General Packet Radio Service (“GPRS”). The battery life of a PocketFinder and PocketFinder Pet will typically last between 2-29 days, depending upon environmental and usage factors.

30

The PocketFinder Vehicle locator is intended to be hardwired to a battery powered asset such as a vehicle, watercraft or mobile generator. The device is rugged, spark-proof and water resistant and enables a user to locate and track a mobile asset at any time from almost anywhere using the A-GPS and GPRS technologies.

PocketFinder and PocketFinder Vehicle users can view all of the devices on their account by logging on via the web at www.pocketfinder.com or our PocketFinder App, which is native to the iPhone, iPad and Android phone.

Commercial products are sold under the LBT brand and include the LBT-886 (“886”) and the LBT Vehicle Tracker. The LBT-886 is a compact, rugged, long-lasting location device that enables a user to locate and track any person or mobile asset at any time from almost anywhere using A-GPS and GPRS technologies.  Battery life of the LBT-886 typically ranges from 21 days to 3 months depending upon environmental and usage factors. We have received FCC and IC approval for the LBT-886 and we recently received network approval from AT&T.

The LBT Vehicle Tracker has similar form-factor as the PocketFinder Vehicle device with the additional capability to accommodate a 3 to 7 wire harness. The wiring harness can increase the device’s functionality by adding capabilities such as temperature, light and humidity monitoring, engine on/off monitoring and engine kill capability or lone worker Emergency Alert features.  

Commercial customers can access their account by logging on through our LBT corporate website (www.locationbasedtech.com) which is optimized for web browsing, or through our App, which is native to the iPhone, iPad and Android phone.  The commercial user-interface features enhanced back end services that include additional reporting features and zone capabilities.

We generate revenue by selling our products and charging customers an ongoing service fee, for which we offer monthly and annual subscription plans.  Currently, PocketFinder customers in the US and Canada pay a monthly service fee of $12.95 per month with no contract, while commercial customers in the US and Canada typically pay $15.95 per month with no service contract.

All of our devices are made in the USA and come standard with an AT&T SIM card, which enables them to roam internationally on the AT&T network in the following countries:  Mexico, Argentina, Australia, Brazil, Caribbean, Chile, China, Colombia, India, Japan, New Zealand, Singapore, Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.  Roaming charges can be up to $29.95 per month.

Devices can also be manufactured with SIM cards provided by EE or Telefonica (through the Aeris platform).  Monthly service rates will vary from region to region depending on the fee charged by the local network carrier; however, in nearly all instances the monthly fees will be less than $29.95. We typically source SIM cards based on the carrier which can provide the best coverage at the most competitive price for a given region.

Research and Development.  Our goal is to always be a leader in the location based technologies market.  Our ongoing research and development is intended to either improve our existing products and services or create new products and services. 

In an ongoing effort to improve the user’s experience we are constantly upgrading our device software and our system’s back end. Our software development efforts are intended to result in additional features on our end user interface and increased device functionality through our back end.  The software updates for all of our products are delivered over the air, which allows every customer to receive the latest version of our firmware simply by charging their device.

Our current hardware development is primarily focused on enhancing the indoor tracking capability of a new 3G PocketFinder device, a miniaturized dual Iridium/GSM device and a personnel or Lone Worker tracking device with a panic button, all of which are in the final stages of building prototypes, testing and certification before market entry. Having a 3G consumer device will enable us to sell PocketFinder and PocketFinder Pet devices into territories that predominately operate on the 3G network, like Canada and Australia. New Wi-Fi capability will significantly improve indoor location accuracy and greatly reduce “false alert” reports that result from relying on GPS capability only. Additionally, we were recently informed that AT&T’s 2G network will be terminated at some point in the future, so having a 3G device will prepare us for the eventual transition. Both the lone worker and dual Iridium/GSM device are designed to exploit sales channels such as the US military, lone worker programs and large corporations with employees in dangerous areas. Our involvement in the airline cargo and container application has also resulted in the development of a fully “submersible” waterproof LBT-886 variant that will meet application requirements. These projects were also undertaken pursuant to customer requests.

In addition to creating new products, we will also work to customize products to better fit specific vertical market needs and requirements.  For example, we are currently working on a light, temperature and humidity sensor which can be attached to our LBT-886 device. This project was also undertaken pursuant to a customer request.

31

We will continue to invest heavily in our research and development efforts for the foreseeable future.  

Consumer Sales Channels.  In the US, our PocketFinder family of products can be found at the following online locations: Amazon.com, Newegg.com, Walmart.com, Bestbuy.com/Future Shop (Canada), Crutchfield.com, our www.pocketfinder.com website and numerous affiliate marketing websites.  Additionally, our new PocketFinder 886 Vehicle device has received network certification and we intend to make the device available for purchase at AT&T’s retail and online stores this calendar year.

Internationally, our devices are being sold in Mexico, the United Kingdom (the, “UK”) other European Union countries, Colombia and Ecuador.  In the UK, we have partnered with EE (the largest mobile-to-mobile telecommunications company in the UK) to sell our PocketFinder devices in their flagship stores.  EE recently decided to expand the relationship and sell our PocketFinder and PocketFinder Pet devices on their online store. Recent reports show Europe at the forefront of the M2M revolution with revenues from M2M services expected to grow at a compound annual rate of 33% between 2011 and 2016 in a selection of European markets, including Germany, France, Poland, Russia, Sweden and the UK. These are the findings of new research from Frost & Sullivan, which predicts that the number of SIM connections will rise to 75 million in 2016, with the UK emerging as the biggest market and Germany a close second. The market-research company also reports that Europe’s mobile network operators are looking to expand their M2M portfolios to profit from applications rather than just connectivity.

In Asia, Apple has invited us to sell PocketFinder devices in their Singapore, China, Hong Kong, Australia and New Zealand stores and Online. We expect to begin sales in Singapore this coming fiscal quarter.

Commercial Sales Channels.   Our recent increase in commercial product sales are primarily attributable to increased marketing efforts and re-orders from existing customers. In October 2012, we received a purchase order from AT&T for our LBT-886 devices which was fulfilled in March and April of 2013. This initial order for devices is being used internally by AT&T to keep track of some of their emergency response mobile assets.  Our relationship with AT&T has the potential to significantly expand over the next 24 months as AT&T looks to place tracking units on more of its mobile assets. We believe that in calendar year 2014, AT&T may place a significant order for additional devices.

The Company recently entered into a relationship with a distributor in Australia that is primarily focused on commercial sales opportunities.  The distributor may distribute to the territories of Australia, New Zealand, Malaysia and the Philippines.

In February of 2013, the military concluded its testing of the LBT-886 and the device received final military approval.  We were negatively impacted by the sequester, however now that the sequester has ended, we believe the military intends to resume evaluating our products for a potential order in 2014.

We have also been working closely with the Department of Energy (the, “DOE”) on a project which would require us to integrate their advanced weather tracking system, called Verde, onto our GPS platform. The intent is to market and sell our products and a Verde-enhanced service to utility companies in US, Canada, Mexico and parts of Central America, particularly in areas that are impacted by natural disasters. The DOE has agreed to work with us in a joint sales and marketing effort to proliferate the Verde system (though our devices and service) to the country’s power, water, gas and phone companies. We anticipate that we could begin the marketing efforts in the first calendar quarter of 2014.

Our Personal Locator Services.  Our products are currently being sold through various brick-and-mortar and online retailers and through our website.  We provide customer service and support in the United States through existing, award winning call centers owned by Affinitas.  In the consumer market we are selling into multiple vertical market segments including the following:

● Parents of young children (primarily 5 to 12 years of age) who do not own a cell phone;

● Small, mid-sized, and enterprise class business owners;

● First time family drivers or for added security in heavy snow states;

● Elder care and special needs support and applications such as Autism, Down Syndrome, Dementia, and Alzheimer’s;

● Pet care and location capability; and

● Asset tracking and location capability: cars, trucks, snowmobiles, fleet management, luggage, boats, RVs, and other high-valued assets.

Our Intellectual Property Investment.  We continue to invest in intellectual property that consists of apparatus patents and applications and system and method patents and applications.  We have filed claims that cover many aspects of the PocketFinder, its operating system and user interface.  Our intellectual property portfolio includes 35 issued US patents, 10 pending US patents, 7 pending foreign patents, 6 PCT filings, 16 registered trademarks and 4 Madrid protocol trademark cases. 

32

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

Our Target Markets and Marketing Strategy.  We provide wireless location based solutions for global positioning products along with its proprietary “friendly user interface” software system.  We deliver rugged, compact products with near real time location-based information over its proprietary server architecture.  Our products optimize the way businesses utilize mobile assets, save money and connect with key personnel; similarly, families utilizing our products in our ever increasingly mobile society are now able to easily stay connected with one another while on the go and from wherever they are.  We have the ability to add our customer’s existing location devices onto our superior location platform in order to simplify the customers need to manage all location-based devices and assets through one easy tool.

Our marketing initiatives will include:

● Licensing opportunities for the products in international areas or regions;

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

● Affinity group marketing and outreach opportunities;

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

● Retail distribution initiatives.

Our Revenue Sources.  We expect our revenues to be derived from the following sources:

● Potential licensing fees;

● Organizations that will self-brand LBT’s services for specialized niche markets (“white label”);

● Asset and personal locator device sales to commercial customers and through retailers;

● Personal locator device sales through affinity groups and through our website;

● Consumer and commercial tracking device accessory sales; and

● Monthly recurring service fees.

Our Growth Strategy.  Our objective is to become a premier provider of personal and asset location services in the Location Based Services consumer and commercial markets.  We intend to gain market share in the consumer segment by partnering with large retail partners like Apple, EE and AT&T, and allowing them to sell our devices through their retail channels around the world.  We will continue our own retail efforts, but we believe we will reach the largest consumer audience by leveraging the size, financial strength, infrastructure and brand recognition of our elite partners.

We subdivide the commercial market into three categories: small/midsize businesses, enterprise businesses and governmental organizations including the US military.  We will attempt to gain market share in the small/midsize business segment through telesales efforts and through upselling our existing PocketFinder customers.  The enterprise businesses and military segments are far more difficult to penetrate because they tend to require long sales cycles and rigorous testing but, once approved, tend to be long-term partners.  To date, most of the large companies and organizations we are working with have approached us. We expect that as we continue to gain traction with large, reputable institutions, their peers will continue to seek us out.

Our Competition.  Personal location and property tracking devices are 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.

33

Our competitors include, but are not limited to: Geospatial Platform Providers, Application Developers, Garmin’s GTU-10, Tagg, Amber Alert, Spark Nano, LiveView GPS, eZoom, iTrack, 5 Star, Meitrack, iTrack GPS Locator, Lo-Jack, SpotLight, and commercial providers such as Fleetmatics, NetworkFleet, and Qualcomm.  Some competitors may be better financed, have superior technology or have greater marketing and scientific resources than we do.

In related markets, GPS devices have become widely used for automotive and marine applications where line-of-sight to GPS satellites is not a significant issue.  Manufacturers such as Garmin, Navman, Magellan, TomTom, Pharos, NovAtel and DeLorne are finding a market interested in using these products for both business and leisure purposes.  As a result, use of GPS technology in devices such as chart plotters, fitness and training devices, fish finders, laptop computers, and personal digital assistant (“PDA”) location devices are gaining significant market acceptance and commercialization.  Prices range from $100 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 Federal Communications Commission, Internationale Canada (“IC”) and CE (European Economic Area) wireless device regulations and controls.  We believe that we are in conformity with all applicable laws in all relevant jurisdictions.  We are NOM and NYCE certified and ready to begin sales in Mexico.  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.     

Employees and Outsourced Assistance.  We have limited our use of contracted professionals who have been engaged in hardware and software development, early marketing and sales preparation, and preparation for customer service support.  Mr. Scalisi, our Co-President and Chief Development Officer, Mr. Morse, our Co-President and Chief Executive Officer, and Mrs. Mejia, our Chief Operating Officer, Mr. Gregory Gaines, our Chief Marketing and Sales Officer, Mr. Gregory Harrison, our General Counsel, and Dave Morse, Jr., as VP of Customer Service, currently work full time for the Company.  Our CFO, Mr. Glenn Davidson, is currently serving part-time.  Since its inception, LBT has used an extended workforce concept which includes outsourcing partners and vendors, and using a contingent workforce (consultants, part-time /interim executives and temporary workers) and strategic partners to stay competitive in the marketplace. We do not see this as a trend. We will continue to use this model for the foreseeable future.

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

RESULTS OF OPERATIONS

For the quarter ended November 30, 2013 compared to the quarter ended November 30, 2012.

Revenue.  For the quarter ended November 30, 2013, we generated $408,804 of net revenue compared to $208,555 of net revenue for the quarter ended November 30, 2012.  Net revenue for the quarter ended November 30, 2013, consisted of $243,391 from the sales of PocketFinder devices compared to $127,856 for the quarter ended November 30, 2012 and $165,413 from monthly subscription service income compared to $80,699 for the quarter ended November 30, 2012. The 96% increase in total revenue is the result of more devices being sold.

Cost of Revenue.  For the quarter ended November 30, 2013, cost of revenue totaled $381,807 resulting in a gross margin of $26,997 compared to cost of revenue totaling $309,040 resulting in a negative gross margin of $100,485 for the quarter ended November 30, 2012.  The Company realized an improvement in the gross margin as there were no write-downs of inventory during the current quarter.

Operating Expenses.  For the quarter ended November 30, 2013, our total operating expenses were $1,507,354 compared to total operating expenses of $1,910,485 for the quarter ended November 30, 2012.  Operating expenses decreased by $403,131 or 21% in 2013 from 2012.  The decrease in operating expenses is primarily attributed to the following fluctuations:

● A $121,274 increase in general and administrative expenses to $728,634 for the quarter ended November 30, 2013, compared to $607,360 for the quarter ended November 30, 2012.  The increase in general and administrative expenses in 2013 compared to 2012 is primarily due to an increase in advertising and marketing fees to market our products;

● A $17,017 increase in officer compensation to $246,687 for the quarter ended November 30, 2013, compared to $229,670 for the quarter ended November 30, 2012 due to the reclassification of an employee to an officer for a portion of the year;

34

● Professional fees were reduced by $30,435 to $374,493 for quarter ended November 30, 2013 compared to $404,928 for quarter ended November 30, 2012. This was primarily due to a reduction in warrants being issued in connection with professional fees in 2013 than in 2012;

● An $47,394 increase in research and development costs to $89,758 for the quarter ended November 30, 2013 compared to $42,364 for the quarter ended November 30, 2012 due to additional research and development invested to meet new customer requests;

● A $102,141 decrease in salaries and wages to $48,579 for the quarter ended November 30, 2013, compared to $150,720 for the quarter ended November 30, 2012. A portion of the reduction was due to the reduction of two employees in 2013 and the remainder was due to a reclassification of an employee to an officer; and

● The recognition of an asset impairment on certain patents totaling $455,916 during the three months ended November 30, 2012; whereby, there was no such impairment recognized during the three months ended November 30, 2013.

Other Income/Expenses.  For the quarter ended November 30, 2013, we reported net other income totaling $435,567 which consisted of financing costs, amortization of beneficial conversion feature, deferred financing costs and debt discount, gain on debt settlement, interest expense and gain on asset disposal compared to net other expenses totaling $1,413,734 for the quarter ended November 30, 2012.  The $1,849,301 decrease in net other expenses is primarily due to the following:

● A $67,880 increase in financing costs to $148,880 for the quarter ended November 30, 2013, compared to $81,000 for the quarter ended November 30, 2012 due to extending the guarantor agreement that resulted in $65,000 of common stock being issued in connection with the guarantor extension;

● A $28,586 decrease in the amortization of beneficial conversion features on notes payable to $32,647 for the quarter ended November 30, 2013, compared to $61,233 for the quarter ended November 30, 2012 as there were several convertible notes from 2012 that contained beneficial conversion features which fully amortized prior to 2013;

● A $64,139 decrease in the amortization of deferred financing costs to $17,827 for the quarter ended November 30, 2013, compared to $81,966 for the quarter ended November 30, 2012 as there was were fewer notes payable issued with common stock resulting in reduced deferred financing costs in 2013 than in 2012;

● A $98,906 increase in the amortization of debt discounts associated with the issuance of warrants on convertible notes payable to $98,906 for the quarter ended November 30, 2013. There were no such warrant issuances during the quarter ended November 30, 2012;

● A $1,144,647 loss on the fair value of derivative liabilities was recognized during the three months ended November 30, 2012; whereby, there was no such loss for the three months ended November 30, 2013 as the JMJ debt was settled during the current quarter;

● The recognition of a $886,548 gain in connection with the JMJ debt settlement was recognized during the three months ended November 30, 2013; whereby, there no such debt settlement during the three months ended November 30, 2012; and

● A $108,418 increase in interest expense to $153,290 for the quarter ended November 30, 2013, compared to $44,872 for the quarter ended November 30, 2012 as there was approximately $7.9 million in notes payable at November 30, 2013 as compared to $3.5 million in notes payable at November 30, 2012.

Net Loss.  For the quarter ended November 30, 2013, we reported a net loss of $1,045,590 compared to a net loss of $3,425,504 for the quarter ended November 30, 2012, due to fluctuations in operating and other expenses as previously discussed.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $97,211 as of November 30, 2013, compared to $680,914 as of August 31, 2013.  

As of November 30, 2013, current assets totaled $1,107,583 compared to $1,620,771 as of August 31, 2013 and consisted of cash, accounts receivable, inventory, deferred financing costs, prepaid expenses and other assets. The decrease at November 30, 2013, from August 31, 2013 is primarily due to a decrease in cash.

As of November 30, 2013, current liabilities totaled $5,145,676 compared to $8,410,439 as of August 31, 2013 and consisted of accounts payable and accrued expenses, deferred compensation, line of credit, convertible notes payable, accrued interest and derivative liabilities. The decrease at November 30, 2013, is due to the conversion of the $1,000,000 line of credit into a non-current term loan, the elimination of the derivative liability associated with the JMJ debt settlement and the reclassification of a $1,000,000 convertible note payable as long-term.

35

As at November 30, 2013, the Company had a working capital deficit of $4,038,093 compared with a working capital deficit of $6,789,668 as of August 31, 2013.  

Cash Flows from Operating Activities. During the quarter ended November 30, 2013, the Company used $1,444,413 of cash used for operating activities compared with $720,119 for the quarter ended November 30, 2012.  The increase in the cash used for operating activities was primarily attributed to the $886,000 adjustment for the gain on debt settlement to reconcile the net loss to net cash used in operating activities during the quarter ended November 30, 2013.

Cash Flows From Investing Activities. During the quarter ended November 30, 2013, the Company used $10,465 of cash for investing compared with $120,000 for the quarter ended November 30, 2012.  The decrease in the cash used for investing operating activities was attributed to fewer capital expenditures during the quarter ended November 30, 2013 compared to the quarter ended November 30, 2012. 

Cash Flows from Financing Activities. During the quarter ended November 30, 2013, the Company received $900,000 in cash from financing activities related to the issuance of convertible promissory notes. During the quarter ended November 30, 2012, the Company received $600,000 from the issuance of promissory notes. Current convertible notes payable totaling $4,504,737 are unsecured, bear interest at 5%-10% per annum, and are to be repaid out of future operating cash flow. Long-term convertible promissory notes totaling $2,800,000 are secured, bear interest at 10% per annum with due dates ranging from September 30, 2015 to November 6, 2015 and are to be repaid out of future operating cash flow.

Going Concern. We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities.  For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

CASH REQUIREMENTS

We are a wireless technology company focused on the marketing and sales of the PocketFinder family of products for retail and commercial distribution.  Since our inception, we have generated significant losses.  As of November 30, 2013, we had an accumulated deficit of $57,110,055 and we expect to incur continual losses until sometime in calendar year 2014. 

As of November 30, 2013, we had $97,211 in cash and cash-equivalents.  Over the next several quarters we expect to invest a significant amount to develop our sales and marketing programs associated with the commercialization and branding of the PocketFinder family of products.  We also expect to fund any necessary general overhead requirements.

We expect to have to obtain additional financing in the coming months for overhead costs, general and administrative expenses and for related purposes such as packaging, shipping, and direct sales and marketing costs.  Our funding requirements will depend on numerous factors, including:

● Costs involved in production and manufacturing to fill purchase orders, software and interface customization for OEM partners, and the network necessary to further the commercialization of the PocketFinder family of products;

● The costs of outsourced manufacturing;

● The costs of commercialization activities, including product marketing, sales and distribution, and customer service and support;

● Our revenues, if any, from successful commercialization of the PocketFinder devices and the PocketFinder Network platform services; and

● Other general and administrative expenses associated with running the day to day operations of our Company.

Product Research and Development

We plan to continue to develop new product enhancements to our existing product on the market including PocketFinder People and PocketFinder Vehicles.  New 3G devices will meet the requirements of pending GSM network changes in multiple countries, including the US, and the dual GSM/Iridium device will open new government and commercial shipping markets.

36

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 significant amounts of plant and equipment, or significant numbers of employees.  We currently have eight employees and do not anticipate hiring any significant number of additional employees during the next 12 months.

Off-Balance Sheet Arrangements

As of November 30, 2013, we had no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Our management carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act").  Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of November 30, 2013, due to the material weaknesses resulting from a lack of segregation of duties in our accounting department.

Changes in Internal Control Over Financial Reporting

In December 2013, our part-time CFO, Kenneth Fronk, resigned to pursue a full-time opportunity and was replaced by our current part-time CFO, Glenn Davidson. Other than the change in our CFO, there were no changes in internal controls over financial reporting that occurred during the three months ended November 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

37

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On December 12, 2013 the Company and JMJ executed a comprehensive Release and Settlement and Agreement (the, “Settlement”) which pertains to all claims and counter-claims previously filed by both Parties. The Settlement will require the company to repay $1,096,200 of principal and interest on the outstanding notes. The terms of the Settlement are confidential.

Previously, on December 6, 2012, the Company had filed a lawsuit against Justin Keener d/b/a JMJ Financial (“JMJ”) relating to a promissory note entered into between the Company and JMJ on March 16, 2012. The Company sought a declaratory judgment that the note – including all principal and interest purportedly owed thereunder – violates applicable usury laws and thus is unenforceable.  The Company also sought damages for alleged violations of Florida Statute 517.301.  Thereafter on December 6, 2012, JMJ had filed a Complaint against the Company alleging breach of contract for two promissory notes entered into between JMJ and the Company, the first on March 16, 2012 and the second on May 1, 2012.

ITEM 1.A.  RISK FACTORS

Not applicable.

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

Common Stock Issuances for Services Provided

On December 5, 2013, the Company issued 1,759,375 shares of common stock to consultants in exchange for various advisory services valued at $143,670 on the award date.

Common Stock Issuances for Debt Extension

On January 2, 2014, the Company issued 4,000,000 shares of common stock in connection with a debt extension valued at $240,000 on the award date.

Warrant issuance for Note Payable Issuances

On September 19, 2013, the Company awarded “Series BB” warrants to a related party note holder to purchase 1,200,000 common shares at $0.20 per share in connection with debt issuances and expires on August 29, 2016.

On November 6, 2013, the Company awarded “Series CC” warrants to a related party note holder to purchase 600,000 common shares at $0.20 per share in connection with debt issuances and expires on November 6, 2016.

On December 20, 2013, the Company awarded “Series DD” warrants to a related party note holder to purchase 200,000 common shares at $0.15 per share in connection with a debt issuance and expires on December 20, 2016.

Exemption From Registration. The shares of Common Stock and Warrants referenced in Part II, Item 2 above were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(2) of the Securities Act of 1933, as amended, (“Securities Act”), and/or Regulation D, as promulgated by the U.S. Securities and Exchange Commission under the Securities Act, based upon the following: (a) each of the persons to whom the shares of Common Stock and Warrants were issued (each such person, an “Investor”) confirmed to the Company that it or he is an “accredited investor,” as defined in Rule 501 of Regulation D promulgated under the Securities Act and has such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities, (b) there was no public offering or general solicitation with respect to the offering of such shares, (c) each Investor was provided with certain disclosure materials and all other information requested with respect to the Company, (d) each Investor acknowledged that all securities being purchased were being purchased for investment intent and were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act and (e) a legend has been, or will be, placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

38

ITEM 5.  OTHER INFORMATION

None. 

ITEM 6.  EXHIBITS

Exhibit No.*	Document Description
3.1	Articles of Incorporation of Springbank Resources, Inc. (now known as Location Based Technologies, Inc.) (incorporated by reference from Exhibit 3.1 to the Registrant’s Registration Statement on Form SB-2 (Registration No. 333-139395) filed December 15, 2006).
3.1A	Amended Articles of Incorporation, dated October 20, 2008 (incorporated by reference from Exhibit 3.1A to the Registrant’s Form 10-KSB filed December 12, 2008).
3.2	Amended and Restated By-Laws of Location Based Technologies, Inc. (incorporated by reference from the Registrant’s Current Report on Form 8-K filed January 4, 2008).

10.52	Form of “CC” Warrant Agreement. †
10.53	Secured Convertible Promissory Note Amendment 2 between the Company and Bridge Loans, LLC dated December 10, 2013. †
10.54	Secured Convertible Promissory Note between the Company and Greggory Haugen dated December 20, 2013. †
10.55	Secured Convertible Promissory Note between the Company and Charles Smith dated December 20, 2013. †
10.56	Form of “DD” Warrant Agreement. †

21.1	Subsidiary of the Registrant †
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

101.INS   XBRL Instance Document **

101.SCH  XBRL Taxonomy Extension Schema Document **

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document **

101.DEF  XBRL Taxonomy Extension Definition Linkbase Document **

101.LAB XBRL Taxonomy Extension Label Linkbase Document **

101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document **

*	Management contract or compensatory plan
**	Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections
†	Filed herewith

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LOCATION BASED TECHNOLOGIES, INC.
Dated:  January 14, 2014	By:	/s/ David M. Morse
		David M. Morse
		Co- President and Chief Executive Officer

Dated:  January 14, 2014	By:	/s/ Glenn Davidson
		Glenn Davidson
		Chief Financial Officer

40

EX-10

Exhibit 10.52

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

No. CC(1)  Warrant to Purchase 600,000 Shares of

Common Stock

WARRANT TO PURCHASE COMMON STOCK
of
LOCATION BASED TECHNOLOGIES, INC.
Void after November 6, 2016

This certifies that, for value received, Greggory Haugen or registered assigns (“Holder”) is entitled, subject to the terms set forth below, to purchase from LOCATION BASED TECHNOLOGIES, INC. (the “Company”), a Nevada corporation, Six Hundred Thousand (600,000) shares of the Common Stock of the Company, as constituted on the date hereof (the “Warrant Issue Date”), upon surrender hereof, at the principal office of the Company referred to below, with the Election to Exercise form attached hereto duly executed, and simultaneous payment in lawful money of the United States or otherwise as hereinafter provided, at the Exercise Price as set forth in Section 2 below. The number, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below.

1.             Term of Warrant. Subject to the terms and conditions set forth herein, the purchase right represented by this Warrant shall terminate on or before

(a)            5 p.m., Pacific Time, on November 6, 2016.

2.            Exercise Price. The Exercise Price at which this Warrant may be exercised shall be $0.20 per share of Common Stock, as adjusted from time to time pursuant to Section 11 hereof.

3.             Exercise of Warrant.

(a)            The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, but not for less than 10,000 shares at a time (or such lesser number of shares which may then constitute the maximum number purchasable; such number being subject to adjustment as provided in Section 11 below), at any time, or from time to time, during the term hereof as described in Section 1 above, by the surrender of this Warrant and the Election to Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), upon payment (i) in cash or by check acceptable to the Company, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder, or (iii) by a combination of (i) and (ii), of the purchase price of the shares to be purchased.

A-1

(b)           This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.

(c)           Cashless, or Net Issue, Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may request (at the Company’s discretion) to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise and notice of such election in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X             =             Y(A-B)

A

Where                    X             =           the number of shares of Common Stock to be issued to the Holder

Y            =          the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation)

A             =           the fair market value of one share of the Company’s Common Stock (at the date of such calculation)

B              =           Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, fair market value of one share of Common Stock shall be determined by the Company’s Board of Directors in good faith; provided, however, that where there exists a public market for the Company’s Common Stock at the time of such exercise, the fair market value per share shall be the average of the closing bid and asked prices of the Common Stock quoted in the OTC Bulletin Board or the last reported sale price of the Common Stock or the closing price quoted on the NASDAQ Stock Market or on any exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the five (5) trading days prior to the date of determination of fair market value. Notwithstanding the foregoing, in the event the Warrant is exercised in connection with a public offering of the Company’s Common Stock, the fair market value per share shall be the per share offering price to the public of the Company’s public offering. A cashless exercise of this Warrant requires the express written consent of the Company. The Company is under no obligation to permit a cashless exercise of this Warrant.

A-2

4.             No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction.

5.             Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company and its transfer agent or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

6.             Rights of Stockholders. This Warrant shall not entitle its Holder to any of the rights of a stockholder of the Company.

7.             Transfer of Warrant.

(a)           Warrant Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

(b)           Warrant Agent. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 7(a) above, issuing the Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent.

(c)           Transferability and Non-negotiability of Warrant. This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company). Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws, title to this Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.

A-3

(d)           Exchange of Warrant Upon a Transfer. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and applicable state securities laws, and with the limitations on assignments and transfers contained in this Section 7, the Company at its expense shall issue to or on the order of the Holder a new warrant of Warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

(e)           Compliance with Securities Laws.

(i)             The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock or Common Stock to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock or Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock or Common Stock so purchased are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

(ii)           This Warrant and all shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

A-4

8.             Reservation of Stock. The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of the Warrant. The Company further covenants that all shares that may be issued upon the exercise of rights represented by this Warrant, upon exercise of the rights represented by this Warrant and payment of the Exercise Price, all as set forth herein, will be free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein). The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant.

9.             Notices.

(a)           Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant.

(b)           In case:

(i)              the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

(ii)           of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation, or

(iii)           of any voluntary dissolution, liquidation or winding-up of the Company,

then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least 15 days prior to the date therein specified.

A-5

(c)           All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing.

10.           Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

11.           Adjustments. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows:

11.1         Merger, Sale of Assets, Etc. If at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 11. The foregoing provisions of this Section 11.1 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

A-6

11.2         Reclassification, Etc. If the Company, at any time while this Warrant, or any portion thereof, remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 11.

11.3         Split, Subdivision or Combination of Shares. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination.

11.4         Adjustments for Dividends in Stock or Other Securities or Property. If while this Warrant, or any portion hereof, remains outstanding and unexpired the holders of the securities as to which purchase rights under this Warrant exist at the time shall have received, or, on or after the record date fixed for the determination of eligible shareholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 11.

11.5         Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 11, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request, at any time, of any such Holder, furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of shares and the amount, if any, of other property that at the time would be received upon the exercise of the Warrant.

11.6         No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 11 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of this Warrant against impairment.

A-7

12.           Miscellaneous.

12.1         Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a reputable overnight delivery service, in each case properly addressed to the party to receive the same. Such addresses and facsimile numbers are below the signature lines on the signature page hereof.

12.2         Failure of any party to exercise any right under this Warrant or otherwise, or delay by a party exercising such right, shall not operate as a waiver thereof.

12.3         All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdictions) that would cause application of the laws of any jurisdictions other than the State of California.

12.4         Except as otherwise provided in this Warrant, this Warrant shall inure to the benefit of and be binding upon the permitted successor and assigns of each of the parties hereto.

12.5         The headings in this Warrant are for reference only and shall not limit or otherwise affect the meaning thereof.

12.6         The Company shall provide Holder with quarterly financial statements within 45 days of the end of each fiscal quarter and annual financial statements within 90 days of the end of each fiscal year. At such time as the Company’s financial statements (or those of any successor entity which assumes the Company’s obligations hereunder) are available on the website of the Securities and Exchange Commission, the obligation of the Company (or such successor) to provide such quarterly and annual financial statements shall cease.

12.7         This Warrant may be executed in two or more identical counterparts, all of which shall be considered one and the same document and shall become effective when counterparts have been signed by each party and delivered to each other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as of the signature were an original, not facsimile.

12.8         The language used in this Warrant will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

12.9         This Warrant may be amended only in writing by a document signed by the parties hereto.

A-8

IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be executed.

Dated: November 6, 2013

ACCEPTED BY HOLDER:   LOCATION BASED TECHNOLOGIES, INC.

By By

Greggory Haugen David Morse, CEO

A-9

To:         LOCATION BASED TECHNOLOGIES, INC.

_______________

_______________

_______________

ELECTION TO EXERCISE

The undersigned hereby exercises his or its rights to purchase _______________ shares of Common Stock covered by the within S Warrant and tenders payment herewith in the amount of $_______________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to

and, if such number of shares of Common Stock shall not be all the shares of Common Stock covered by the within Warrant, that a new Warrant for the balance of the shares of Common Stock covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.

Dated:	, 20	Name:
			(Print)
Address:
			(Signature)

A-10

To:         LOCATION BASED TECHNOLOGIES, INC.

_______________

_______________

_______________

CASHLESS EXERCISE FORM

The undersigned hereby irrevocably elects to surrender its Warrant for the number of shares of Common Stock as shall be issuable pursuant to the cashless exercise provisions set forth in Section 3(c) of the within __Warrant, in respect of _______________ shares of Common Stock underlying the within S Warrant, and requests that certificates for such securities be issued in the name of, and delivered to

and, if such number of shares shall not be all the shares exchangeable or purchasable under the within Warrant for the balance of the shares of Common Stock covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.

Dated:	, 20	Name:
			(Print)
Address:
			(Signature)

A-11

ASSIGNMENT FORM

(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED, ______________________________ hereby sells, assigns and transfers unto ______________________________ [choose either: this __Warrant in its entirety OR the right to purchase pursuant to this Warrant _______________ shares of Common Stock of Location Based Technologies, Inc. (the “Company”)], together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ______________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.

Dated: , 20 Signature

NOTICE

The Signature on the foregoing Assignment must correspond to the name as written upon the fact of this __Warrant in every particular, without alteration or enlargement or any change whatsoever.

A-12

EX-10

Exhibit 10.53

SECURED CONVERTIBLE PROMISSORY NOTE

AMENDMENT 2

This Second Amendment (the "Amendment”) is to amend the following terms and conditions of the Secured Convertible Promissory Note dated November 28, 2012, (the “Note”) by and between Location Based Technologies, Inc., a Nevada corporation (the "Company"), and Bridge Loans, LLC (the “Lender”) (each a, “Party” both are, “Parties”).

WHEREAS, the Company is a publicly-held corporation with its common stock traded on the OTC Market under the symbol LBAS; and

WHEREAS, on November 28, 2012, the Company entered into a Secured Convertible Promissory Note with the Lender (as the same may from time to time be further amended, modified, supplemented or restated), in which the Lender may invest capital in the Company of up to One Million Dollars ($1,000,000) in the form of secured convertible debt;

WHEREAS, the Parties desire to amend the Note:

NOW THEREFORE, in consideration of the promises and the mutual covenants and agreements of the services rendered by the Lender to the Company, the following terms and conditions hereinafter set forth shall apply, and the parties hereto covenant and agree as follows:

Subsection (a) of Section 1 titled, “Terms of Repayment and Conversion”, shall be and is hereby amended as follows:

a. All amounts outstanding under this Note shall mature and become due and payable on Monday, December 30^th, 2014(the "Maturity Date"), subject to any prior payment required by this Note.

Subsection (d) shall be added to Section 1 and which shall read as follows:

d.      Holder shall be entitled to receive four million (4,000,000) shares of Company’s restricted common stock which shall be issued at the Lender’s request, which shall be no earlier than January 1, 2014 and no later than December 31, 2014.

All other terms and conditions of the Note shall remain unchanged.

{Signature Page to Follow}

1

IN WITNESS WHEREOF, this amendment to the Note has been executed this 10^th day of December, 2013.

Borrower:

LOCATION BASED TECHNOLOGIES, INC.

By:
	David M. Morse, CEO

Date: December 10, 2013

Lender:

Bridge Loans, LLC

By:
	Alfred G. Allen, III, Manager

Date:          December 10, 2013

2

EX-10

Exhibit 10.54

SECURED CONVERTIBLE PROMISSORY NOTE

$100,000	Orange County, CA
	December 20, 2013

FOR VALUE RECEIVED, the undersigned, Location Based Technologies, Inc., a Nevada corporation (referred to herein as the “Borrower” or “Company”), hereby unconditionally promises to pay to the order of Greggory S. Haugen, its endorsees, successors and assigns (the “Holder” or “Lender”), in lawful money of the United States the principal sum of One Hundred Thousand Dollars ($100,000).

1.     Terms of Repayment and Conversion.

a.        Upon the execution and delivery of this Note, the Holder shall disburse to the Borrower the sum of One Hundred Thousand Dollars ($100,000).

All amounts outstanding under this Note shall mature and become due and payable on December 20, 2015(the "Maturity Date"), subject to any prior payment required by this Note. At the Maturity Date, or during the Term, the Lender shall have the right, but not the obligation, to convert this Note into shares of the Company’s common stock at a price of $0.15 per share (the “Conversion Price”).

b.        The Holder may from time to time effect conversions of all or a portion of the outstanding principal amount and accrued interest of this Note by delivering written notice to the Company specifying therein the principal amount of this Note to be converted. Such conversions shall be effected within ten (10) days of receipt by the Company of the notice of exercise conversion. The number of shares issuable upon a conversion hereunder shall be equal to the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted plus any accrued but unpaid interest thereon, by (y) the Conversion Price. The Conversion Price shall be appropriately and equitably adjusted following any stock splits, stock dividends, spin-offs, distributions and similar events. The shares issued upon conversion shall be duly and validly issued, fully paid and non-assessable and, following the applicable Rule 144 holding period and compliance by the Holder with any reasonable requirements of the Company’s transfer agent to eliminate restrictions on transfer under the Securities Act of 1933, as amended, freely tradable. The Holder shall receive the stock certificate(s) within five (5) business days following the date of conversion.

2.     Interest Rate. This Note shall accrue interest on the principal from the date of this Note at a rate of Ten Percent (10%) per annum (the “Interest Rate”). All payments and conversions hereunder are to be applied first to the payment or satisfaction of accrued interest, and the remaining balance to the payment or satisfaction of principal. In the event of default, interest shall stop accruing when Lender takes possession of the Collateral.

3.     Warrant. Lender shall receive a three year warrant to purchase Two Hundred Thousand (200,000) shares of restricted common stock at $0.15.

4.     Events of Default. If any of the events of default specified in this Section shall occur, Holder may, so long as such condition continues, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice:

1

a.        Default in the payment of the principal or unpaid accrued interest of this Note when due and payable;

b.        Failure to issue shares of common stock of the Company within 10 days after the Company’s receipt of a valid notice of conversion; or

c.        The Company shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction;

d.        Any case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 3.(c) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of sixty (60) days.

5.     Successors and Assigns: Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. Nothing in this Note, express or implied, is intended to confer upon any party, other than the parties hereto and their successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided herein. The Company may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Holder.

6.     Governing Law. This agreement is entered into in Orange County, California, and shall be construed in accordance with and governed by the laws of the State of California applicable to contracts made and to be performed in California. Further, the parties agree that venue shall rest solely and exclusively in Orange County, California, and any challenge or objection thereto is hereby waived.

7.      Security Interest. This Note is secured by a security interest granted to the Lender pursuant to the Security Agreement dated January 5, 2011, by and among the Borrower and the Lender. The Borrower acknowledges and agrees that should a proceeding under any bankruptcy or insolvency law be commenced by or against the Borrower, or if any of the Collateral (as defined in the Security Agreement) should become the subject of any bankruptcy or insolvency proceeding, then the Lender should be entitled to, among other relief to which the Lender may be entitled hereunder or under any of the other documents executed in connection herewith or and any other agreement to which the Borrower and Lender are parties (collectively, “Loan Documents”) and/or applicable law, an order from the court granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to permit the Lender to exercise all of its rights and remedies pursuant to the Loan Documents and/or applicable law. Immediately, upon satisfaction of this Note (either by repayment or conversion), the security interest granted to the Lender pursuant to the Security Agreement shall be released unconditionally, fully and completely.

2

8.     Notices. For the purpose of this Note, notices and all other communications provided for in this Note shall be in writing and shall be deemed to have been duly given as of the date if delivered in person or by telecopy, on the next business day, if sent by a nationally recognized overnight courier service, and on the second business day if mailed by registered mail, return receipt requested, postage prepaid, and if addressed to the Company then at its principal place of business, or if addressed to the Holder, then the last known address on file with the Company.

If to the Company:               Location Based Technologies, Inc.

49 Discovery, Ste 260

Irivne, CA 92618

Facsimile Number: (714) 200-0287

E-mail: Gregory.harrison@pocketfinder.com

If to Lender:  

or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties

9.      Heading; References. The headings have been inserted for convenience only and are not to be considered when construing the provisions of this Note.

10.     Representations and Warranties. Each Party has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Note and otherwise to carry out its obligations hereunder.

11.     Counterparts. This Agreement may be executed in counterparts by the Company and the Lender, both of which taken together shall be deemed one original, binding on both parties, notwithstanding that all parties are not signatories to the original or the same counterpart.

12.     Entire Agreement. This Note and the Loan Documents constitute the entire understanding between the parties hereto in respect of the terms of this Note by the Holder and by the Company, superseding all negotiations, prior discussions, prior written, implied and oral agreements, preliminary agreements and understandings with the Company or any of its officers, employees or agents.

{Signature Page to Follow}

3

IN WITNESS WHEREOF, the Borrower has executed this Promissory Note as of the date first set forth above.

Borrower:

LOCATION BASED TECHNOLOGIES, INC.

By:
	David M. Morse
	CEO

Date: December 20, 2013

Lender:

Greggory S Haugen

By:
	Greggory Haugen

Date:          December 20, 2013

4

Exhibit A

Notice of Conversion

The undersigned herby elects to convert $___________ of the principal and all of the accrued interest on the principal of the Promissory Note issued by Location Based Technologies, Inc., on ___________, 201_ being converted into shares of Common Stock of Location Based Technologies, Inc. according to the conditions set forth in such Note, as the date written below.

Date of Conversion: ___________________

Conversion Price: $_______

Shares To Be Delivered: ________________

Signature: ___________________________

Printed Name: Greggory S. Haugen

Name on the Certificate (if different from above):

Mailing Address:

______________________

5

EX-10

Exhibit 10.55

UNSECURED PROMISSORY NOTE

$100,000 Orange County, California

December 20, 2013

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the order of Chuck Smith, its endorsees, successors and assigns (the “Lender”), in lawful money of the United States at such other address as the Lender may from time to time designate, the principal sum of One Hundred Thousand Dollars ($100,000).

1.     Terms of Repayment. Upon the execution and delivery of this Note, the Lender shall disburse to the Borrower the sum of $100,000, which is the principal amount. All remaining amounts outstanding under this Note shall mature and become due and payable in full on March 31, 2014 (the "Maturity Date"), subject to any prior pre-payment required.

2.     Interest Rate. This Note shall accrue interest on the principal for a period of thirty days from the date of this Note at an anualized rate of Ten Percent (10%) (the “Interest Rate”). All payments hereunder are to be applied first to the payment of accrued interest, and the remaining balance to the payment of principal. Additionally, Lender shall receive one (1) share of common stock for every dollar invested. The Lender is thereby entitled to One Hundred Thousand (100,000) shares of restricted common stock.

3.      At any time and from time to time this Note shall be convertible, in whole or in part, into shares of the Company’s Common Stock (“Conversion Shares”) at the option of the Lender. The Lender shall effect conversions by delivering written notice to the Company specifying therein the principal amount of this Note to be converted. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted plus any accrued but unpaid interest thereon, by (y) the Conversion Price, where the “Conversion Price” shall equal $0.15. The Conversion Price shall be appropriately and equitably adjusted following any stock splits, stock dividends, spin-offs, distributions and similar events. The Conversion Shares shall be duly and validly issued, fully paid and non-assessable and, following the applicable Rule 144 holding period, freely tradable. The Lender shall receive the stock certificate(s) within ten (10) business days following the date of conversion

4.     Events of Default. If any of the events of default specified in this Section shall occur, Lender may, so long as such condition declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the borrower, this Note and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice:

a.        Default in the payment of the principal or unpaid accrued interest of this Note when due and payable; or

b.        Lender may exercise collateral as payment in full for said Promissory Note by placing a written request to LBAS transfer agent (www.Transhare.com) for ownership change at the day of default.

5.     Successors and Assigns: Assignment. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. Nothing in this Note, express or implied, is intended to confer upon any party, other than the parties hereto and their successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided herein. The Company may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Lender.

1 | Page

6.     Governing Law. This agreement is entered into in Orange County, California, and shall be construed in accordance with and governed by the laws of the State of California applicable to contracts made and to be performed in California. Further, the parties agree that venue shall rest solely and exclusively in Orange County, California, and any challenge or objection thereto is hereby waived.

7.     Notices. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given as of the date if delivered in person or by telecopy, on the next business day, if sent by a nationally recognized overnight courier service, and on the second business day if mailed by registered mail, return receipt requested, postage prepaid, and if addressed to the Company then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Company.

If to the Borrower:               Location Based Tech Inc

49 Discovery Suite 260

Irvine, CA 92618

Facsimile Number: (714) 200-0287

E-mail: Greg.harrison@pocketfinder.com

If to Lender:                       Chuck Smith

or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

8.     Heading; References. The headings have been inserted for convenience only and are not to be considered when construing the provisions of this Agreement.

9.     Entire Agreement. This Agreement constitutes the entire understanding between the parties hereto in respect of the terms of this Note by the Lender and superseding all negotiations, prior discussions, prior written, implied and oral agreements, preliminary agreements and understandings with Company or any of its officers, employees or agents.

[Signature Page to Follow]

2 | Page

IN WITNESS WHEREOF, the undersigned has executed this Secured Promissory Note as of the date first set forth above.

The “Borrower”: Location Based Tech Inc

By:
	David M. Morse
	Chief Executive Officer

 

The “Lender”: Chuck Smith

 

By:
	Chuck Smith

 

3 | Page

EX-10

Exhibit 10.56

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

No. DD(1)  Warrant to Purchase 200,000 Shares of

Common Stock

WARRANT TO PURCHASE COMMON STOCK
of
LOCATION BASED TECHNOLOGIES, INC.
Void after November 6, 2016

This certifies that, for value received, Greggory Haugen or registered assigns (“Holder”) is entitled, subject to the terms set forth below, to purchase from LOCATION BASED TECHNOLOGIES, INC. (the “Company”), a Nevada corporation, Two Hundred Thousand (200,000) shares of the Common Stock of the Company, as constituted on the date hereof (the “Warrant Issue Date”), upon surrender hereof, at the principal office of the Company referred to below, with the Election to Exercise form attached hereto duly executed, and simultaneous payment in lawful money of the United States or otherwise as hereinafter provided, at the Exercise Price as set forth in Section 2 below. The number, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below.

1.             Term of Warrant. Subject to the terms and conditions set forth herein, the purchase right represented by this Warrant shall terminate on or before

(a)            5 p.m., Pacific Time, on December 20, 2016.

2.            Exercise Price. The Exercise Price at which this Warrant may be exercised shall be $0.15 per share of Common Stock, as adjusted from time to time pursuant to Section 11 hereof.

3.             Exercise of Warrant.

(a)            The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, but not for less than 10,000 shares at a time (or such lesser number of shares which may then constitute the maximum number purchasable; such number being subject to adjustment as provided in Section 11 below), at any time, or from time to time, during the term hereof as described in Section 1 above, by the surrender of this Warrant and the Election to Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), upon payment (i) in cash or by check acceptable to the Company, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder, or (iii) by a combination of (i) and (ii), of the purchase price of the shares to be purchased.

A-1

(b)           This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.

(c)           Cashless, or Net Issue, Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may request (at the Company’s discretion) to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise and notice of such election in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X             =             Y(A-B)

A

Where                   X              =            the number of shares of Common Stock to be issued to the Holder

Y            =          the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (at the date of such calculation)

A             =            the fair market value of one share of the Company’s Common Stock (at the date of such calculation)

B              =            Exercise Price (as adjusted to the date of such calculation)

For purposes of the above calculation, fair market value of one share of Common Stock shall be determined by the Company’s Board of Directors in good faith; provided, however, that where there exists a public market for the Company’s Common Stock at the time of such exercise, the fair market value per share shall be the average of the closing bid and asked prices of the Common Stock quoted in the OTC Bulletin Board or the last reported sale price of the Common Stock or the closing price quoted on the NASDAQ Stock Market or on any exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the five (5) trading days prior to the date of determination of fair market value. Notwithstanding the foregoing, in the event the Warrant is exercised in connection with a public offering of the Company’s Common Stock, the fair market value per share shall be the per share offering price to the public of the Company’s public offering. A cashless exercise of this Warrant requires the express written consent of the Company. The Company is under no obligation to permit a cashless exercise of this Warrant.

A-2

4.             No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction.

5.             Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company and its transfer agent or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

6.             Rights of Stockholders. This Warrant shall not entitle its Holder to any of the rights of a stockholder of the Company.

7.             Transfer of Warrant.

(a)           Warrant Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder or Holders. Any Holder of this Warrant or any portion thereof may change his address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

(b)           Warrant Agent. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 7(a) above, issuing the Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent.

(c)           Transferability and Non-negotiability of Warrant. This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if such are requested by the Company). Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws, title to this Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.

A-3

(d)           Exchange of Warrant Upon a Transfer. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and applicable state securities laws, and with the limitations on assignments and transfers contained in this Section 7, the Company at its expense shall issue to or on the order of the Holder a new warrant of Warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

(e)           Compliance with Securities Laws.

(i)             The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock or Common Stock to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock or Common Stock to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock or Common Stock so purchased are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

(ii)           This Warrant and all shares of Common Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER OR THEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

A-4

8.             Reservation of Stock. The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of the Warrant. The Company further covenants that all shares that may be issued upon the exercise of rights represented by this Warrant, upon exercise of the rights represented by this Warrant and payment of the Exercise Price, all as set forth herein, will be free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein). The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the exercise of this Warrant.

9.             Notices.

(a)           Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant.

(b)           In case:

(i)              the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

(ii)           of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation, or

(iii)           of any voluntary dissolution, liquidation or winding-up of the Company,

then, and in each such case, the Company will mail or cause to be mailed to the Holder or Holders a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least 15 days prior to the date therein specified.

A-5

(c)           All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing.

10.           Amendments. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

11.           Adjustments. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows:

11.1         Merger, Sale of Assets, Etc. If at any time while this Warrant, or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 11. The foregoing provisions of this Section 11.1 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

A-6

11.2         Reclassification, Etc. If the Company, at any time while this Warrant, or any portion thereof, remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 11.

11.3         Split, Subdivision or Combination of Shares. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination.

11.4         Adjustments for Dividends in Stock or Other Securities or Property. If while this Warrant, or any portion hereof, remains outstanding and unexpired the holders of the securities as to which purchase rights under this Warrant exist at the time shall have received, or, on or after the record date fixed for the determination of eligible shareholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Warrant shall represent the right to acquire, in addition to the number of shares of the security receivable upon exercise of this Warrant, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such exercise had it been the holder of record of the security receivable upon exercise of this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 11.

11.5         Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 11, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request, at any time, of any such Holder, furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of shares and the amount, if any, of other property that at the time would be received upon the exercise of the Warrant.

11.6         No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 11 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of this Warrant against impairment.

A-7

12.           Miscellaneous.

12.1         Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a reputable overnight delivery service, in each case properly addressed to the party to receive the same. Such addresses and facsimile numbers are below the signature lines on the signature page hereof.

12.2         Failure of any party to exercise any right under this Warrant or otherwise, or delay by a party exercising such right, shall not operate as a waiver thereof.

12.3         All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdictions) that would cause application of the laws of any jurisdictions other than the State of California.

12.4         Except as otherwise provided in this Warrant, this Warrant shall inure to the benefit of and be binding upon the permitted successor and assigns of each of the parties hereto.

12.5         The headings in this Warrant are for reference only and shall not limit or otherwise affect the meaning thereof.

12.6         The Company shall provide Holder with quarterly financial statements within 45 days of the end of each fiscal quarter and annual financial statements within 90 days of the end of each fiscal year. At such time as the Company’s financial statements (or those of any successor entity which assumes the Company’s obligations hereunder) are available on the website of the Securities and Exchange Commission, the obligation of the Company (or such successor) to provide such quarterly and annual financial statements shall cease.

12.7         This Warrant may be executed in two or more identical counterparts, all of which shall be considered one and the same document and shall become effective when counterparts have been signed by each party and delivered to each other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as of the signature were an original, not facsimile.

12.8         The language used in this Warrant will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

12.9         This Warrant may be amended only in writing by a document signed by the parties hereto.

A-8

IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be executed.

Dated: December 20, 2013

ACCEPTED BY HOLDER:   LOCATION BASED TECHNOLOGIES, INC.

By By

Greggory Haugen David Morse, CEO

A-9

To:         LOCATION BASED TECHNOLOGIES, INC.

_______________

_______________

_______________

ELECTION TO EXERCISE

The undersigned hereby exercises his or its rights to purchase _______________ shares of Common Stock covered by the within S Warrant and tenders payment herewith in the amount of $_______________ in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to

and, if such number of shares of Common Stock shall not be all the shares of Common Stock covered by the within Warrant, that a new Warrant for the balance of the shares of Common Stock covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.

Dated:	, 20	Name:
			(Print)
Address:
			(Signature)

A-10

To:         LOCATION BASED TECHNOLOGIES, INC.

_______________

_______________

_______________

CASHLESS EXERCISE FORM

The undersigned hereby irrevocably elects to surrender its Warrant for the number of shares of Common Stock as shall be issuable pursuant to the cashless exercise provisions set forth in Section 3(c) of the within __Warrant, in respect of _______________ shares of Common Stock underlying the within S Warrant, and requests that certificates for such securities be issued in the name of, and delivered to

and, if such number of shares shall not be all the shares exchangeable or purchasable under the within Warrant for the balance of the shares of Common Stock covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below.

Dated:	, 20	Name:
			(Print)
Address:
			(Signature)

A-11

ASSIGNMENT FORM

(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)

FOR VALUE RECEIVED, ______________________________ hereby sells, assigns and transfers unto ______________________________ [choose either: this __Warrant in its entirety OR the right to purchase pursuant to this Warrant _______________ shares of Common Stock of Location Based Technologies, Inc. (the “Company”)], together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ______________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.

Dated: , 20 Signature

NOTICE

The Signature on the foregoing Assignment must correspond to the name as written upon the fact of this __Warrant in every particular, without alteration or enlargement or any change whatsoever.

A-12

EX-21

Exhibit 21.1

List of Subsidiaries

Location Based Technologies, Ltd. – an England and Wales private limited company

EX-31

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13(a)-14(a)/15(d)-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David M. Morse, certify that:

1.           I have reviewed this Form 10-Q of Location Based Technologies, Inc. (the “Registrant”);

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.           The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the Registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.           The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated:  January 14, 2014	By:	/s/ David M. Morse
		David M. Morse Co- President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13(a)-14(a)/15(d)-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Glenn Davidson, certify that:

1.           I have reviewed this Form 10-Q of Location Based Technologies, Inc. (the “Registrant”);

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.           The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the Registrant and have:

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)         Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)         Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.           The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated:  January 14, 2014	By:	/s/ Glenn Davidson
		Glenn Davidson
		Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, David M. Morse, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Location Based Technologies, Inc. (the “Company”) on Form 10-Q for the quarter quarter ended May 31, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of the Company.

Date:  January 14, 2014	By:	/s/ David M. Morse
		Name: David M. Morse
		Co-President and Chief Executive Officer

I, Glenn Davidson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report of Location Based Technologies, Inc. (the “Company”) on Form 10-Q for the quarter quarter ended May 31, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of the Company.

Date:  January 14, 2014	By:	/s/ Glenn Davidson
		Glenn Davidson
		Chief Financial Officer

XML

Note 7 - Line of Credit (Details) (USD $)						0 Months Ended
	Nov. 30, 2013	Aug. 31, 2013	Nov. 30, 2013 Loan Agreement [Member]	Aug. 31, 2013 Loan Agreement [Member]	Jan. 05, 2011 Loan Agreement [Member]	Dec. 12, 2013 Settlement Agreement [Member]	Jan. 05, 2011 Settlement Agreement [Member]	Jan. 05, 2011 Minimum [Member] Loan Agreement [Member]	Jan. 05, 2011 Maximum [Member] Loan Agreement [Member]
Note 7 - Line of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity					$ 1,000,000
Debt Instrument, Interest Rate, Stated Percentage								2.50%	6.50%
Line of Credit Facility, Amount Outstanding			1,000,000	1,000,000
Interest Payable	208,045	287,827	0	9,042
Litigation Settlement, Amount						1,096,200
Payments for Legal Settlements						324,000
Common Stock Payment for Legal Settlement						772,200
Notes Payable						1,105,000
Gain on Debt Settlement, Abated Interest							132,600
Gain on Debt Settlement, Principal Reduction							8,800
Gain on Debt Settlement, Elimination of Derivative Liabilities Associated with Conversion Features							$ 745,148

XML

Note 11 - Subsequent Events (Details) (USD $)	3 Months Ended		12 Months Ended	0 Months Ended					3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012	Aug. 31, 2013	Dec. 10, 2013 Subsequent Event [Member] Amendment to Extend Due Date [Member] Incentive Organizer Agreement [Member]	Dec. 10, 2013 Subsequent Event [Member] Amendment to Extend Due Date [Member]	Dec. 05, 2013 Subsequent Event [Member] Advisory Services [Member]	Dec. 20, 2013 Subsequent Event [Member] Unsecured Promissory Note Agreement [Member]	Dec. 20, 2013 Subsequent Event [Member] Secured Promissory Note Agreement [Member]	Nov. 30, 2013 Advisory Services [Member]
Note 11 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares)						1,759,375			83,334
Stock Issued During Period, Value, Issued for Services	$ 17,500	$ 49,500				$ 143,670			$ 10,000
Convertible Notes Payable	2,462,085		3,585,225				100,000	100,000
Debt Instrument, Interest Rate, Stated Percentage							10.00%	10.00%
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.3		$ 0.3				$ 0.15	$ 0.15
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	17,256,715						100,000	200,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)	0.21							0.15
Notes Payable					1,000,000
Stock Issued During Period, Shares, New Issues (in Shares)	4,000,000		4,000,000	500,000	4,000,000
Stock Issued During Period, Value, New Issues	$ 240,000		$ 240,000	$ 30,000	$ 240,000

XML

Note 10 - Provision for Income Taxes (Details) - Components of Deferred Tax Assets (USD $)	Nov. 30, 2013	Aug. 31, 2013
Components of Deferred Tax Assets [Abstract]
Net operating loss carry forward and deductible temporary differences	$ 18,794,000	$ 19,904,000
Valuation allowance	(18,794,000)	(19,904,000)
Net deferred tax asset	$ 0	$ 0

XML

Note 4 - Intangible Assets (Details) (USD $)	3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
Disclosure Text Block [Abstract]
Amortization of Intangible Assets	$ 16,737	$ 16,792
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	67,000
Finite-Lived Intangible Assets, Amortization Expense, after Year Five	$ 364,000

XML

Note 9 - Equity (Tables)

3 Months Ended

Nov. 30, 2013

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Number of Shares		Exercise Price		Expiration
Outstanding warrants as of August 31, 2013		15,456,715
Warrants granted:
BB warrants		1,200,000	$	0.20	August 29, 2016
CC warrants		600,000	$	0.20	November 6, 2016
Outstanding warrants as of November 30, 2013		17,256,715

XML

Note 8 - Commitments and Contingencies (Details) - Future Minimum Operating Lease Payments (USD $)	Nov. 30, 2013
Future Minimum Operating Lease Payments [Abstract]
November 30, 2014	$ 83,663
November 30, 2015	50,351
Total	$ 134,014

XML

Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) (USD $)	3 Months Ended	12 Months Ended
	Nov. 30, 2013	Aug. 31, 2013
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Number of shares called by warrants in connection with convertible notes payable (in Shares)	17,256,715
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.3	$ 0.3
Common stock issued in connection with extension of due date,shares (in Shares)	4,000,000	4,000,000
Common stock issuеd in connеction with еxtеnsion of duе datе, valuе (in Dollars)	$ 240,000	$ 240,000
V Warrants [Member] | JMJ Financial [Member] | Due on September 16, 2012 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Sep. 16, 2012	Sep. 16, 2012
Number of shares called by warrants in connection with convertible notes payable (in Shares)	869,565	869,565
Warrant Issued in connection with convertible notes payable (in Dollars)	200,000	200,000
W Warrants [Member] | JMJ Financial [Member] | Due on November 1, 2012 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Nov. 01, 2012	Nov. 01, 2012
Number of shares called by warrants in connection with convertible notes payable (in Shares)	1,086,957	1,086,957
Warrant Issued in connection with convertible notes payable (in Dollars)	250,000	250,000
Z Warrants [Member] | Related Party [Member] | Due on September 30, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Sep. 30, 2015	Sep. 30, 2015
Number of shares called by warrants in connection with convertible notes payable (in Shares)	400,000	400,000
Warrant Issued in connection with convertible notes payable (in Dollars)	324,585	324,585
Convertible notes payable,interest rate	0.10%	0.10%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Z Warrants [Member] | Due on March 19, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Mar. 19, 2014	Mar. 19, 2014
Number of shares called by warrants in connection with convertible notes payable (in Shares)	150,000	150,000
Warrant Issued in connection with convertible notes payable (in Dollars)	24,617	24,617
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Z Warrants [Member] | Due on March 25, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Mar. 25, 2014	Mar. 25, 2014
Number of shares called by warrants in connection with convertible notes payable (in Shares)	1,000,000	1,000,000
Warrant Issued in connection with convertible notes payable (in Dollars)	164,022	164,022
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Z Warrants [Member] | Due on April 15, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Apr. 15, 2014	Apr. 15, 2014
Number of shares called by warrants in connection with convertible notes payable (in Shares)	200,000	200,000
Warrant Issued in connection with convertible notes payable (in Dollars)	30,731	30,731
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
BB Warrants [Member] | Related Party [Member] | Due on September 30, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Number of shares called by warrants in connection with convertible notes payable (in Shares)	2,000,000	2,000,000
CC Warrants [Member] | Due on November 6, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Nov. 06, 2015	Nov. 06, 2015
Number of shares called by warrants in connection with convertible notes payable (in Shares)	600,000	600,000
Warrant Issued in connection with convertible notes payable (in Dollars)	118,757	118,757
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.20	$ 0.20
Related Party [Member] | Due on March 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Mar. 13, 2014	Mar. 13, 2014
Convertible notes payable,interest rate	5.00%	5.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Related Party [Member] | Due on Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,interest rate	5.00%	5.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.17	$ 0.17
Due on December 28, 2013 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Dec. 28, 2013	Dec. 28, 2013
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.3	$ 0.3
Due on December 30,2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Dec. 30, 2014	Dec. 30, 2014
Convertible notes payable,interest rate	8.00%	8.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Due on January 9, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Jan. 09, 2014	Jan. 09, 2014
Convertible notes payable,interest rate	10.00%	10.00%
Common stock issued in connection with extension of due date,shares (in Shares)	205,000	205,000
Common stock issuеd in connеction with еxtеnsion of duе datе, valuе (in Dollars)	30,750	30,750
Due on January 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Jan. 13, 2014	Jan. 13, 2014
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.3	$ 0.3
Common stock issued in connection with extension of due date,shares (in Shares)	300,000	300,000
Common stock issuеd in connеction with еxtеnsion of duе datе, valuе (in Dollars)	$ 45,000	$ 45,000
Due on February 5, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Feb. 05, 2014	Feb. 05, 2014
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Due on April 10, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,due date	Apr. 10, 2014	Apr. 10, 2014
Convertible notes payable,interest rate	10.00%	10.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.2	$ 0.2
Due on Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible notes payable,interest rate	5.00%	5.00%
Convеrtiblе notеs payablе, convеrsion pricе (in Dollars per share)	$ 0.13	$ 0.13

XML

Note 10 - Provision for Income Taxes (Details) - Reconciliation of Combined Federal and State Statutory Income Taxes Rate and the Effective Rate	3 Months Ended	12 Months Ended
	Nov. 30, 2013	Aug. 31, 2013
Reconciliation of Combined Federal and State Statutory Income Taxes Rate and the Effective Rate [Abstract]
Federal tax at statutory rate	34.00%	34.00%
State income tax net of federal benefit	5.83%	5.83%
Valuation allowance	(39.83%)	(39.83%)
	0.00%	0.00%

XML

Note 4 - Intangible Assets

3 Months Ended

Nov. 30, 2013

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

4.             INTANGIBLE ASSETS

Intangible assets at November 30, 2013 and August 31, 2013 consisted of the following:

	November 30, 2013			August 31, 2013
Patents	$	742,945		$	742,945
Trademarks		52,539			59,470
		795,484			802,415
Less: accumulated amortization		(103,420	)		(86,683	)
Total intangible assets	$	692,064		$	715,732

Amortization expense for the three months ended November 30, 2013 and 2012 amounted to $16,737 and $16,792, respectively.

As of November 30, 2013, Company estimates amortization expense approximating $67,000 each year for the next five years and $364,000 thereafter. 

XML

Note 9 - Equity (Details) (USD $)	3 Months Ended		12 Months Ended	0 Months Ended			0 Months Ended		3 Months Ended		0 Months Ended		3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012	Aug. 31, 2013	Jan. 12, 2012 Stock Incentive Plan 2007 [Member] Options Granted to Each of Three Officers [Member]	Jan. 12, 2012 Stock Incentive Plan 2007 [Member] Options Granted to Three Officers [Member]	Nov. 30, 2013 Stock Incentive Plan 2007 [Member] Options Granted to Three Officers [Member]	Mar. 15, 2012 Stock Incentive Plan 2007 [Member] Options Granted to Three Officers and One Employee [Member]	Nov. 30, 2013 Stock Incentive Plan 2007 [Member] Options Granted to Three Officers and One Employee [Member]	Nov. 30, 2013 Stock Incentive Plan 2007 [Member]	Jan. 12, 2012 Stock Incentive Plan 2007 [Member]	Aug. 30, 2007 Outside of 2007 Plan [Member] Options Granted to Each of Three Officers [Member]	Aug. 30, 2007 Outside of 2007 Plan [Member] Options Granted to Three Officers [Member]	Nov. 30, 2013 Advisory Services [Member]	Nov. 30, 2013 Note Payable Issuance [Member]
Note 9 - Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares)													83,334
Stock Issued During Period, Value, Issued for Services (in Dollars)	$ 17,500	$ 49,500											$ 10,000
Stock Issued During Period, Shares, New Issues (in Shares)	4,000,000		4,000,000											50,000
Stock Issued During Period, Value, New Issues (in Dollars)	$ 240,000		$ 240,000											$ 7,500
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	17,256,715
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per Item)	0.21
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized										20,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				4,000,000	12,000,000		6,500,000		18,500,000		6,000,000	18,000,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)					$ 0.31		$ 0.31					$ 0.33
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term												10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number						1,500,000		2,025,000

XML

Note 2 - Inventory (Details) (USD $)	Nov. 30, 2013	Aug. 31, 2013
Inventory Disclosure [Abstract]
Inventory, Noncurrent	$ 893,401	$ 893,401

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) - Antidilutive Securities Excluded From Earnings Per Share	3 Months Ended	12 Months Ended
	Nov. 30, 2013	Aug. 31, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	51,034,357	44,232,067
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	17,256,715	15,456,715
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	3,525,000	3,475,000
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities	30,252,642	25,300,352

XML

Note 9 - Equity (Details) - Warrants			3 Months Ended
	Nov. 30, 2013	Aug. 31, 2013	Nov. 30, 2013 Warrant Series BB [Member]	Nov. 30, 2013 Warrant Series CC [Member]
Class of Warrant or Right [Line Items]
Outstanding warrants	17,256,715	15,456,715
Warrants Granted - Number of Shares			1,200,000	600,000
Warrants Granted - Exercise Price Per Share (in Dollars per Item)	0.21		0.20	0.20
Warrants Granted - Expiration			Aug. 29, 2016	Nov. 06, 2016

XML

Note 2 - Inventory (Details) - Inventory (USD $)	Nov. 30, 2013	Aug. 31, 2013
Inventory [Line Items]
Finished goods	$ 1,299,383	$ 1,286,953
Inventories, noncurrent	893,401	893,401
Inventories, current	800,900	788,470
Finished Goods [Member]
Inventory [Line Items]
Inventory Valuation Reserve	(498,483)	(498,483)
Device Components [Member]
Inventory [Line Items]
Inventory Valuation Reserve	(578,003)	(578,003)
Device components	$ 1,471,404	$ 1,471,404

XML

Note 3 - Property and Equipment (Details) (USD $)	3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
Property, Plant and Equipment [Abstract]
Depreciation	$ 14,191	$ 9,848

XML

Note 3 - Property and Equipment

3 Months Ended

Nov. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

3.             PROPERTY AND EQUIPMENT

Property and equipment at November 30, 2013 and August 31, 2013 consisted of the following:

	November 30, 2013			August 31, 2013
Machinery and equipment	$	108,319		$	106,354
Computer software (mobile apps)		82,999			66,999
Computer software (internal)		51,263			51,263
Computer and video equipment		19,756			19,756
Office furniture		24,526			24,526
		286,863			268,898
Less: accumulated depreciation		(172,276	)		(158,085	)
Total property and equipment	$	114,587		$	110,813

Depreciation expense for the three months ended November 30, 2013 and 2012 amounted to $14,191 and $9,848, respectively.

XML

Note 3 - Property and Equipment (Details) - Property and Equipment (USD $)	Nov. 30, 2013	Aug. 31, 2013
Property, Plant and Equipment [Line Items]
Equipment	$ 286,863	$ 268,898
Less: accumulated depreciation	(172,276)	(158,085)
Total property and equipment	114,587	110,813
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Equipment	108,319	106,354
Computer Software Mobile Apps [Member]
Property, Plant and Equipment [Line Items]
Equipment	82,999	66,999
Internal [Member]
Property, Plant and Equipment [Line Items]
Equipment	51,263	51,263
Computer and Video Equipment [Member]
Property, Plant and Equipment [Line Items]
Equipment	19,756	19,756
Office Furniture [Member]
Property, Plant and Equipment [Line Items]
Equipment	$ 24,526	$ 24,526

XML

Note 7 - Line of Credit (Details) - Principal Maturities of the term loan (USD $)	Nov. 30, 2013
Principal Maturities of the term loan [Abstract]
November 30, 2014	$ 633,667
November 30, 2015	1,254,200
November 30, 2016	208,333
Total term loans	2,096,200
Less current portion of term loans	(633,667)
Long-term term loans	$ 1,462,533

XML

Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Nov. 30, 2013	Aug. 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 97,211	$ 680,914
Accounts receivable, net of allowances	128,134	77,584
Inventory, net of reserves	800,900	788,470
Prepaid expenses and other assets	73,338	47,976
Deferred financing costs	8,000	25,827
Total current assets	1,107,583	1,620,771
Property and equipment, net of accumulated depreciation	114,587	110,813
OTHER ASSETS
Intangible assets, net of accumulated amortization	692,065	715,732
Inventory, net of reserves	893,401	893,401
Deposits	30,000	30,000
Total other assets	1,615,466	1,639,133
TOTAL ASSETS	2,837,636	3,370,717
CURRENT LIABILITIES
Accounts payable and accrued expenses	1,840,252	1,699,114
Deferred compensation	146,231	267,730
Deferred revenue	22,472	25,371
Line of credit and accrued interest		1,009,042
Advances from officer and accrued interest	176	29,219
Convertible notes payable and accrued interest, net of unamortized discounts	1,384,310	3,585,225
Related party convertible notes payable and accrued interest, net of unamortized discounts	1,118,568	1,049,590
Current portion of term loans	633,667
Derivative liabilities		745,148
Total current liabilities	5,145,676	8,410,439
Convertible notes payable	1,077,775
Related party convertible notes payable and accrued interest, net of unamortized discounts	2,584,449	1,719,036
Term loans	1,462,533
TOTAL LIABILITIES	10,270,433	10,129,475
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 300,000,000 shares authorized; 212,050,845 and 211,917,511 shares issued and outstanding at November 30, 2013 and August 31, 2013, respectively	212,051	211,917
Additional paid-in capital	49,592,293	49,388,375
Prepaid services paid in common stock	(127,086)	(294,585)
Accumulated deficit	(57,110,055)	(56,064,465)
Total stockholders' deficit	(7,432,797)	(6,758,758)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 2,837,636	$ 3,370,717

XML

Note 10 - Provision for Income Taxes (Details) (USD $)	Nov. 30, 2013	Aug. 31, 2013
Income Tax Disclosure [Abstract]
Operating Loss Carryforwards	$ 47,186,000	$ 48,074,000

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

3 Months Ended

Nov. 30, 2013

Accounting Policies [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1.             NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company designs, develops, and sells personal, pet, and vehicle locator devices and services including PocketFinder® People, PocketFinder® Pets and PocketFinder® Vehicles. The PocketFinder® is a small, completely wireless, location device that enables a user to locate a person, pet, vehicle or valuable item at any time from almost anywhere using Global Positioning System (“GPS”) and General Packet Radio Service (“GPRS”) technologies. The Company is located in Irvine, California.

Organization

Location Based Technologies, Inc. (formerly known as Springbank Resources, Inc.) (the “Company,” “our,” “we” or “LBT”) was incorporated under the laws of the State of Nevada on April 10, 2006.

Location Based Technologies, Corp. (formerly known as PocketFinder, Inc.) was incorporated under the laws of the State of California on September 16, 2005. On July 7, 2006, it established PocketFinder, LLC (“LLC”), a California Limited Liability Company. On May 29, 2007, PocketFinder, Inc. filed amended articles with the Secretary of State to change its name to Location Based Technologies, Corp., and in October 2007 was merged into LBT.

On September 30, 2009, the Company formed Location Based Technologies, Ltd. (“LBT, Ltd.”), an England and Wales private limited company, to establish a presence in Europe. LBT, Ltd. is a wholly owned subsidiary of the Company.

Consolidation Policy

The accompanying consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiary, Location Based Technologies, Ltd. Intercompany balances and transactions have been eliminated in consolidation. 

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to financial statements included in the annual report on Form 10-K of Location Based Technologies, Inc. for the year ended August 31, 2013. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended November 30, 2013, 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 consolidated financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended August 31, 2013, included in the Company’s report on Form 10-K.

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred net losses since inception, and as of November 30, 2013, had an accumulated deficit of $57,110,055 and negative working capital of $4,038,093. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management recognizes that the Company must generate additional resources to enable it to continue operations. Management intends to raise additional financing through debt and equity financing or through other means that it deems necessary, with a view to moving forward and sustaining prolonged growth in its strategy phases. However, no assurance can be given that the Company will be successful in raising additional capital. Further, even if the Company raises additional capital, there can be no assurance that the Company will achieve profitability or positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive cash flow, the Company will not be able to meet its obligations and may have to cease operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.

Reclassifications

Certain reclassifications have been made to prior period amounts or balances to conform to the presentation adopted in the current period.

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 November 30, 2013 and August 31, 2013 were principally held by two institutions which insured our aggregated accounts with the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per insured banking institution. At times, the Company has maintained bank balances which have exceeded FDIC limits. The Company has not experienced any losses with respect to its cash balances.

Revenue and Accounts Receivable –For the three months ended November 30, 2013, revenue from the Company’s largest customer amounted to $111,577 or 27% of total net revenue. Accounts receivable from this customer amounted to $82,439 or 56% of total accounts receivable at November 30, 2013.

For the three months ended November 30, 2012, revenue from two of the Company’s largest customers amounted to $43,011 or 21% of total net revenue. Accounts receivable from these customers amounted to $100,957 or 94% of total accounts receivable at November 30, 2012.

Allowance for Doubtful Accounts

The allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of November 30, 2013 and August 31, 2013, the allowance for doubtful accounts amounted to $3,000.

Allowance for Sales returns

An allowance for sales returns is recorded as a reduction to revenue and based on management’s judgment using historical experience and expectation of future conditions. As of November 30, 2013 and August 31, 2013, the allowance for sales returns amounted to $16,500 and $8,500, respectively.

Inventory

Inventories are valued at the lower of cost (first-in, first-out) or market and primarily consisted of components and finished goods for the Company’s PocketFinder® products. Packaging costs are expensed as incurred. The Company provides for a lower-of-cost-or-market ("LCM") adjustment against gross inventory values. The Company recorded an inventory valuation reserve for LCM inventory adjustments amounting to $1,076,486 as of November 30, 2013. In addition, the components inventory, net of the LCM valuation reserve, totaling $893,401 is classified as a noncurrent asset at November 30, 2013 (see Note 2).

Fair Value of Financial Instruments

Pursuant to FASB ASC 820 – Fair Value Measurement and Disclosures, 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, inventory, accounts payable and notes payable approximate their fair value due to the short period to maturity of these instruments.

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 1 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.

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with FASB ASC 360 – Impairment or Disposal of Long-Lived Assets that requires 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. During the three months ended November 30, 2012, the Company recorded an impairment of certain patents amounting to $455,916. There was no such impairment recognized during the three months ended November 30, 2013.

Intangible Assets – Patents and Trademarks

The Company capitalizes internally developed assets related to certain costs associated with patents and trademarks. These costs include legal and registration fees needed to apply for and secure patents. The intangible assets acquired from other enterprises or individuals in an “arms length” transaction are recorded at cost. As of November 30, 2013 and August 31, 2013, the Company capitalized $742,945 for patent related expenditures. As of November 30, 2013 and August 31, 2013, the Company capitalized $52,539 and $59,470 for trademark related expenditures, respectively. Accumulated amortization of intangible assets was $103,420 and $86,683 at November 30, 2013 and August 31, 2013, respectively.

Patents are subject to amortization upon issuance by the United States Patent and Trademark Office. Intangible assets are amortized in accordance with FASB ASC 350 – Intangibles – Goodwill and Other, using the straight-line method over the shorter of their estimated useful lives or remaining legal life. Amortization expense totaled $16,737 and $16,792 for the three months ended November 30, 2013 and 2012, respectively.

Deferred Revenue

Deferred revenue is a liability related to revenue producing activity for which revenue has not yet been recognized. As of November 30, 2013 and August 31, 2013, deferred revenue amounted to $22,472 and $25,371, respectively, and consisted of prepaid service revenue from subscribers.

Beneficial Conversion Feature of Convertible Notes Payable

The Company accounts for the beneficial conversion feature of convertible notes payable when the conversion rate is below market value. Pursuant to FASB ASC 470-20 – Debt With Conversion and Other Options, the estimated fair value of the beneficial conversion feature is recorded in the financial statements as a discount from the face amount of the notes. Such discounts are amortized over the term of the notes or conversion of the notes, if sooner. The Company recognized amortization expense related to the beneficial conversion features on convertible notes payable totaling $32,647 and $61,233 during the three months ended November 30, 2013 and 2012, respectively.

Derivative Liabilities

The Company accounts for its warrants and embedded conversion features in its convertible debentures in accordance FASB ASC 815-10 – Derivatives and Hedging, which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40 – Contracts in Entity’s Own Equity. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Gain (Loss) on Change in Fair Value of Derivative Liability” in other income (expense).

The Company determined that the conversion feature of two promissory notes met the criteria of an embedded derivative, and therefore the conversion feature of these notes needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion feature was estimated at the default date when the notes became convertible using the Black-Scholes model. In connection with the JMJ debt settlement, the derivative liabilities were eliminated and included in the gain on debt settlement. For the three months ended November 30, 2012, the Company recorded a loss for the change in fair value of the derivative liabilities in the amount of $1,144,647 due to the fluctuation in the current market prices.

Revenue Recognition

Revenues are recognized in accordance with FASB ASC 605 – 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) collectability 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.

Device Sales Revenue – Revenue from the sales of PocketFinder® products is recognized upon shipment to website customers and upon delivery to distributors net of an allowance for estimated returns. The allowance for sales returns is estimated based on management’s judgment using historical experience and expectation of future conditions.

Service Revenue – Service revenue consists of monthly service fees initiated by the customer upon activation of a PocketFinder® device. Services fees are billed and collected in advance of the service provided for that month. Service revenue is recognized upon billing the customer.

Shipping Costs

Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are included in cost of sales.

Advertising Costs

Advertising costs are expensed as incurred. For the three months ended November 30, 2013 and 2012, the Company incurred $485,391 and $268,025 of advertising costs, respectively.

Research and Development

Research and development costs are clearly identified and are expensed as incurred in accordance with FASB ASC 730 – Research and Development.

Stock Based Compensation

The Company measures and recognizes compensation expense associated with its grant of equity-based awards in accordance with FASB ASC 718, Compensation – Stock Compensation. ASC 718 requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting period.

In accordance with ASC 718, the Company estimates the grant-date fair value of its stock options using the Black-Scholes option-pricing model, which takes into account assumptions regarding an expected dividend yield, a risk-free interest rate, an expected volatility factor for the market price of the Company’s common stock and an expected term of the stock options. The fair value of stock options granted is amortized on a straight-line basis over the vesting periods. For the three months ended November 30, 2013 and 2012, stock-based compensation expense associated with stock options totaled $20,630 and $81,855, respectively.

Income Taxes

The Company accounts for income taxes under FASB ASC 740 – Income Taxes. 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. 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 minimum California state income tax in its provision for income taxes for the three months ended November 30, 2013 and 2012.

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 FASB ASC 260 – Earnings Per Share, which specifies the compilation, presentation, and disclosure requirements for income per share for entities with publicly held common stock or instruments which are potentially common stock.

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. The following potential common shares are excluded from diluted loss per share as their effect would be anti-dilutive.

	November 30, 2013		August 31, 2013
Warrants		17,256,715		15,456,715
Stock options		3,525,000		3,475,000
Convertible notes payable		30,252,642		25,300,352
Dilutive potential common shares		51,034,357		44,232,067

XML

Note 5 - Related Party Transactions (Details) (USD $)					3 Months Ended	1 Months Ended
	Nov. 30, 2013	Aug. 31, 2013	Nov. 30, 2013 Accrued Interest [Member] Co-President [Member]	Nov. 30, 2013 Officer [Member]	Nov. 30, 2013 Co-President [Member]	Jul. 31, 2012 West Coast Customs [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage				8.00%
Due to Related Parties			$ 176		$ 100,000
Repayments of Related Party Debt					128,825
Due to Related Parties, Current	176	29,219			0
Accounts Payable, Related Parties	$ 175,000	$ 100,000
Related Party Ownership Percentage						1.50%

XML

Note 6 - Convertible Notes Payable (Tables)

3 Months Ended

Nov. 30, 2013

Convertible Notes Payable [Abstract]

Convertible Debt [Table Text Block]

	November 30, 2013		August 31, 2013
Convertible Notes Payable
Note payable to JMJ Financial in the amount of $555,000 due on September 16, 2012. “V warrants” to purchase 869,565 shares of the Company’s common stock valued at $200,000 were issued in connection with the note. The note was converted into a term loan. See Note 7.	$	-	$	555,000
Note payable to JMJ Financial in the amount of $550,000 due on November 1, 2012. “W warrants” to purchase 1,086,957 shares of the Company’s common stock and valued at $250,000 were issued in connection with the note. The note was converted into a term loan. See Note 7.		-		550,000
Note payable in the amount of $300,000 due on December 28, 2013 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share.		300,000		300,000
Note payable in the amount of $1,000,000 due on December 30, 2014 at an interest rate of 8% per annum and convertible into shares of the Company’s common stock at $0.20 per share. In connection with the extension of the due date on December 10, 2013, 4,000,000 shares of the Company’s stock valued at $240,000 were awarded.		1,000,000		1,000,000
Three notes payable in the amount of $102,500 due on January 9, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share. In connection with the extension of the due date, 205,000 shares of the Company’s stock valued at $30,750 were awarded in July 2013.		102,500		102,500

	November 30, 2013		August 31, 2013
Convertible Notes Payable (Continued)
Two notes payable in the amount of $150,000 due on January 13, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share. In connection with the extension of the due date, 300,000 shares of the Company’s stock valued at $45,000 were awarded during 2013.	$	150,000	$	150,000
Note payable in the amount of $41,000 due on February 5, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share.		41,000		41,000
Note payable in the amount of $75,000 due on March 19, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 150,000 shares of the Company’s common stock valued at $24,617 were issued in connection with the note.		75,000		75,000
Note payable in the amount of $500,000 due on March 25, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 1,000,000 shares of the Company’s common stock valued at $164,022 were issued in connection with the note.		500,000		500,000
Two notes payable in the amount of $50,000 due on April 10, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share.		50,000		50,000

	November 30, 2013			August 31, 2013
Convertible Notes Payable (Continued)
Note payable in the amount of $100,000 due on April 15, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 200,000 shares of the Company’s common stock valued at $30,731 were issued in connection with the note.	$	100,000		$	100,000
Total convertible notes payable		2,318,500			3,423,500
Unamortized debt and beneficial conversion feature discounts		(64,460	)		(126,102	)
Accrued interest		208,045			287,827
Total convertible notes payable, net and accrued interest		2,462,085			3,585,225
Less current portion		(1,384,310	)		(3,585,225	)
Long-term convertible notes payable, net and accrued interest	$	1,077,775		$	-

	November 30, 2013			August 31, 2013
Related Party Convertible Notes Payable
Six notes payable in the amount of $996,987 due on March 13, 2014 at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.20 per share.	$	996,987		$	996,987
Four notes payable in the amount of $28,750 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.17 per share.		28,750			28,750
Four notes payable in the amount of $55,500 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.13 per share.		55,500			-
Seven notes payable in the amount of $2,500,000 due on September 30, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 400,000 and “BB warrants” to purchase 2,000,000 shares of the Company’s common stock valued at $324,585 were issued in connection with the extension of the notes during 2013.		2,500,000			1,900,000
Note payable in the amount of $300,000 due on November 6, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “CC warrants” to purchase 600,000 shares of the Company’s common stock valued at $118,757 were issued in connection with the note.		300,000			-
Total related party convertible notes payable		3,881,237			2,925,737
Unamortized debt and beneficial conversion feature discounts		(350,839	)		(254,827	)
Accrued interest		172,619			97,716
Total related party convertible notes payable, net and accrued interest		3,703,017			2,768,626

	November 30, 2013			August 31, 2013
Related Party Convertible Notes Payable (Continued)
Less current portion		(1,118,568	)		(1,049,590	)
Long-term related party convertible notes payable, net and accrued interest	$	2,584,449		$	1,719,036

Schedule of Maturities of Long-term Debt [Table Text Block]

For the Years Ending:
November 30, 2014	$	3,399,737
November 30, 2015		2,800,000
Total	$	6,199,737

XML

Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (USD $)	Nov. 30, 2013	Aug. 31, 2013
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	$ 2,318,500	$ 3,423,500
Unamortized debt and beneficial conversion feature discounts	(64,460)	(126,102)
Accrued interest	208,045	287,827
Total convertible notes payable, net	2,462,085	3,585,225
Less current portion	(1,384,310)	(3,585,225)
Long-term convertible notes payable, net and accrued interest	1,077,775
V Warrants [Member] | JMJ Financial [Member] | Due on September 16, 2012 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description		555,000
W Warrants [Member] | JMJ Financial [Member] | Due on November 1, 2012 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description		550,000
Z Warrants [Member] | Due on March 19, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	75,000	75,000
Z Warrants [Member] | Due on March 25, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	500,000	500,000
Z Warrants [Member] | Due on April 15, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	100,000	100,000
CC Warrants [Member] | Related Party [Member] | Due on November 6, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	3,881,237	2,925,737
Unamortized debt and beneficial conversion feature discounts	(350,839)	(254,827)
Accrued interest	172,619	97,716
Total convertible notes payable, net	3,703,017	2,768,626
CC Warrants [Member] | Due on November 6, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	300,000
Related Party [Member] | Due on March 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	996,987	996,987
Related Party [Member] | Due on Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	28,750	28,750
Related Party [Member] | Due on September 30, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	2,500,000	1,900,000
Related Party [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Less current portion	(1,118,568)	(1,049,590)
Long-term convertible notes payable, net and accrued interest	2,584,449	1,719,036
Due on December 28, 2013 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	300,000	300,000
Due on December 30,2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	1,000,000	1,000,000
Due on January 9, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	102,500	102,500
Due on January 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	150,000	150,000
Due on February 5, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	41,000	41,000
Due on April 10, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	50,000	50,000
Due on Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible notes payable description	$ 55,500

XML

Note 8 - Commitments and Contingencies (Tables)

3 Months Ended

Nov. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

For the Years Ending:
November 30, 2014	$	83,663
November 30, 2015		50,351
Total	$	134,014

XML

Note 2 - Inventory

3 Months Ended

Nov. 30, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

2.             INVENTORY

Inventory at November 30, 2013 and August 31, 2013 consisted of the following:

	November 30, 2013			August 31, 2013
Current:
Finished goods	$	1,299,383		$	1,286,953
Inventory valuation reserve for finished goods		(498,483	)		(498,483	)
Inventories, current	$	800,900		$	788,470
Noncurrent:
Device components	$	1,471,404		$	1,471,404
Inventory valuation reserve for components		(578,003	)		(578,003	)
Inventories, noncurrent	$	893,401		$	893,401

In the first quarter of 2012, the Company purchased a substantial amount of inventory components to produce PocketFinder® devices. Management analyzed its inventories based on existing purchase orders and current potential orders for future delivery and determined we may not realize all of the inventory components within the next year. Inventories totaling $893,401 which may not be realized within a 12-month period have been reclassified as long-term as of November 30, 2013 and August 31, 2013.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	Nov. 30, 2013	Aug. 31, 2013
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in Shares)	10,000,000	10,000,000
Preferred stock, shares issued (in Shares)	0	0
Preferred stock, shares outstanding (in Shares)	0	0
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in Shares)	300,000,000	300,000,000
Common stock,shares issued (in Shares)	212,050,845	211,917,511
Common stock,shares outstanding (in Shares)	212,050,845	211,917,511

XML

Accounting Policies, by Policy (Policies)

3 Months Ended

Nov. 30, 2013

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Nature of Business

The Company designs, develops, and sells personal, pet, and vehicle locator devices and services including PocketFinder® People, PocketFinder® Pets and PocketFinder® Vehicles. The PocketFinder® is a small, completely wireless, location device that enables a user to locate a person, pet, vehicle or valuable item at any time from almost anywhere using Global Positioning System (“GPS”) and General Packet Radio Service (“GPRS”) technologies. The Company is located in Irvine, California.

Organization

Location Based Technologies, Inc. (formerly known as Springbank Resources, Inc.) (the “Company,” “our,” “we” or “LBT”) was incorporated under the laws of the State of Nevada on April 10, 2006.

Location Based Technologies, Corp. (formerly known as PocketFinder, Inc.) was incorporated under the laws of the State of California on September 16, 2005. On July 7, 2006, it established PocketFinder, LLC (“LLC”), a California Limited Liability Company. On May 29, 2007, PocketFinder, Inc. filed amended articles with the Secretary of State to change its name to Location Based Technologies, Corp., and in October 2007 was merged into LBT.

On September 30, 2009, the Company formed Location Based Technologies, Ltd. (“LBT, Ltd.”), an England and Wales private limited company, to establish a presence in Europe. LBT, Ltd. is a wholly owned subsidiary of the Company.

Consolidation, Policy [Policy Text Block]

Consolidation Policy

The accompanying consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiary, Location Based Technologies, Ltd. Intercompany balances and transactions have been eliminated in consolidation.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to financial statements included in the annual report on Form 10-K of Location Based Technologies, Inc. for the year ended August 31, 2013. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended November 30, 2013, 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 consolidated financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended August 31, 2013, included in the Company’s report on Form 10-K.

Liquidity Disclosure [Policy Text Block]

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred net losses since inception, and as of November 30, 2013, had an accumulated deficit of $57,110,055 and negative working capital of $4,038,093. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management recognizes that the Company must generate additional resources to enable it to continue operations. Management intends to raise additional financing through debt and equity financing or through other means that it deems necessary, with a view to moving forward and sustaining prolonged growth in its strategy phases. However, no assurance can be given that the Company will be successful in raising additional capital. Further, even if the Company raises additional capital, there can be no assurance that the Company will achieve profitability or positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive cash flow, the Company will not be able to meet its obligations and may have to cease operations.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain reclassifications have been made to prior period amounts or balances to conform to the presentation adopted in the current period.

Cash and Cash Equivalents, Policy [Policy Text Block]

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 Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

Cash and Cash Equivalents – The cash and cash equivalent balances at November 30, 2013 and August 31, 2013 were principally held by two institutions which insured our aggregated accounts with the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 per insured banking institution. At times, the Company has maintained bank balances which have exceeded FDIC limits. The Company has not experienced any losses with respect to its cash balances.

Revenue and Accounts Receivable –For the three months ended November 30, 2013, revenue from the Company’s largest customer amounted to $111,577 or 27% of total net revenue. Accounts receivable from this customer amounted to $82,439 or 56% of total accounts receivable at November 30, 2013.

For the three months ended November 30, 2012, revenue from two of the Company’s largest customers amounted to $43,011 or 21% of total net revenue. Accounts receivable from these customers amounted to $100,957 or 94% of total accounts receivable at November 30, 2012.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Allowance for Doubtful Accounts

The allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of November 30, 2013 and August 31, 2013, the allowance for doubtful accounts amounted to $3,000.

Revenue Recognition, Sales Returns [Policy Text Block]

Allowance for Sales returns

An allowance for sales returns is recorded as a reduction to revenue and based on management’s judgment using historical experience and expectation of future conditions. As of November 30, 2013 and August 31, 2013, the allowance for sales returns amounted to $16,500 and $8,500, respectively.

Inventory, Policy [Policy Text Block]

Inventory

Inventories are valued at the lower of cost (first-in, first-out) or market and primarily consisted of components and finished goods for the Company’s PocketFinder® products. Packaging costs are expensed as incurred. The Company provides for a lower-of-cost-or-market ("LCM") adjustment against gross inventory values. The Company recorded an inventory valuation reserve for LCM inventory adjustments amounting to $1,076,486 as of November 30, 2013. In addition, the components inventory, net of the LCM valuation reserve, totaling $893,401 is classified as a noncurrent asset at November 30, 2013 (see Note 2).

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Pursuant to FASB ASC 820 – Fair Value Measurement and Disclosures, 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, inventory, accounts payable and notes payable approximate their fair value due to the short period to maturity of these instruments.

Property, Plant and Equipment, Policy [Policy Text Block]

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 1 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.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with FASB ASC 360 – Impairment or Disposal of Long-Lived Assets that requires 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. During the three months ended November 30, 2012, the Company recorded an impairment of certain patents amounting to $455,916. There was no such impairment recognized during the three months ended November 30, 2013.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets – Patents and Trademarks

The Company capitalizes internally developed assets related to certain costs associated with patents and trademarks. These costs include legal and registration fees needed to apply for and secure patents. The intangible assets acquired from other enterprises or individuals in an “arms length” transaction are recorded at cost. As of November 30, 2013 and August 31, 2013, the Company capitalized $742,945 for patent related expenditures. As of November 30, 2013 and August 31, 2013, the Company capitalized $52,539 and $59,470 for trademark related expenditures, respectively. Accumulated amortization of intangible assets was $103,420 and $86,683 at November 30, 2013 and August 31, 2013, respectively.

Patents are subject to amortization upon issuance by the United States Patent and Trademark Office. Intangible assets are amortized in accordance with FASB ASC 350 – Intangibles – Goodwill and Other, using the straight-line method over the shorter of their estimated useful lives or remaining legal life. Amortization expense totaled $16,737 and $16,792 for the three months ended November 30, 2013 and 2012, respectively.

Revenue Recognition, Deferred Revenue [Policy Text Block]

Deferred Revenue

Deferred revenue is a liability related to revenue producing activity for which revenue has not yet been recognized. As of November 30, 2013 and August 31, 2013, deferred revenue amounted to $22,472 and $25,371, respectively, and consisted of prepaid service revenue from subscribers.

Beneficial Conversion Feature of Convertible Notes Payable [Policy Text Block]

Beneficial Conversion Feature of Convertible Notes Payable

The Company accounts for the beneficial conversion feature of convertible notes payable when the conversion rate is below market value. Pursuant to FASB ASC 470-20 – Debt With Conversion and Other Options, the estimated fair value of the beneficial conversion feature is recorded in the financial statements as a discount from the face amount of the notes. Such discounts are amortized over the term of the notes or conversion of the notes, if sooner. The Company recognized amortization expense related to the beneficial conversion features on convertible notes payable totaling $32,647 and $61,233 during the three months ended November 30, 2013 and 2012, respectively.

Derivatives, Policy [Policy Text Block]

Derivative Liabilities

The Company accounts for its warrants and embedded conversion features in its convertible debentures in accordance FASB ASC 815-10 – Derivatives and Hedging, which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and FASB ASC 815-40 – Contracts in Entity’s Own Equity. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Gain (Loss) on Change in Fair Value of Derivative Liability” in other income (expense).

The Company determined that the conversion feature of two promissory notes met the criteria of an embedded derivative, and therefore the conversion feature of these notes needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion feature was estimated at the default date when the notes became convertible using the Black-Scholes model. In connection with the JMJ debt settlement, the derivative liabilities were eliminated and included in the gain on debt settlement. For the three months ended November 30, 2012, the Company recorded a loss for the change in fair value of the derivative liabilities in the amount of $1,144,647 due to the fluctuation in the current market prices.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenues are recognized in accordance with FASB ASC 605 – 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) collectability 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.

Device Sales Revenue – Revenue from the sales of PocketFinder® products is recognized upon shipment to website customers and upon delivery to distributors net of an allowance for estimated returns. The allowance for sales returns is estimated based on management’s judgment using historical experience and expectation of future conditions.

Service Revenue – Service revenue consists of monthly service fees initiated by the customer upon activation of a PocketFinder® device. Services fees are billed and collected in advance of the service provided for that month. Service revenue is recognized upon billing the customer.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping Costs

Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are included in cost of sales.

Advertising Costs, Policy [Policy Text Block]

Advertising Costs

Advertising costs are expensed as incurred. For the three months ended November 30, 2013 and 2012, the Company incurred $485,391 and $268,025 of advertising costs, respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development costs are clearly identified and are expensed as incurred in accordance with FASB ASC 730 – Research and Development.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock Based Compensation

The Company measures and recognizes compensation expense associated with its grant of equity-based awards in accordance with FASB ASC 718, Compensation – Stock Compensation. ASC 718 requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting period.

In accordance with ASC 718, the Company estimates the grant-date fair value of its stock options using the Black-Scholes option-pricing model, which takes into account assumptions regarding an expected dividend yield, a risk-free interest rate, an expected volatility factor for the market price of the Company’s common stock and an expected term of the stock options. The fair value of stock options granted is amortized on a straight-line basis over the vesting periods. For the three months ended November 30, 2013 and 2012, stock-based compensation expense associated with stock options totaled $20,630 and $81,855, respectively.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under FASB ASC 740 – Income Taxes. 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. 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 minimum California state income tax in its provision for income taxes for the three months ended November 30, 2013 and 2012.

Earnings Per Share, Policy [Policy Text Block]

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 FASB ASC 260 – Earnings Per Share, which specifies the compilation, presentation, and disclosure requirements for income per share for entities with publicly held common stock or instruments which are potentially common stock.

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. The following potential common shares are excluded from diluted loss per share as their effect would be anti-dilutive.

XML

Document And Entity Information	3 Months Ended
	Nov. 30, 2013	Jan. 10, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Location Based Technologies, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--08-31
Entity Common Stock, Shares Outstanding		213,810,220
Amendment Flag	false
Entity Central Index Key	0001383196
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Nov. 30, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Nov. 30, 2013

Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	November 30, 2013		August 31, 2013
Warrants		17,256,715		15,456,715
Stock options		3,525,000		3,475,000
Convertible notes payable		30,252,642		25,300,352
Dilutive potential common shares		51,034,357		44,232,067

XML

Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
Net revenue
Devices	$ 243,391	$ 127,856
Services	165,413	80,699
Total net revenue	408,804	208,555
Cost of revenue
Devices	143,817	131,259
Services	237,990	177,781
Total cost of revenue	381,807	309,040
Gross loss	26,997	(100,485)
Operating expenses
General and administrative	728,634	607,360
Officer compensation	246,687	229,670
Professional fees	374,493	404,928
Rent	19,203	19,527
Research and development	89,758	42,364
Salaries and wages	48,579	150,720
Loss on asset impairment	455,916	455,916
Total operating expenses	1,507,354	1,910,485
Net operating loss	(1,480,357)	(2,010,970)
Other income (expense)
Financing costs	(148,880)	(81,000)
Amortization of beneficial conversion feature	(32,647)	(61,233)
Amortization of deferred financing costs	(17,827)	(81,966)
Amortization of debt discount	(98,906)
Loss on change in fair value of derivative liabilities		(1,144,647)
Interest expense, net	(153,290)	(44,872)
Gain on debt settlement	886,548
Gain on asset disposal	569
Foreign currency loss, net		(16)
Total other income (expense)	435,567	(1,413,734)
Net loss before income taxes	(1,044,790)	(3,424,704)
Provision for income taxes	800	800
Net Loss	$ (1,045,590)	$ (3,425,504)
Basic and Diluted - Earnings (loss) Per Share (in Dollars per share)	$ 0.00	$ (0.02)
Basic and Diluted - Weighted Average Number of Shares Outstanding (in Shares)	212,015,680	199,734,700

XML

Note 7 - Line of Credit (Line of Credit [Member])

3 Months Ended

Nov. 30, 2013

Line of Credit [Member]

Note 7 - Line of Credit [Line Items]

Debt Disclosure [Text Block]

7.             LINE OF CREDIT AND TERM LOANS

SVB Line of Credit

On January 5, 2011, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank for a $1,000,000 non-formula line of credit. The principal amount outstanding under the credit line accrues interest at a floating per annum rate equal to the greater of (i) the Prime Rate, plus 2.5% or (ii) 6.5% and is to be paid monthly. The Company must maintain certain financial covenants under the Loan Agreement. The personal guarantor for the credit line is a director and stockholder of the Company.

On November 20, 2013, the Company entered into a Fifth Amendment to Loan and Security Agreement with Silicon Valley Bank to convert the line of credit into a term loan to be repaid by April 1, 2016 with interest only payments from December 2013 to April 2014, followed by twenty-four equal installments of principal plus monthly accrued interest.

As of November 30, 2013, the outstanding balance on the term loan and accrued interest totaled $1,000,000 and $0, respectively. As of August 31, 2013, the outstanding balance on the line of credit and accrued interest totaled $1,000,000 and $9,042, respectively.  

JMJ Notes Payable

On December 12, 2013 the Company and JMJ executed a comprehensive Release and Settlement Agreement (“Settlement”) which pertains to all claims and counter-claims previously filed by both Parties. The Settlement will require the company to repay $1,096,200 principal and interest on the outstanding notes to be $324,000 in cash payments and $772,200 in common stock. Under the payment terms of the Settlement, $1,105,000 previously classified as convertible notes were reclassified as a term loan as of November 30, 2013. As a result, the Company recorded a gain on debt settlement consisting of $132,600 of abated interest, $8,800 in principal reduction and $745,148 from the elimination of derivative liabilities associated with the conversion features.

As of November 30, 2013, the principal maturities of the SVB and JMJ term loans are as follows:

For the Years Ending:
November 30, 2014	$	633,667
November 30, 2015		1,254,200
November 30, 2016		208,333
Total term loans		2,096,200
Less current portion of term loans		(633,667	)
Long-term term loans	$	1,462,533

XML

Note 6 - Convertible Notes Payable

3 Months Ended

Nov. 30, 2013

Convertible Notes Payable [Abstract]

Convertible Notes Payable [Text Block]

6.             CONVERTIBLE NOTES PAYABLE

	November 30, 2013		August 31, 2013
Convertible Notes Payable
Note payable to JMJ Financial in the amount of $555,000 due on September 16, 2012. “V warrants” to purchase 869,565 shares of the Company’s common stock valued at $200,000 were issued in connection with the note. The note was converted into a term loan. See Note 7.	$	-	$	555,000
Note payable to JMJ Financial in the amount of $550,000 due on November 1, 2012. “W warrants” to purchase 1,086,957 shares of the Company’s common stock and valued at $250,000 were issued in connection with the note. The note was converted into a term loan. See Note 7.		-		550,000
Note payable in the amount of $300,000 due on December 28, 2013 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share.		300,000		300,000
Note payable in the amount of $1,000,000 due on December 30, 2014 at an interest rate of 8% per annum and convertible into shares of the Company’s common stock at $0.20 per share. In connection with the extension of the due date on December 10, 2013, 4,000,000 shares of the Company’s stock valued at $240,000 were awarded.		1,000,000		1,000,000
Three notes payable in the amount of $102,500 due on January 9, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share. In connection with the extension of the due date, 205,000 shares of the Company’s stock valued at $30,750 were awarded in July 2013.		102,500		102,500

	November 30, 2013		August 31, 2013
Convertible Notes Payable (Continued)
Two notes payable in the amount of $150,000 due on January 13, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.30 per share. In connection with the extension of the due date, 300,000 shares of the Company’s stock valued at $45,000 were awarded during 2013.	$	150,000	$	150,000
Note payable in the amount of $41,000 due on February 5, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share.		41,000		41,000
Note payable in the amount of $75,000 due on March 19, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 150,000 shares of the Company’s common stock valued at $24,617 were issued in connection with the note.		75,000		75,000
Note payable in the amount of $500,000 due on March 25, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 1,000,000 shares of the Company’s common stock valued at $164,022 were issued in connection with the note.		500,000		500,000
Two notes payable in the amount of $50,000 due on April 10, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share.		50,000		50,000

	November 30, 2013			August 31, 2013
Convertible Notes Payable (Continued)
Note payable in the amount of $100,000 due on April 15, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 200,000 shares of the Company’s common stock valued at $30,731 were issued in connection with the note.	$	100,000		$	100,000
Total convertible notes payable		2,318,500			3,423,500
Unamortized debt and beneficial conversion feature discounts		(64,460	)		(126,102	)
Accrued interest		208,045			287,827
Total convertible notes payable, net and accrued interest		2,462,085			3,585,225
Less current portion		(1,384,310	)		(3,585,225	)
Long-term convertible notes payable, net and accrued interest	$	1,077,775		$	-

	November 30, 2013			August 31, 2013
Related Party Convertible Notes Payable
Six notes payable in the amount of $996,987 due on March 13, 2014 at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.20 per share.	$	996,987		$	996,987
Four notes payable in the amount of $28,750 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.17 per share.		28,750			28,750
Four notes payable in the amount of $55,500 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.13 per share.		55,500			-
Seven notes payable in the amount of $2,500,000 due on September 30, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “Z warrants” to purchase 400,000 and “BB warrants” to purchase 2,000,000 shares of the Company’s common stock valued at $324,585 were issued in connection with the extension of the notes during 2013.		2,500,000			1,900,000
Note payable in the amount of $300,000 due on November 6, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “CC warrants” to purchase 600,000 shares of the Company’s common stock valued at $118,757 were issued in connection with the note.		300,000			-
Total related party convertible notes payable		3,881,237			2,925,737
Unamortized debt and beneficial conversion feature discounts		(350,839	)		(254,827	)
Accrued interest		172,619			97,716
Total related party convertible notes payable, net and accrued interest		3,703,017			2,768,626

	November 30, 2013			August 31, 2013
Related Party Convertible Notes Payable (Continued)
Less current portion		(1,118,568	)		(1,049,590	)
Long-term related party convertible notes payable, net and accrued interest	$	2,584,449		$	1,719,036

As of November 30, 2013, the principal maturities of the convertible notes payable and related party convertible notes payable are as follows:

For the Years Ending:
November 30, 2014	$	3,399,737
November 30, 2015		2,800,000
Total	$	6,199,737

XML

Note 7 - Line of Credit (Tables)

3 Months Ended

Nov. 30, 2013

Note 7 - Line of Credit (Tables) [Line Items]

Schedule of Maturities of Long-term Debt [Table Text Block]

For the Years Ending:
November 30, 2014	$	3,399,737
November 30, 2015		2,800,000
Total	$	6,199,737

Line of Credit [Member]

Note 7 - Line of Credit (Tables) [Line Items]

Schedule of Maturities of Long-term Debt [Table Text Block]

For the Years Ending:
November 30, 2014	$	633,667
November 30, 2015		1,254,200
November 30, 2016		208,333
Total term loans		2,096,200
Less current portion of term loans		(633,667	)
Long-term term loans	$	1,462,533

XML

Note 2 - Inventory (Tables)

3 Months Ended

Nov. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	November 30, 2013			August 31, 2013
Current:
Finished goods	$	1,299,383		$	1,286,953
Inventory valuation reserve for finished goods		(498,483	)		(498,483	)
Inventories, current	$	800,900		$	788,470
Noncurrent:
Device components	$	1,471,404		$	1,471,404
Inventory valuation reserve for components		(578,003	)		(578,003	)
Inventories, noncurrent	$	893,401		$	893,401

XML

Note 10 - Provision for Income Taxes

3 Months Ended

Nov. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

10.          PROVISION FOR INCOME TAXES

Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences arise from the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and tax rates on the date of enactment.

The Company did not provide any current or deferred U.S. federal income taxes or benefits for any of the periods presented because the Company has experienced operating losses since inception. The Company provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn sufficient income to realize the deferred tax assets during the carry forward period.

The components of the Company’s deferred tax asset as of November 30, 2013 and August 31, 2013 are as follows:

	November 30, 2013		August 31, 2013
Net operating loss carry forward and deductible temporary differences	$	18,794,000	$	19,904,000
Valuation allowance		(18,794,000)		(19,904,000)
Net deferred tax asset	$	-	$	-

A reconciliation of the combined federal and state statutory income taxes rate and the effective rate is as follows:  

	November 30, 2013		August 31, 2013
Federal tax at statutory rate		34.00%		34.00%
State income tax net of federal benefit		5.83%		5.83%
Valuation allowance		(39.83%)		(39.83%)
		-		-

As of November 30, 2013 and August 31, 2013, the Company had federal and state net operating loss carryforwards of approximately $47,186,000 and $48,074,000, respectively, which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2032. 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.

As of November 30, 2013 and 2012, no accrued interest and penalties are recorded relating to uncertain tax positions. Any such interest and penalties would be included in interest expense as a component of pre-tax net income or loss. The Company's tax filings are no longer open to examination by the Internal Revenue Service for tax years prior to 2009 and by state taxing authorities for tax years prior to 2008.

XML

Note 8 - Commitments and Contingencies

3 Months Ended

Nov. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

8.             COMMITMENTS AND CONTINGENCIES

Operating Leases 

On May 11, 2011, the Company entered into a lease agreement to lease approximately 4,700 square feet of general office space in Irvine, California, for base rent ranging from $6,199 to $7,193 per month over the 48 month lease term. The lease term is from July 1, 2011 through June 30, 2015.

Total rental expense on operating leases for the three months ended November 30, 2013 and 2012 totaled $19,203 and $19,527, respectively.

As of November 30, 2013, the future minimum lease payments are as follows:

For the Years Ending:
November 30, 2014	$	83,663
November 30, 2015		50,351
Total	$	134,014

XML

Note 9 - Equity

12 Months Ended

Aug. 31, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

9.             EQUITY

Common Stock 

The Company issued 83,334 shares of common stock to consultants in exchange for various advisory services during the three months ended November 30, 2013. The shares were valued at $10,000, which represents the fair market value of the shares provided on the award date.

The Company issued 50,000 shares of common stock in connection with a note payable extension during the three months ended November 30, 2013. The shares were valued at $7,500, which represents the fair market value of the note payable extension costs on the award date.

Warrants

Warrants to purchase up to 17,256,715 shares of the Company’s common stock are outstanding at November 30, 2013.

	Number of Shares		Exercise Price		Expiration
Outstanding warrants as of August 31, 2013		15,456,715
Warrants granted:
BB warrants		1,200,000	$	0.20	August 29, 2016
CC warrants		600,000	$	0.20	November 6, 2016
Outstanding warrants as of November 30, 2013		17,256,715

The weighted average exercise price of outstanding warrants was $0.21 at November 30, 2013, with expiration dates ranging from December 16, 2014 to November 6, 2016.

Stock Options

On January 12, 2012, the board of directors adopted the Amended and Restated 2007 Stock Incentive Plan (the “2007 Plan”). The aggregate number of shares of common stock that may be issued under the 2007 Plan is 20,000,000 and such shares are reserved for issuance out of the authorized but previously unissued shares. Employees, service providers and non-employee directors of the Company and its affiliates are eligible to receive non-statutory stock options, incentive stock options, restricted stock and stock appreciation rights. The 2007 Plan will continue until the earlier of the termination of the 2007 Plan by the board of directors or ten years after the effective date. There were 18,500,000 incentive stock options granted under the 2007 Plan as of November 30, 2013.

On August 30, 2007, the Company granted options outside of the 2007 Plan to three of the Company’s officers to purchase 6,000,000 common shares each for a total of 18,000,000 common shares at $0.33 per share that vest upon the achievement of certain milestones. The options expire 10 years from the vested date. As of November 30, 2013, there were no options that were vested and presently exercisable.

On January 12, 2012, the Company granted options under the 2007 Plan to three of the Company’s officers to purchase 4,000,000 common shares each for a total of 12,000,000 common shares at $0.31 per share that vest upon the achievement of certain milestones. The options expire on January 12, 2017. As of November 30, 2013, there were 1,500,000 options that were vested and presently exercisable. No options were exercised as of November 30, 2013.

On March 15, 2012, the Company granted options under the 2007 Plan to three officers and one employee of the Company to purchase 6,500,000 common shares at $0.31 per share per share that vest upon the achievement of certain milestones. The options expire on March 15, 2017. As of November 30, 2013, there were 2,025,000 options that were vested and presently exercisable. No options were exercised as of November 30, 2013.

XML

Note 11 - Subsequent Events

3 Months Ended

Nov. 30, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

11.           SUBSEQUENT EVENTS

On December 5, 2013, the Company issued 1,759,375 shares of common stock to consultants in exchange for various advisory services during the three months ended November 30, 2013. The shares were valued at $143,670, which represents the fair market value of the shares provided on the award date.

On December 20, 2013, the Company entered into an unsecured promissory note agreement with a board member for $100,000 due on March 31, 2014. The note bears interest at 10% per annum and may be converted into common stock of the Company at the rate of $0.15 per share. In addition, the note holder will receive 100,000 shares of common stock.

On December 20, 2013, the Company entered into a secured promissory note agreement with a board member for $100,000 due on December 20, 2015. The note bears interest at 10% per annum and may be converted into common stock of the Company at the rate of $0.15 per share. In addition, each note holder will receive a three year warrant to purchase 200,000 shares of common stock at $0.15.

On December 10, 2013, the Company entered into an Amendment to extend the due date on a $1,000,000 promissory note to December 30, 2014. In connection with the note extension, 4,000,000 shares of common stock valued at $240,000 were awarded and 500,000 shares of common stock valued at $30,000 were awarded under the related incentive organizer agreement. 

XML

Note 4 - Intangible Assets (Details) - Intangible Assets (USD $)	Nov. 30, 2013	Aug. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Intangible Assets	$ 795,484	$ 802,415
Less: accumulated amortization	(103,420)	(86,683)
Total intangible assets	692,064	715,732
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible Assets	742,945	742,945
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible Assets	$ 52,539	$ 59,470

XML

Note 4 - Intangible Assets (Tables)

3 Months Ended

Nov. 30, 2013

Disclosure Text Block [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	November 30, 2013			August 31, 2013
Patents	$	742,945		$	742,945
Trademarks		52,539			59,470
		795,484			802,415
Less: accumulated amortization		(103,420	)		(86,683	)
Total intangible assets	$	692,064		$	715,732

XML

Note 10 - Provision for Income Taxes (Tables)

3 Months Ended

Nov. 30, 2013

Income Tax Disclosure [Abstract]

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	November 30, 2013		August 31, 2013
Net operating loss carry forward and deductible temporary differences	$	18,794,000	$	19,904,000
Valuation allowance		(18,794,000)		(19,904,000)
Net deferred tax asset	$	-	$	-

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	November 30, 2013		August 31, 2013
Federal tax at statutory rate		34.00%		34.00%
State income tax net of federal benefit		5.83%		5.83%
Valuation allowance		(39.83%)		(39.83%)
		-		-

XML

Note 8 - Commitments and Contingencies (Details) (USD $)	3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012	May 11, 2011 sqft
Note 8 - Commitments and Contingencies (Details) [Line Items]
Area of Real Estate Property (in Square Feet)			4,700
Operating Leases, Rent Expense	$ 19,203	$ 19,527
Minimum [Member]
Note 8 - Commitments and Contingencies (Details) [Line Items]
Base Rent Expense Per Month, Operating Lease	6,199
Maximum [Member]
Note 8 - Commitments and Contingencies (Details) [Line Items]
Base Rent Expense Per Month, Operating Lease	$ 7,193

XML

Condensed Consolidated Statements of Cash Flows (unaudited) (USD $)	3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012
Cash Flows from Operating Activities
Net loss	$ (1,045,590)	$ (3,425,504)
Adjustment to reconcile net loss to net cash used in operating activities:
Loss on change in fair value of derivative liabilities		1,144,647
Gain on debt settlement	(886,548)
Loss on asset impairment	455,916	455,916
Provision for doubtful accounts and sales returns	8,000	(15,875)
Depreciation and amortization	30,927	26,640
Amortization of beneficial conversion feature	32,647	61,233
Amortization of deferred financing costs	17,827	81,966
Amortization of prepaid services paid in common stock	167,499	153,125
Amortization of debt discount	98,906
Common stock issued for services and financing costs	17,500	49,500
Warrants issued for services and financing costs		99,873
Stock options issued for services	20,630	81,855
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(58,550)	112,349
(Increase) decrease in inventory	(12,430)	57,164
(Increase) decrease in prepaid expenses and other assets	(25,362)	(10,664)
Increase (decrease) in accounts payable and accrued expenses	141,138	290,608
Increase (decrease) in accrued officer compensation	(65,999)	93,950
Increase (decrease) in deferred revenue	(2,899)	(5,163)
Increase (decrease) in accrued interest	118,461	28,261
Net cash used in operating activities	(1,444,413)	(720,119)
Cash Flows from Investing Activities
Purchase of property and equipment	(17,965)	(120,000)
Cash Flows from Financing Activities
Advances / (repayments) from officers, net	(28,825)
Payments for deferred financing costs		(6,000)
Proceeds from convertible notes payable		250,000
Proceeds from related party convertible notes payable	900,000	350,000
Net cash provided by financing activities	871,175	594,000
Net decrease in cash and cash equivalents	(583,703)	(246,119)
Cash and cash equivalents, beginning of year	680,914	376,554
Cash and cash equivalents, end of year	97,211	130,435
Non-Cash Financing Activities:
Conversion of accrued compensation into convertible notes payable	55,500
Issuance of warrants for financing costs classified as debt discount	165,922
Trademarks [Member]
Adjustment to reconcile net loss to net cash used in operating activities:
Gain on sale of trademark	(569)
Cash Flows from Investing Activities
Proceeds from sale of trademark	7,500
Net cash used in investing activities	$ (10,465)	$ (120,000)

XML

Note 5 - Related Party Transactions

3 Months Ended

Nov. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

5.             RELATED PARTY TRANSACTIONS

Advances from Officer

From time to time, the Company’s officers advance funding to the Company to cover operating expenses. Cash advances from officers accrue interest at the rate of 8% per annum and have no formal repayment terms.

During the three months ended November 30, 2013, there were advances from our Co-President totaling $100,000 and $128,825 of repayments. There were no outstanding advances and related accrued interest amounted to $176 as of November 30, 2013.

Accounts Payable

Amounts payable to related parties totaled $175,000 and $100,000 as of November 30, 2013 and August 31, 2013, respectively.

West Coast Customs

In July 2012, an officer of the Company entered into a Subscription Agreement with West Coast Customs ("WCC") to acquire an approximate 1.5% ownership of WCC. The Company and WCC are under a Manufacturing and Trademark License Agreement for co-branding of the PocketFinder® products.

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended
	Nov. 30, 2013	Nov. 30, 2012	Aug. 31, 2013
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Retained Earnings (Accumulated Deficit)	$ (57,110,055)		$ (56,064,465)
Working Capital	(4,038,093)
Cash, FDIC Insured Amount	250,000
Allowance for Doubtful Accounts Receivable	3,000		3,000
Inventory Adjustments	1,076,486
Inventory, Noncurrent	893,401		893,401
Asset Impairment Charges	455,916	455,916
Finite-Lived Patents, Gross	742,945		742,945
Finite-Lived Trademarks, Gross	52,539		59,470
Finite-Lived Intangible Assets, Accumulated Amortization	103,420		86,683
Amortization of Intangible Assets	16,737	16,792
Deferred Revenue	22,472		25,371
Beneficial Conversion Feature, Accumulated Amortization	32,647	61,233
Derivative, Gain (Loss) on Derivative, Net		(1,144,647)
Marketing and Advertising Expense	485,391	268,025
State and Local Income Tax Expense (Benefit), Continuing Operations	800	800
Largest Customer [Member] | Sales Revenue, Net [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Revenues	111,577	43,011
Concentration Risk, Percentage	27.00%	21.00%
Largest Customer [Member] | Accounts Receivable [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage	56.00%	94.00%
Largest Customer [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Accounts Receivable, Net	82,439	100,957
Employee Stock Option [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Share-based Compensation	20,630	81,855
Allowance for Sales Returns [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Valuation Allowances and Reserves, Balance	$ 16,500		$ 8,500
Minimum [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	1 year
Maximum [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life	5 years

XML

Note 6 - Convertible Notes Payable (Details) - Principal Maturities Of Convertible Notes Payable (USD $)	Nov. 30, 2013
Note 6 - Convertible Notes Payable (Details) - Principal Maturities Of Convertible Notes Payable [Line Items]
November 30, 2014	$ 633,667
November 30, 2015	1,254,200
Total	2,096,200
Convertible Note Payable [Member]
Note 6 - Convertible Notes Payable (Details) - Principal Maturities Of Convertible Notes Payable [Line Items]
November 30, 2014	3,399,737
November 30, 2015	2,800,000
Total	$ 6,199,737

XML

Note 3 - Property and Equipment (Tables)

3 Months Ended

Nov. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	November 30, 2013			August 31, 2013
Machinery and equipment	$	108,319		$	106,354
Computer software (mobile apps)		82,999			66,999
Computer software (internal)		51,263			51,263
Computer and video equipment		19,756			19,756
Office furniture		24,526			24,526
		286,863			268,898
Less: accumulated depreciation		(172,276	)		(158,085	)
Total property and equipment	$	114,587		$	110,813