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 May 31, 2014.

☐     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 July 11, 2014, there were 229,583,162 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	32
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42
ITEM 4.	CONTROLS AND PROCEDURES	42
PART II	OTHER INFORMATION	43
ITEM 1.	LEGAL PROCEEDINGS	43
ITEM 1.A.	RISK FACTORS	43
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	43
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	44
ITEM 5.	OTHER INFORMATION	44
ITEM 6.	EXHIBITS	44
SIGNATURES		45

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Location Based Technologies, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

May 31, 2014 and August 31, 2013

(Unaudited)

	May 31, 2014		August 31, 2013
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	150,802	$	680,914
Accounts receivable, net of allowances		97,793		77,584
Inventory, net of reserves		629,235		788,470
Prepaid expenses and other assets		35,468		47,976
Deferred financing costs		94,150		25,827
Total current assets		1,007,448		1,620,771
Property and equipment, net of accumulated depreciation		96,430		110,813
OTHER ASSETS
Intangible assets, net of accumulated amortization		658,590		715,732
Inventory, net of reserves		892,434		893,401
Deposits		30,000		30,000
Total other assets		1,581,024		1,639,133
TOTAL ASSETS	$	2,684,902	$	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

May 31, 2014 and August 31, 2013

(Unaudited)

	May 31, 2014			August 31, 2013
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Convertible demand notes payable and accrued interest	$	29,803		$	-
Related party convertible demand notes payable and accrued interest		1,178,140			-
Accounts payable and accrued expenses		2,011,951			1,699,114
Deferred compensation		141,410			267,730
Deferred revenue		21,464			25,371
Line of credit and accrued interest		-			1,009,042
Advances from officer and accrued interest		26,188			29,219
Convertible term notes payable and accrued interest, net of unamortized discounts		3,048,653			3,585,225
Related party convertible term notes payable and accrued interest, net of unamortized discounts		104,466			1,049,590
Current portion of term loans and accrued interest		1,165,159			-
Derivative liabilities		-			745,148
Total current liabilities		7,727,234			8,410,439
Convertible term notes payable		806,615			-
Related party convertible term notes payable and accrued interest, net of unamortized discounts		2,543,911			1,719,036
Term loans		842,083			-
TOTAL LIABILITIES		11,919,843			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; 228,160,821 and 211,917,511 shares issued and outstanding at May 31, 2014 and August 31, 2013, respectively		228,161			211,917
Additional paid-in capital		50,639,692			49,388,375
Prepaid services paid in common stock		(105,924	)		(294,585	)
Accumulated deficit		(59,996,870	)		(56,064,465	)
Total stockholders' deficit		(9,234,941	)		(6,758,758	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	2,684,902		$	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 and nine months ended May 31, 2014 and 2013

(Unaudited)

	For the three months ended						For the nine months ended
	May 31, 2014			May 31, 2013			May 31, 2014			May 31, 2013
Net revenue
Devices	$	216,223		$	643,696		$	567,196		$	1,260,828
Services		238,916			111,483			637,838			294,063
Total net revenue		455,139			755,179			1,205,034			1,554,891
Cost of revenue
Devices		182,960			923,560			418,929			1,583,849
Services		234,122			205,025			727,365			571,748
Total cost of revenue		417,082			1,128,585			1,146,294			2,155,597
Gross profit (loss)		38,057			(373,406	)		58,740			(600,706	)
Operating expenses
General and administrative		341,138			486,947			1,360,347			1,539,039
Officer compensation		142,000			253,835			621,746			798,465
Professional fees		285,717			1,004,725			834,674			1,861,706
Rent		19,202			19,202			57,607			57,931
Research and development		-			112,511			99,548			257,797
Salaries and wages		85,762			73,252			195,585			224,453
Loss on asset impairment		-			-			-			455,916
Total operating expenses		873,819			1,950,472			3,169,507			5,195,307
Net operating loss		(835,762	)		(2,323,878	)		(3,110,767	)		(5,796,013	)
Other income (expense)
Financing costs		(105,875	)		(96,634	)		(359,755	)		(456,734	)
Amortization of beneficial conversion feature		(440	)		(85,530	)		(61,388	)		(219,669	)
Amortization of deferred financing costs		(343,805	)		(39,749	)		(452,155	)		(172,257	)
Amortization of debt discount		(55,026	)		(53,757	)		(260,196	)		(53,757	)
Gain (Loss) on change in fair value of derivative liabilities		-			123,460			-			(517,055	)
Interest expense, net		(203,554	)		(107,734	)		(524,991	)		(220,611	)
Gain on debt settlement		-			-			886,548			-
Loss on debt extinguishment		-			(521,820	)		-			(521,820	)
Gain (Loss) on asset disposals		-			631			(48,431	)		631
Foreign currency gain (loss), net		-			(400	)		(470	)		41
Total other income (expense)		(708,700	)		(781,533	)		(820,838	)		(2,161,231	)
Net loss before income taxes		(1,544,462	)		(3,105,411	)		(3,931,605	)		(7,957,244	)
Provision for income taxes		-			-			800			800
Net Loss	$	(1,544,462	)	$	(3,105,411	)	$	(3,932,405	)	$	(7,958,044	)

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 and nine months ended May 31, 2014 and 2013

(Unaudited)

	For the three months ended						For the nine months ended
	May 31, 2014			May 31, 2013			May 31, 2014			May 31, 2013
Basic and Diluted - Earnings (loss) Per Share	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.04	)
Basic and Diluted - Weighted Average Number of Shares Outstanding		226,402,077			207,493,355			218,267,881			203,331,478

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 nine months ended May 31, 2014 and 2013

(Unaudited)

	For the nine months ended
	May 31, 2014			May 31, 2013
Cash Flows from Operating Activities
Net loss	$	(3,932,405	)	$	(7,958,044	)
Adjustment to reconcile net loss to net cash used in operating activities:
Loss on change in fair value of derivative liabilities		-			517,055
Loss (Gain) on asset disposal		49,000			(631	)
Gain on sale of trademark		(569	)		-
Gain on debt settlement		(886,548	)		-
Loss on asset impairment		-			455,916
Loss on debt extinguishment		-			521,820
Provision for doubtful accounts and sales returns		13,931			(31,343	)
Provision (credit) for inventory reserve		(86,605	)		206,120
Depreciation and amortization		92,336			85,619
Amortization of beneficial conversion feature		61,388			219,669
Amortization of deferred financing costs		452,155			172,257
Amortization of prepaid services paid in common stock		389,111			877,706
Amortization of debt discount		260,196			53,757
Common stock issued for services and financing costs		161,170			742,668
Warrants issued for services and financing costs		-			99,873
Stock options issued for services		36,575			131,341
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(34,140	)		65,045
(Increase) decrease in inventory		246,807			336,690
(Increase) decrease in prepaid expenses and other assets		12,508			80,829
Increase (decrease) in accounts payable and accrued expenses		368,239			467,546
Increase (decrease) in accrued officer compensation		(9,070	)		212,849
Increase (decrease) in deferred revenue		(3,907	)		39,207
Increase (decrease) in accrued interest		420,783			156,581
Net cash used in operating activities		(2,389,045	)		(2,547,470	)
Cash Flows from Investing Activities
Purchase of property and equipment		(76,742	)		(146,098	)
Proceeds from sale of trademark		7,500			-
Net cash used in investing activities		(69,242	)		(146,098	)
Cash Flows from Financing Activities
Advances / (repayments) from officers, net		(3,825	)		-
Payments for deferred financing costs		-			(6,000	)
Payments on term loans		(18,000	)		-
Proceeds from convertible term notes payable		500,000			1,791,000
Proceeds from related party convertible term notes payable		1,450,000			800,000
Repayments of related party convertible term notes payable		-			(100,000	)
Net cash provided by financing activities		1,928,175			2,485,000
Net decrease in cash and cash equivalents		(530,112	)		(208,568	)
Cash and cash equivalents, beginning of year		680,914			376,554
Cash and cash equivalents, end of year	$	150,802		$	167,986
Non-Cash Financing Activities:
Conversion of accrued compensation into convertible notes payable	$	117,250		$	996,987
Conversion of accounts payable into common stock	$	315,000		$	-
Issuance of common stock for deferred financing costs	$	357,330		$	-
Issuance of warrants for financing costs classified as debt discount	$	213,486		$	-
Issuance of common stock for payment on term loan	$	80,000		$	-

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

May 31, 2014 

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

May 31, 2014 

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 nine months ended May 31, 2014, 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 May 31, 2014, had an accumulated deficit of $59,996,870 and negative working capital of $6,719,787. 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

May 31, 2014

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 May 31, 2014 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 nine months ended May 31, 2014, revenue from the Company’s largest customer amounted to $187,621 or 27% of total net revenue. Accounts receivable from this customer amounted to $54,275 or 56% of total accounts receivable at May 31, 2014.

For the nine months ended May 31, 2013, revenue from the Company’s largest customer amounted to $882,569 or 57% of total net revenue. Accounts receivable from this customer amounted to $1,517 or 2% of total accounts receivable at May 31, 2013.

10

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

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 May 31, 2014 and August 31, 2013, the allowance for doubtful accounts amounted to $9,000 and $3,000, respectively.

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 May 31, 2014 and August 31, 2013, the allowance for sales returns amounted to $16,431 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. An inventory valuation reserve approximating $989,881 was recorded to reduce the value of the inventory to the current selling price. Management estimates the current selling price as the realizable value of the inventory. No inventory obsolescence reserve was recorded during the nine months ended May 31, 2013. Management estimated sales for the next 24 month period based on historical sales data and prospective sales trends and determined that all inventory is expected to be sold in the next two years. Management analyzed and tested certain components that could possibly become obsolete and determined that the useful life exceeded the two year estimate to sell the inventory. In addition, the components inventory, net of the LCM valuation reserve, totaling $892,434 is classified as a noncurrent asset at May 31, 2014 (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

May 31, 2014

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 nine months ended May 31, 2013, the Company recorded an impairment of certain patents amounting to $455,916. There was no such impairment recognized during the nine months ended May 31, 2014.

Intangible Assets – Patents and Trademarks

The Company capitalizes internally developed assets related to certain costs associated with patents and trademarks. These costs include legal and registration fees needed to apply for and secure patents. The intangible assets acquired from other enterprises or individuals in an “arms-length” transaction are recorded at cost. As of May 31, 2014 and August 31, 2013, the Company capitalized $742,945 for patent related expenditures. As of May 31, 2014 and August 31, 2013, the Company capitalized $52,539 and $59,470 for trademark related expenditures, respectively. Accumulated amortization of intangible assets was $136,894 and $86,683 at May 31, 2014 and August 31, 2013, respectively.

12

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

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.

Deferred Revenue

Deferred revenue is a liability related to revenue producing activity for which revenue has not yet been recognized. As of May 31, 2014 and August 31, 2013, deferred revenue amounted to $21,464 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 $440 and $85,530 during the three months ended May 31, 2014 and 2013, respectively. The Company recognized amortization expense related to the beneficial conversion features on convertible notes payable totaling $50,693 and $219,669 during the nine months ended May 31, 2014 and 2013, 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

May 31, 2014

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.

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 the month the service is provided. Service revenue is recognized upon collecting the monthly service fee from 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

May 31, 2014

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

Advertising Costs

Advertising costs are expensed as incurred. For the three months ended May 31, 2014 and 2013, the Company incurred $19,807 and $51,327 of advertising costs, respectively. For the nine months ended May 31, 2014 and 2013, the Company incurred $486,269 and $420,023 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 May 31, 2014 and 2013, stock-based compensation expense associated with stock options totaled $3,443 and $30,122, respectively. For the nine months ended May 31, 2014 and 2013, stock-based compensation expense associated with stock options totaled $36,575 and $131,341 respectively.

15

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

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 nine months ended May 31, 2014 and 2013.

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.

	May 31, 2014		August 31, 2013
Warrants		17,956,715		15,456,715
Stock options		2,925,000		3,475,000
Convertible notes payable		39,853,796		25,300,352
Dilutive potential common shares		60,735,511		44,232,067

16

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

2.             INVENTORY

Inventory at May 31, 2014 and August 31, 2013 consisted of the following:

	May 31, 2014			August 31, 2013
Current:
Finished goods	$	1,041,739		$	1,286,953
Inventory valuation reserve for finished goods		(412,504	)		(498,483	)
Inventories, current	$	629,235		$	788,470
Noncurrent:
Device components	$	1,469,811		$	1,471,404
Inventory valuation reserve for components		(577,377	)		(578,003	)
Inventories, noncurrent	$	892,434		$	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. The Company expects that it will take approximately one year to sell finished goods inventory on hand at May 31, 2014. Following the sale of all finished goods inventory, components inventory will be utilized to manufacture additional devices that are expected to be sold in year 2. Inventories totaling $892,434 and $893,401 which may not be realized within a 12-month period have been reclassified as long-term as of May 31, 2014 and August 31, 2013, respectively.

17

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

  3.           PROPERTY AND EQUIPMENT

Property and equipment at May 31, 2014 and August 31, 2013 consisted of the following:

	May 31, 2014			August 31, 2013
Machinery and equipment	$	139,821		$	106,354
Computer software (mobile apps)		82,999			66,999
Computer software (internal)		29,537			51,263
Computer and video equipment		19,756			19,756
Office furniture	$	24,526		$	24,526
		296,640			268,898
Less: accumulated depreciation		(200,210	)		(158,085	)
Total property and equipment	$	96,430		$	110,813

Depreciation expense for the three months ended May 31, 2014 and 2013 amounted to $10,076 and $13,476, respectively. Depreciation expense for the nine months ended May 31, 2014 and 2013 amounted to $42,125 and $35,519, respectively.

4.             INTANGIBLE ASSETS

Intangible assets at May 31, 2014 and August 31, 2013 consisted of the following:

	May 31, 2014			August 31, 2013
Patents	$	742,945		$	742,945
Trademarks		52,539			59,470
		795,484			802,415
Less: accumulated amortization		(136,894	)		(86,683	)
Total intangible assets	$	658,590		$	715,732

Amortization expense totaled $16,921 and $16,938 for the three months ended May 31, 2014 and 2013, respectively. Amortization expense totaled $50,211 and $50,100 for the nine months ended May 31, 2014 and 2013, respectively.

18

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

4.             INTANGIBLE ASSETS (Continued)

As of May 31, 2014, Company estimates amortization expense approximating $67,000 each year for the next five years and $324,000 thereafter.

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 nine months ended May 31, 2014, there were advances from our Co-President totaling $151,000 and $154,825 of repayments. As of May 31, 2014, there was $25,000 of outstanding advances and $1,188 of related accrued interest.

Accounts Payable

Amounts payable to related parties totaled $328,000 and $105,000 as of May 31, 2014 and August 31, 2013, respectively.

19

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

6.     CONVERTIBLE NOTES PAYABLE

	May 31, 2014		August 31, 2013
Convertible Demand Notes Payable
Note payable in the amount of $28,500 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.10 per share. In connection with the extension of the due date and consolidation of notes on March 14, 2014, 51,000 shares of the Company’s stock valued at $3,060 were awarded.	$	28,500	$	-
Total convertible demand notes payable		28,500		-
Accrued interest		1,303		-
Total convertible demand notes payable and accrued interest	$	29,803	$	-

Convertible Term 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 $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. As of May 31, 2014 the note was not renewed and is due on demand.		500,000		500,000
Note payable in the amount of $25,000 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. As of May 31, 2014, the note was not renewed and is due on demand.		25,000		25,000

20

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

6.     CONVERTIBLE NOTES PAYABLE

	May 31, 2014		August 31, 2013
Convertible Term Notes Payable
Two notes payable in the amount of $75,000 due on July 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, 150,000 shares of the Company’s stock valued at $15,000 were awarded in January 2014.	$	75,000	$	75,000
Two notes payable in the amount of $150,000 due on July 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 $30,000 were awarded in January 2014.		150,000		150,000
Note payable in the amount of $300,000 due on July 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 on January 22, 2014, 600,000 shares of the Company’s stock valued at $60,000 were awarded.		300,000		300,000
Two notes payable in the amount of $68,500, plus accrued interest of $7,952, were combined into a new note due on August 9, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. In connection with the combination of the notes and the extension of due dates, 137,000 shares of the Company’s stock valued at $12,330 were awarded in January 2014.		76,452		68,500
Note payable in the amount of $500,000 due on September 21, 2014 at an interest rate of 36% per annum. The note is collateralized by 20,000,000 shares of common stock.		500,000		-

21

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

6.     CONVERTIBLE NOTES PAYABLE (Continued)

	May 31, 2014		August 31, 2013
Convertible Term Notes Payable (Continued)
Note payable in the amount of $25,000 due on October 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. In connection with the extension of the due date, 50,000 shares of the Company’s stock valued at $2,450 were awarded in April 2014.	$	25,000	$	25,000
Note payable in the amount of $100,000 due on October 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. In connection with the extension of the due date, 200,000 shares of the Company’s stock valued at $7,340 were awarded in April 2014.		100,000		100,000
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
Two notes payable in the amount of $600,000 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. “BB warrants” to purchase 1,000,000 shares of the Company’s common stock valued at $133,001 were issued in connection with the extension of the notes during 2013.		600,000		-
Note payable in the amount of $75,000 due on January 21, 2016 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

22

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

 CONVERTIBLE NOTES PAYABLE (Continued) 

	May 31, 2014			August 31, 2013
Convertible Term Notes Payable (Continued)
Note payable in the amount of $150,000 due on January 21, 2016 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. “DD warrants” to purchase 300,000 shares of the Company’s common stock valued at $25,971 were issued in connection with the note.	$	150,000		$	-
Total convertible notes payable		3,576,452			3,423,500
Unamortized debt and beneficial conversion feature discounts		(86,221	)		(126,102	)
Accrued interest		365,037			287,827
Total convertible notes payable, net and accrued interest		3,855,268			3,585,225
Less current portion		(3,048,653	)		(3,585,225	)
Long-term convertible notes payable, net and accrued interest	$	806,615		$	-

Related Party Convertible Demand Notes Payable
Five notes payable in the amount of $1,114,587 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.10 per share.	$	1,114,487	$	-
Total related party convertible demand notes payable		1,114,487		-
Accrued interest		63,653		-
Total related party convertible demand notes payable and accrued interest	$	1,178,140	$	-

23

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

6.     CONVERTIBLE NOTES PAYABLE (Continued)

	May 31, 2014		August 31, 2013
Related Party Convertible Term Notes Payable
Note payable in the amount of $100,000 due on June 30, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. In connection with the note, 100,000 shares of the Company’s stock valued at $6,000 were awarded in January 2014. In connection with the extension of the due date on March 31, 2014, 200,000 shares of the Company’s stock valued at $20,000 were awarded.	$	100,000	$	-
Seven notes payable in the amount of $1,900,000 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.		1,900,000		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		-
Note payable in the amount of $100,000 due on December 20, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. “DD warrants” to purchase 200,000 shares of the Company’s common stock valued at $10,085 were issued in connection with the note.		100,000		-
Note payable in the amount of $200,000 due on March 5, 2016 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “EE warrants” to purchase 200,000 shares of the Company’s common stock valued at $11,508 were issued in connection with the note.		200,000		-

24

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

 6.  CONVERTIBLE NOTES PAYABLE (Continued) 

	May 31, 2014			August 31, 2013
Related Party Convertible Notes Payable (Continued)
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
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
Total related party convertible notes payable		2,600,000			2,925,737
Unamortized debt and beneficial conversion feature discounts		(186,609	)		(254,827	)
Accrued interest		234,986			97,716
Total related party convertible notes payable, net and accrued interest		2,648,377			2,768,626
Less current portion		(104,466	)		(1,049,590	)
Long-term related party convertible notes payable, net and accrued interest	$	2,543,911		$	1,719,036

As of May 31, 2014, the principal maturities of the convertible notes payable and related party convertible notes payable are as follows:

For the Years Ending:
May 31, 2015	$	3,994,439
May 31, 2016		3,325,000
Total	$	7,319,439

25

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

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.

On May 30, 2014, the Company entered into a Sixth Amendment to the Loan and Security Agreement with Silicon Valley Bank to defer the principal payments due on the first day of May, June and July until August 1, 2014. The deferred payments will be due in full on August 1, 2014.

As of May 31, 2014, the outstanding balance on the term loan and accrued interest totaled $1,000,000 and $9,042, 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 over a period of 16 months. Under the payment terms of the Settlement, $1,105,000 previously classified as convertible notes were reclassified as a term loan on the settlement date. 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.

26

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

7.            LINE OF CREDIT AND TERM LOAN (Continued)

JMJ Notes Payable (Continued)

As of May 31, 2014, the principal maturities of the SVB and JMJ term loans are as follows:

For the Years Ending:
May 31, 2015	$	1,156,117
May 31, 2016		758,750
May 31, 2017		83,333
Total term loans		1,998,200
Less current portion of term loans		(1,156,117	)
Long-term term loans	$	842,083

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 each of the three months ended May 31, 2014 and 2013 totaled $19,202. Total rental expense on operating leases for the nine months ended May 31, 2014 and 2013 totaled $57,607 and $57,931, respectively.

As of May 31, 2014, the future minimum lease payments are as follows:

For the Years Ending:
May 31, 2015	$	93,130
May 31, 2016		7,193
Total	$	100,323

27

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

9.            EQUITY

Common Stock 

The Company issued 3,192,709 shares of common stock to consultants in exchange for various advisory services during the nine months ended May 31, 2014. The shares were valued at $192,670, which represents the fair market value of the shares provided on the award date.

The Company issued 5,203,667 shares of common stock in connection with note payable extensions during the nine months ended May 31, 2014. The shares were valued at $364,830, which represents the fair market value of the note payable extension costs on the award date.

The Company issued 5,250,000 shares of common stock for the conversion of $315,000 in accounts payable. The shares were valued at $315,000, which represents the fair market value of the conversion costs on the award date.

The Company issued 1,913,601 shares of common stock for the payment pursuant the JMJ Settlement during the nine months ended May 31, 2014. The shares were valued at $80,000, which represents the fair market value of the principal payments on the award date.

The Company issued 20,000,000 shares of common stock as collateral for a $500,000 prommissory note during the nine months ended May 31, 2014.

Warrants

Warrants to purchase up to 17,956,715 shares of the Company’s common stock are outstanding at May 31, 2014.

	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
DD warrants		500,000	$	0.15	January 21, 2017
EE warrants		200,000	$	0.15	March 4, 2017
Outstanding warrants as of May 31, 2014		17,956,715

The weighted average exercise price of outstanding warrants was $0.20 at May 31, 2014, with expiration dates ranging from December 16, 2014 to March 4, 2017.

28

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

 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 May 31, 2014.

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 May 31, 2014, 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 May 31, 2014, there were 1,500,000 options that were vested and presently exercisable. No options were exercised as of May 31, 2014.

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 May 31, 2014, there were 1,425,000 options that were vested and presently exercisable. No options were exercised as of May 31, 2014.

29

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

10.          PROVISION FOR INCOME TAXES

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

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

The components of the Company’s deferred tax asset as of May 31, 2014 and August 31, 2013 are as follows:

	May 31, 2014			August 31, 2013
Net operating loss carry forward and deductible temporary differences		20,674,563			19,904,000
Valuation allowance	$	(20,674,563	)	$	(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:  

	May 31, 2014			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%	)
		-			-

30

LOCATION BASED TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2014

10.          PROVISION FOR INCOME TAXES (Continued)

As of May 31, 2014 and August 31, 2013, the Company had federal and state net operating loss carryforwards of approximately $51,934,091 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 May 31, 2014 and 2013, 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.         RECENT ACCOUNTING PRONOUNCEMENT

In May 2014, the FASB, jointly with the International Accounting Standards Board, issued a comprehensive new standard on revenue recognition from contracts with customers. The standard's core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its scope, an entity will: (1) identify the contract(s) with a customer, (2) identify the performance obligation in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, this new guidance would require significantly expanded disclosures about revenue recognition. Provisions of this new standard are effective for annual reporting periods (including interim reporting periods within those annual periods) beginning after December 15, 2016. Early application is not permitted. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt this new guidance. The Company is currently evaluating the potential effect on its consolidated financial position, results of operations and cash flows from adoption of this standard.

12.          SUBSEQUENT EVENTS

On June 4, 2014, the Company issued 702,341 shares of common stock in connection with the conversion of notes payable valued at $21,000 on the award date.

On June 18, 2014, the Company issued 720,000 shares of common stock in connection with the conversion of notes payable valued at $18,000 on the award date. A total of 360,000 common shares were issued in satisfaction of the May 15, 2014 principal payment.

31

 

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. 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.

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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 is engaged in the growing market for the Internet-of-Things (“IoT”). The company designs, develops, and sells consumer and commercial GPS tracking solutions that enhance the way customers stay connected with any mobile asset or mobile person. Our products and services provide data that are intended to enhance safety, security, connectivity, operational savings, coordination of mobile assets and managerial or parental decisions. Our devices operate on the worldwide GSM network and therefore work around most of the world. Consumer products are primarily intended to be used by people who need to locate any portable asset (powered or unpowered), vehicles, pets, and people who are unable to use a cell phone to communicate their location or for travelers who seek a dedicated tracking system to enhance safety and connectivity.  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 Luggage, 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 Personal/Pet or luggage devices 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 2-4 days, depending upon environmental and usage factors.

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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.

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 “starter interrupt” 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 and on their roaming partners’ networks.  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 and a miniaturized dual Iridium/GSM device both of which are close to the final stages of building prototypes, testing and certification before market entry. Having a 3G consumer device will enable us to sell PocketFinder Personal Locator 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. This will be particularly beneficial to the child market and the pet market.

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

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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.  

Internationally, our devices are being sold and marketed 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). Recent reports show Europe at the forefront of M2M (“Machine-to-Machine”) or the adoption of “Internet-of-things” applications with revenues from M2M services market wide expected to grow at a compounded 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. LBT desires to play a part in the European M2M/IoT growth expansion and we are working with companies in the UK, France, Poland and Sweden as potential distributors.

In Asia, we have recently received iDA approval which will allow us to begin sales through Apple in Singapore. Through our primary distributor in Australia and New Zealand, FindA, we are gaining acceptance in multiple applications for both Consumer and Commercial customers. We expect to begin sales in Singapore very soon.

Commercial Sales Channels.  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’s relationship with our distributor in Australia is experiencing solid success bringing LBT’s platform and products into high growth commercial sales opportunities.  The distributor may distribute to the territories of Australia, New Zealand, Malaysia and the Philippines based on early expressions of interest from these areas.

We have signed an exclusive contract with the Department of Energy (the, “DOE”) on a project which will allow us to integrate and market an Oak Ridge National Laboratory technology that provides real-time status of the electric grid and critical energy sectors along with real-time severe weather conditions. The system, called VERDE (Visualizing Energy Resources Dynamically on the Earth), enables decision-makers to respond swiftly to major power disruptions. VERDE, which combines the display capabilities of Google Earth with analysis and modeling components, significantly enhances situational awareness and speeds recovery times from power outages. We have completed integration of the system and have begun sales of the system to public utilities (power, water and telecom) and will soon expand to specific commercial and other first responder agencies throughout the United States.

The shipping and asset tracking market is showing signs of IoT interest. In Berg Insight’s 2nd Edition of research on Container Tracking and Security, they focused on tracking and security of intermodal shipping containers. The installed base of remote tracking systems for shipping containers is forecasted to grow at a compound annual growth rate of 49.1 percent from 137,000 units at the end of 2012 to 1.0 million units by 2017. The LBT-886 device is well suited for tracking of assets and containers.

Our Personal Locator Services.  Our products are currently being sold through various online retailers and through our website.  We provide customer service and support in the United States and through existing partners in other parts of the world.  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.

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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 37 issued US patents, 3 pending US patents, 2 issued foreign patents, 3 pending foreign patents, 6 PCT filings, 16 registered trademarks and 4 Madrid protocol trademark cases. 

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.  

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

● Software 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 will continue our own retail efforts, but we believe we will reach the largest and most desirable markets by focusing more on commercial opportunities.

We subdivide the commercial market into three categories: small/midsize businesses, (including the strategic utility company market), enterprise businesses and governmental organizations including the US military.  We will attempt to gain market share in the small/midsize business segment through channel sales efforts.  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 good 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. The exclusive contract integrating DOE’s VERDE feed positions us with a significant differentiator in the utility market throughout the US and Canada.

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Our Competition.  Even though there has been tremendous growth in tracking Apps for mobile phones, personal location and property tracking devices are beginning to significantly penetrate the marketplace.  In fact, growth for asset tracking solutions is projected to be very strong over the next five years.

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, Dan Hogan, our VP of Marketing, and Dave Morse, Jr., as VP of Customer Service, currently work full time for the Company. Mr. Scalisi has recently been sharing his time with other ventures that may continue over the coming quarters. 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 with an eye to reduce corporate overhead and expenses.

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 three months ended May 31, 2014 compared to the three months ended May 31, 2013. 

Revenue.  For the three months ended May 31, 2014, we generated $455,136 of net revenue compared to $755,179 of net revenue for the three months ended May 31, 2013.  Normalized device sales, without the AT&T order, represent an increase in device sales of 141% over the same quarter in 2013. The 39% decrease in total revenue is due to the following:

● Device revenue – For the three months ended May 31, 2014, we generated $216,223 of net device revenue compared to $643,696 for the three months ended May 31, 2013. The $427,473 decrease in device revenue consists of the following:

o The most significant contributor to the decrease in revenue for the three months ended May 31, 2014 is due to spikes in LBT-886 orders from our commercial sales channel. During the three months ended May 31, 2013, revenue from the sale of LBT-886 devices to AT&T totaled $490,410. Although we expect to receive additional orders from AT&T in 2014, no orders for LBT-886 devices were received during the three months ended May 31, 2014. During this quarter, sales totaling $9,404 of LBT-886 devices were from various other commercial accounts;  

o Revenue from the sale of PocketFinder Personal devices increased from $2,699 for the three months ended May 31, 2013 to $133,579 for the three months ended May 31, 2014 due to an increase in quantities sold as a result of sales programs and the addition of a few resellers during the quarter; 

o Revenue from the sale of PetFinder devices decreased from $27,947 for the three months ended May 31, 2013 to $8,791 for the three months ended May 31, 2014 due to the company’s strategic focus away from the pet market until its new devices with indoor locate capability are ready for market; and  

o PocketFinder Vehicle sales decreased from $93,957 for the three months ended May 31, 2013 to $70,640 for the three months ended May 31, 2014 due to a change in distribution channels.

● Service revenue – For the three months ended May 31, 2014, we generated $238,916 of service revenue compared to $111,483 for the three months ended May 31, 2013. The increase is the result of adding net subscribers for the three months ended May 31, 2014.

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Cost of Revenue.  For the three months ended May 31, 2014, cost of revenue totaled $417,082 resulting in a positive gross margin of $38,057 compared to cost of revenue totaling $1,128,585 resulting in a negative gross margin of $373,406 for the three months ended May 31, 2013.  The Company realized an improvement in the gross margin as there were no significant write-downs of inventory during the current quarter.

A majority of the costs we incur to generate revenue are fixed. These costs include but are not limited to, customer service, operating expenses and employee salaries. As we continue to grow our revenue, our gross margins will also continue to improve. 

Management estimates that revenue will exceed costs in 2015 assuming the following conditions occur:

● Increased sales growth for the PocketFinder Vehicle and LBT-886 products;

● Penetration of our products into new markets, primarily Asia and Europe; and

● Reducing costs by incorporating self-help UserVoice tools that allow customers to resolve issues and find answers directly from the website when they are online no matter the time or day. In addition, we will be changing our customer service call center and moving it to a more local service with lower costs.

Operating Expenses.  For the three months ended May 31, 2014, our total operating expenses were $873,819 compared to total operating expenses of $1,950,472 for the three months ended May 31, 2013.  Operating expenses decreased by $1,076,653 or 55% for the three months ended May 31, 2014 and is primarily attributed to the following fluctuations:

● A $145,809 decrease in general and administrative expenses to $341,138 for the three months ended May 31, 2014, compared to $486,947 for the three months ended May 31, 2013.  The decrease in general and administrative expenses three months ended May 31, 2014 compared to 2013 is primarily due the following:  

● $31,520 decrease in advertising and marketing fees to market our products due to cash flow spending limitations;

● $40,000 decrease in stock based awards to board of directors for their service due to timing differences as awards were not made in the same quarter each year;

● $16,484 decrease in computer related expenditures due to spending restrictions to conserve cash; and

● $22,570 decrease in commissions as more sales were sold thru direct channels.

● A $64,098 decrease in officer compensation to $142,000 for the three months ended May 31, 2014, compared to $206,098 for the three months ended May 31, 2013 due to the reclassification of an officer to employee and the outsourcing of the Chief Financial Officer position for the three months ended May 31, 2014;

● Professional fees were reduced by $719,009 to $285,717 for three months ended May 31, 2014 compared to $1,004,725 for three months ended May 31, 2013. This was primarily due to a reduction in the value of common stock being issued in connection with business development and financial advisory fees;

● A $112,511 decrease in research and development costs to $0 for the three months ended May 31, 2014 compared to $112,511 for the three months ended May 31, 2013 as certain R&D projects are close to being completed; and

● A $35,227 decrease in salaries and wages to $85,762 for the three months ended May 31, 2014, compared to $120,989 for the three months ended May 31, 2013. The increase is attributed to the reclassification of an officer to an employee and lower stock based compensation.

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Other Income/Expenses.  For the three months ended May31, 2014, we reported net other expense totaling $708,700 which consisted of financing costs, amortization of beneficial conversion feature, deferred financing costs and debt discount, interest expense and loss on asset disposals compared to net other income totaling $781,533 for the three months ended May 31, 2013.  The $72,832 decrease in net other expenses is primarily due to the following:

● A $9,241 increase in financing costs to $105,875 for the three months ended May 31, 2014, compared to $96,634 for the three months ended May 31, 2013 as notes entered into during the current quarter incurred finder’s fees;

● A $85,090 decrease in the amortization of beneficial conversion features on notes payable to $440 for the three months ended May 31, 2014, compared to $85,530 for the three months ended May 31, 2013 as there were several convertible notes with beneficial conversion features were fully amortized in 2013 and new notes entered into in 2014 did not contain beneficial conversion features;

● A $304,056 increase in the amortization of deferred financing costs to $343,805 for the three months ended May 31, 2014, compared to $39,749 for the three months ended May 31, 2013 as there were numerous notes payable extensions issued with common stock resulting in increased deferred financing costs for three months ended May 31, 2014 than in 2013;

● A $123,460 gain on the fair value of derivative liabilities was recognized during the three months ended May 31, 2013; whereby, there was no such gain for the three months ended May 31, 2014 as the JMJ debt was settled during the first quarter of 2014;

● A $95,820 increase in interest expense to $203,554 for the three months ended May 31, 2014, compared to $107,734 for the three months ended May 31, 2013 as there was approximately $9.7 million in notes payable at May 31, 2014 as compared to $6.6 million in notes payable at May 31, 2013; and

● The recognition of a loss on debt extinguishment totaling $521,820 during the three months ended May 31, 2013; whereby, there was no such loss during the three months ended May 31, 2014.

Net Loss.  For the three months ended May 31, 2014, we reported a net loss of $1,544,462 compared to a net loss of $3,105,411 for the three months ended May 31, 2013, due to fluctuations in operating and other expenses as previously discussed.

For the nine months ended May 31, 2014 compared to the nine months ended May 31, 2013. 

Revenue.  For the nine months ended May 31, 2014, we generated $1,205,034 of net revenue compared to $1,554,891 of net revenue for the nine months ended May 31, 2013.  The 23% decrease in total revenue is due to the following:

● Device revenue – For the nine months ended May 31, 2014, we generated $567,196 of net device revenue compared to $1,260,828 for the nine months ended May 31, 2013. The $693,632 decrease in device revenue consists of the following:

o The most significant contributor to the decrease in revenue for the nine months ended May 31, 2014 is due to spikes in LBT-886 orders from our commercial sales channel. During the nine months ended May 31, 2013, revenue from the sale of LBT-886 devices to AT&T totaled $879,700. Although we expect to receive additional orders from AT&T in 2014, no orders for LBT-886 devices were received during the nine months ended May 31, 2014. During this nine month period, sales totaling $27,287 of LBT-886 devices were from various other commercial accounts; normalizing sales without AT&T’s order the company shows a 149% increase in device revenues compared to the nine months ending May 31, 2013;

o Revenue from the sale of PocketFinder Personal devices increased from $22,574 for the nine months ended May 31, 2013 to $265,787 for the nine months ended May 31, 2014 due to an increase in quantities sold as a result of focused sales programs with key retailers;

o Revenue from the sale of PetFinder devices decreased from $46,201 for the nine months ended May 31, 2013 to $23,632 for the nine months ended May 31, 2014; and

o PocketFinder Vehicle sales decreased slightly from $241,874 for the nine months ended May 31, 2013 to $241,581 for the nine months ended May 31, 2014 due to delays with multiple auto market and dealerships alliances formed in fiscal 2014.

● Service revenue – For the nine months ended May 31, 2014, we generated $637,838 of service revenue compared to $294,063 for the nine months ended May 31, 2013. The increase is the result of adding net subscribers for the nine months ended May 31, 2014.

Cost of Revenue.  For the nine months ended May 31, 2014, cost of revenue totaled $1,146,294 resulting in a gross margin of $58,740 compared to cost of revenue totaling $2,155,597 resulting in a negative gross margin of $600,705 for the nine months ended May 31, 2013.  The Company realized an improvement in the gross margin as there were no significant write-downs of inventory during the current nine-month period.

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A majority of the costs we incur to generate revenue are fixed. These costs include but are not limited to, customer service, operating expenses and employee salaries. As we continue to grow our revenue, the discrepancy between our fixed costs and our income will decrease. 

Management estimates that revenue will exceed costs in 2015 assuming the following conditions occur: 

● Increased sales growth for the PocketFinder Vehicle and LBT-886 products;

● Penetration of our products into new markets, primarily Asia and Europe; and

● Reducing costs through enhanced self-help online tools and by moving to a less expensive local customer service call center.

Operating Expenses.  For the nine months ended May 31, 2014, our total operating expenses were $3,169,507 compared to total operating expenses of $5,195,307 for the nine months ended May 31, 2013.  Operating expenses decreased by $2,025,800 or 39% for the nine months ended May 31, 2014 and is primarily attributed to the following fluctuations:

● A $178,692 decrease in general and administrative expenses to $1,360,347 for the nine months ended May 31, 2014, compared to $1,539,039 for the nine months ended May 31, 2013 primarily due to a reduction in other general and administrative expenses as a result of reduced spending; 

● A $176,719 decrease in officer compensation to $621,746 for the nine months ended May 31, 2014, compared to $798,465 for the nine months ended May 31, 2013 due to the reclassification of an officer to an employee in 2014 and reduced stock based compensation;

● Professional fees were reduced by $1,027,032 to $834,674 for the nine months ended May 31, 2014 compared to $1,861,706 for the nine months ended May 31, 2013. This was primarily due to a reduction in the value of common stock being issued in connection with business development and financial advisory fees;

● A $158,249 decrease in research and development costs to $99,548 for the nine months ended May 31, 2014 compared to $257,797 for the nine months ended May 31, 2013 as certain R&D projects are close to being completed;

● A $28,868 decrease in salaries and wages to $195,585 for the nine months ended May 31, 2014, compared to $224,453 for the nine months ended May 31, 2013. The decrease is attributed to the reduction of one employee and due to a reclassification of an officer to an employee; and

● The recognition of an asset impairment on certain patents totaling $455,916 during the nine months ended May 31, 2013; whereby, there was no such impairment recognized during the nine months ended May 31, 2014.

Other Income/Expenses.  For the nine months ended May 31, 2014, we reported net other expense totaling $820,838 which consisted of financing costs, amortization of beneficial conversion feature, deferred financing costs and debt discount, interest expense, gain on debt settlement, and loss on asset disposals compared to net other expense totaling $2,161,231 for the nine months ended May 31, 2013.  The $1,340,393 decrease in net other expenses is primarily due to the following:

● A $96,979 decrease in financing costs to $359,755 for the nine months ended May 31, 2014, compared to $456,734 for the nine months ended May 31, 2013 as majority of notes entered into in the current quarter did not incur finder’s fees;

● A $158,281 decrease in the amortization of beneficial conversion features on notes payable to $61,388 for the nine months ended May 31, 2014, compared to $219,669 for the nine months ended May 31, 2013 as there were several convertible notes with beneficial conversion features were fully amortized in 2013 and new notes entered into in 2014 did not contain beneficial conversion features;

● A $279,898 increase in the amortization of deferred financing costs to $452,155 for the nine months ended May 31, 2014, compared to $172,257 for the nine months ended May 31, 2013 as there was were more notes payable issued with common stock resulting in higher deferred financing costs nine months ended May 31, 2014 than in 2013;

● A $206,439 increase in the amortization of debt discounts associated with the issuance of warrants on convertible notes payable to $260,196 for the nine months ended May 31, 2014, compared to $53,757as there were more warrant issuances during the nine months ended May 31, 2014;

● A $517,055 loss on the fair value of derivative liabilities was recognized during the nine months ended May 31, 2013; whereby, there was no such gain recognized during the nine months ended May 31, 2014 as the JMJ debt was settled during the first quarter of 2014;

● The recognition of a $886,548 gain in connection with the JMJ debt settlement was recognized during the nine months ended May 31, 2014; whereby, there no such debt settlement during the nine months ended May 31, 2013;

● The recognition of a $48,431 loss in connection with asset disposals during the nine months ended May 31 2014; whereby, there no such asset disposals in during the nine months ended May 31, 2013;

● A $304,380 increase in interest expense to $524,991 for the nine months ended May 31, 2014, compared to $220,611 for the nine months ended May 31, 2013 as there was approximately $9.7 million in notes payable at May 31, 2014 as compared to $6.6 million in notes payable at May 31, 2013; and

● The recognition of a loss on debt extinguishment totaling $521,820 during the nine months ended May 31, 2013; whereby, there was no such loss during the nine months ended May 31, 2014.

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Net Loss.  For the nine months ended May 31, 2014, we reported a net loss of $3,932,405 compared to a net loss of $7,958,044 for the nine months ended May 31, 2013, due to fluctuations in operating and other expenses as previously discussed. 

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $150,802 as of May 31, 2014, compared to $680,914 as of August 31, 2013.  

As of May 31, 2014, current assets totaled $1,007,448 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 May 31, 2014, from August 31, 2013 is primarily due to a decrease in cash offset by an increase in deferred financing costs. The decrease in cash is the result of covering our operating costs with minimal cash inflows during the first nine months of operations. The increase in deferred offering costs is the result of issuing common stock in connection with multiple notes payable due dates being extended.

As of May 31, 2014, current liabilities totaled $7,727,235 compared to $8,410,439 as of August 31, 2013 and consisted of accounts payable and accrued expenses, deferred compensation, term loans, convertible notes payable and accrued interest. The decrease at May 31, 2014, is due to the conversion of the $1,000,000 line of credit into a term loan and the elimination of the $745,148 derivative liability associated with the JMJ debt settlement.

As at May 31, 2014, the Company had a working capital deficit of $6,719,787 compared with a working capital deficit of $6,789,668 as of August 31, 2013.  

Cash Flows from Operating Activities. During the nine months ended May 31, 2014, the Company used $2,389,045 of cash used for operating activities compared with $2,547,470 for the nine months ended May 31, 2013.  

Cash Flows From Investing Activities. During the nine months ended May 31, 2014, the Company used $69,242 of cash for investing compared with $146,098 for the nine months ended May 31, 2013.  The decrease in the cash used for investing operating activities was attributed to fewer capital expenditures during the nine months ended May 31, 2014 compared to the nine months ended May 31, 2013. 

Cash Flows from Financing Activities. During the nine months ended May 31, 2014, the Company received $1,928,175 in cash from financing activities related to the issuance of convertible promissory notes. During the nine months ended May 31, 2013, the Company received $2,485,000 from the issuance of convertible promissory notes. Demand convertible notes payable totaling $1,142,987 are unsecured, bear interest at 5% per annum, and are to repaid out of future operating cash flows. Current convertible term notes payable totaling $2,351,452 are unsecured, bear interest at 8%-36% per annum, and are to be repaid out of future operating cash flow. Long-term convertible term notes totaling $3,325,000 are secured, bear interest at 10% per annum with due dates ranging from September 30, 2015 to March 5, 2016 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 May 31, 2014, we had an accumulated deficit of $59,996,870 and we expect to incur continual losses until sometime in calendar year 2015-2016. 

As of May 31, 2014, we had $150,802 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.

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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.

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 six employees and do not anticipate hiring any significant number of additional employees during the next twelve months.

Off-Balance Sheet Arrangements

As of May 31, 2014, 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 May 31, 2014, 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. In April 2014, our part-time CFO, Glenn Davidson, resigned to pursue a full-time opportunity and was replaced by our current part-time CFO, Gregory Andrews. Other than the changes in our CFO, there were no changes in internal controls over financial reporting that occurred during the nine months ended May 31, 2014, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

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PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 1.A.  RISK FACTORS

Not applicable.

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

Common Stock Issuances for Debt Conversion

On April 16, 2014, the Company issued 219,512 shares of common stock in connection with the conversion of notes payable valued at $9,000 on the award date.

On May 2, 2014, the Company issued 617,647 shares of common stock in connection with the conversion of notes payable valued at $21,000 on the award date.

On May 29, 2014, the Company issued 243,243 shares of common stock in connection with the conversion of notes payable valued at $9,000 on the award date.

On June 4, 2014, the Company issued 702,341 shares of common stock in connection with the conversion of notes payable valued at $21,000 on the award date.

On June 18, 2014, the Company issued 750,000 shares of common stock in connection with the conversion of notes payable valued at $18,000 on the award date.

Warrant Issuance for Note Payable

On March 5, 2014, the Company awarded “Series EE” warrants to a note holder to purchase 200,000 common shares at $0.15 per share in connection with a debt issuance and expires on March 4, 2017. 

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.

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ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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).
10.60	Form of “EE” Warrant Agreement. †
10.61	Unsecured Convertible Promissory Note Amendment between the Company and David M. Morse dated March 14, 2014. †
10.62	Unsecured Convertible Promissory Note Amendment between the Company and Desiree Mejia dated March 14, 2014. †
10.63	Unsecured Convertible Promissory Note Amendment between the Company and Gregory Harrison dated March 14, 2014. †
10.64	Unsecured Convertible Promissory Note Amendment between the Company and David Michael Morse Jr. dated March 14, 2014. †
10.65	Unsecured Convertible Promissory Note Amendment between the Company and Florance Accountancy dated March 14, 2014. †
10.66	Unsecured Convertible Promissory Note Amendment between the Company and Eric Fronk dated March 14, 2014. †
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

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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:  July 11, 2014	By:	/s/ David M. Morse
		David M. Morse
		Co- President and Chief Executive Officer

Dated:  July 11, 2014	By:	/s/ Gregory Andrews
		Gregory Andrews
		Chief Financial Officer

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EX-10

Exhibit 10.60

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. EE(1)	Warrant to Purchase 200,000 Shares of
	Common Stock

WARRANT TO PURCHASE COMMON STOCK
of
LOCATION BASED TECHNOLOGIES, INC.
Void after March 4, 2017

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 March 4, 2017.

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.

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(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.

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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.

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(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.

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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.

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(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.

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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.

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12.      “Piggyback” Registrations.

(a)     If at any time or from time to time, prior to the third anniversary of Holder’s initial exercise of this Warrant, the Company shall determine to register any of its securities, either for its own account or the account of security holders, other than a registration relating solely to employee benefit plans or a registration on Form S-4 relating solely to a SEC Rule 145 transaction, the Company will:

(i)     promptly give to Holder written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and

(ii)     include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the registrable securities specified in a written request, made by Holder within 30 days after receipt of such written notice from the Company, except as set forth in Section 12(b) below.

(b)     If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise Holder as a part of the written notice given pursuant to Section 12(a)(i). In such event the right of Holder to registration pursuant to this Section 12 shall be conditioned upon Holder’s participation in such underwriting and the inclusion of Holder’s registrable securities in the underwriting to the extent provided herein. Holder, together with the Company and the other parties distributing their securities through such underwriting, shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Section 12, if the underwriter determines that marketing factors require a limitation of the number of shares or type of securities to be underwritten, the underwriter may limit the number of registrable securities to be included in the registration and underwriting, or may exclude registrable securities entirely from such registration and underwriting subject to the terms of this Section. The Company shall so advise all holders of the Company’s securities that would otherwise have a right to be so registered and underwritten and the number of shares of such securities, including registrable securities, that may be included in the registration and underwriting shall be allocated among Holder and all such other holders in proportion, as nearly as practicable, to the respective amounts of securities of the Company proposed to be included in such underwritten offering by all shareholders other than the Company; provided, however, that the rights of Holder to include all or any allocable portion of such registrable securities shall be subject to the priority (prior to any allocation to Holder or others) of the holders of existing “demand” registration rights existing on the date hereof or that otherwise have priority over the rights of Holder set forth in this Section 12. No securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. If Holder disapproves of the terms of the underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter. The registrable securities so withdrawn shall also be withdrawn from registration.

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(c)     The Holder agrees that any shares of registrable securities which are not included in an underwritten public offering described in Section 12(b) shall not be publicly sold by the Holder for a period, not to exceed 180 days, which the managing underwriter reasonably determines is necessary in order to effect such underwritten public offering.

13.     Miscellaneous.

13.1     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.

13.2     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.

13.3     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.

13.4     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.

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

13.6     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.

13.7     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.

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13.8     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.

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

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

Dated: March 5, 2014
ACCEPTED BY HOLDER:		LOCATION BASED TECHNOLOGIES, INC.
By:		By:
	Greggory Haugen		David Morse, CEO

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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)

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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)

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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.

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EX-10

Exhibit 10.61

LOAN AMENDMENT AND EXTENSION AGREEMENT

This Loan Amendment and Extension Agreement (this “Agreement”), dated as of March 14, 2014, is entered into by and among Location Based Technologies, Inc., a Nevada corporation (“Borrower”) and David M. Morse (“Lender”).

RECITALS:

WHEREAS, the Lender provided services to the Borrower and the Borrower was at certain times unable to pay for that service.

WHEREAS, the amounts owed for the unpaid services were classified as “deferred compensation”.

WHEREAS, the Lender chose to convert the amount owed for the unpaid services from deferred compensation into loans under promissory notes.

WHEREAS, under these promissory notes, the Lender has loaned the following amounts (collectively, “Principal Amount”) to the Borrower:

(a) Five Hundred and Eighty-Five Thousand One Hundred and Twelve Dollars ($585,112) as evidenced by a Promissory Note Agreement dated March 13, 2013 with an original maturity date of March 13, 2014; and

(b) Seven Thousand Five Hundred Dollars ($7,500) as evidenced by a Promissory Note Agreement dated June 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

(c) Fifteen Thousand Dollars ($15,000) as evidenced by a Promissory Note Agreement dated September 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

(d) Twenty Thousand Dollars ($20,000), which under the terms stated below shall be added to the Principal Sum owed under the Promissory Note Agreement dated September 1, 2013; and

WHEREAS, the Borrower and Lender wish to combine the obligations under the above-referenced Promissory Note Agreements into a single agreement; and

WHEREAS, the Borrower and Lender wish to amend the above-referenced Promissory Note Agreements to include additional terms regarding extension; and

WHEREAS, the Borrower and Lender agree to amend the terms of the above-referenced Promissory Note Agreements in accordance with the provisions hereof.

AGREEMENT:

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the order of Dave M. Morse, his 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 sum of Six Hundred and Twenty-Seven Thousand Six Hundred and Twelve Dollars ($627,612) (the, “New Principal Sum”), which represents the combined amounts of the promissory notes dated March 13, 2013, June 1, 2013, September 1, 2013, and the recently incurred sum of Twenty Thousand Dollars ($20,000). This amount of Twenty Thousand Dollars ($20,000) shall be added to the Principal Sum owed under the Promissory Note Agreement dated September 1, 2013 and subject to the terms and conditions stated herein. These Promissory Note Agreements shall be collectively referred to as “Note” and shall be subject to the terms and conditions as stated below. Should any conflict between the original Note and this Agreement arise, this Agreement shall govern.

1. Terms of Repayment and Prepayment. Principal of and interest on this Note shall be due upon demand by Lender. In additional Borrower reserves the right to prepay this Note (in full or in part) at any time.

2. Interest Rate. This Note shall accrue interest on the principal at a rate of Five Percent (5%) per annum (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.

3.

Conversion. 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 $0.10. 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.

Piggyback Registration Rights. If at any time after the execution of this Note there is not an effective registration statement covering all of the Conversion Shares and the Company determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Borrower shall send to the Lender written notice of such determination and, if within fifteen calendar days after receipt of such notice, the Lender shall so request in writing, the Borrower shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415). The obligations of the Borrower under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 4. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement. All expenses incurred by the Borrower in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Borrower, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of registrable securities are called "Selling Expenses." The Borrower will pay all Registration Expenses and Selling Expenses in connection with the registration statement under Section 4.

5. Extension Fee. In consideration for offering this extension, the Lender shall receive shares of restricted common stock to be calculated as two (2) shares for every $1.00 owed at the execution of this Agreement and shall also receive additional restricted common stock, calculated as stated under this Section 5, every six (6) months thereafter until all sums owed by Borrower are paid in full.

6. Events of Default. Default in the payment of the principal or unpaid accrued interest of this Note when due and payable shall be deemed an event of default. If any of the events of default specified in this Section 6 shall occur, Lender may, so long as such condition persists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Borrower, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice. Lender may exercise collateral as payment in full for said Note by placing a written request to LBAS transfer agent (www.Broadridge.com) for ownership change upon default.

7. 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 Agreement, 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 Agreement, except as expressly provided herein. The Lender may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Borrower.

8. Taxes. All income shall be subject to withholding for federal, state and local income tax. The Parties agree to abide by all applicable tax laws upon the repayment of the New Principal Sum.

9. 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.

10. 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 Borrower then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Borrower, or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

If to the Borrower:      Location Based Tech Inc

  49 Discovery Suite 260

  Irvine, CA 92618

  Facsimile Number: (714) 200-0287

  E-mail: desiree@pocketfinder.com

If to Lender:                David M. Morse

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

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

13. Full Force and Effect.  Except as otherwise expressly provided herein, the Note shall remain in full force and effect.  Except for any waivers and modifications contained herein, this Agreement shall not in any way waive or prejudice any of the rights or obligations of the Lender or the Borrower under the Note, under any law, in equity or otherwise, and such waivers and modifications shall not constitute a waiver or modification of any other provision of the Note nor a waiver or modification of any subsequent default or breach of any obligation of the Borrower or of any subsequent right of the Lender. 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of March 14, 2014.

The “Borrower”

LOCATION BASED TECHNOLOGIES, INC.

Desiree Mejia

COO & Director  

The “Lender”

David M. Morse

EX-10

Exhibit 10.62

LOAN AMENDMENT AND EXTENSION AGREEMENT

This Loan Amendment and Extension Agreement (this “Agreement”), dated as of March 14, 2014, is entered into by and among Location Based Technologies, Inc., a Nevada corporation (“Borrower”) and Desiree Mejia (“Lender”).

RECITALS:

WHEREAS, the Lender provided services to the Borrower and the Borrower was at certain times unable to pay for that service.

WHEREAS, the amounts owed for the unpaid services were classified as “deferred compensation”.

WHEREAS, the Lender chose to convert the amount owed for the unpaid services from deferred compensation into loans under promissory notes.

WHEREAS, under these promissory notes, the Lender has loaned the following amounts (collectively, “Principal Amount”) to the Borrower:

(a) Three Hundred Thousand Dollars ($300,000) as evidenced by a Promissory Note Agreement dated March 13, 2013 with an original maturity date of March 13, 2014; and

(b) Ten Thousand Dollars ($10,000) as evidenced by a Promissory Note Agreement dated September 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

WHEREAS, the original maturity date of the first note is set to expire and the Borrower and Lender wish to amend the above-referenced Promissory Note Agreements to include additional terms regarding extension; and

WHEREAS, the Borrower and Lender wish to combine the obligations under the above-referenced Promissory Note Agreements into a single agreement; and

WHEREAS, Lender has adopted a new format for some of its loan agreements and wishes to use the new format for this Agreement; and

WHEREAS, the Borrower and Lender agree to amend the terms of the above-referenced Promissory Note Agreements in accordance with the provisions hereof.

AGREEMENT:

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the order of Desiree Mejia, her 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 sum of Three Hundred and Ten Thousand ($310,000) (the, “New Principal Sum”), which represents the combined amounts of the promissory notes dated March 13, 2013, and September 1, 2013. These Promissory Note Agreements shall be collectively referred to as “Note” and shall be subject to the terms and conditions as stated below. Should any conflict between the original Note and this Agreement arise, this Agreement shall govern.

1. Terms of Repayment and Prepayment. Principal of and interest on this Note shall be due upon demand by Lender. In additional Borrower reserves the right to prepay this Note (in full or in part) at any time.

2. Interest Rate. This Note shall accrue interest on the principal at a rate of Five Percent (5%) per annum (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.

3. Conversion. 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 $0.10. 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. Piggyback Registration Rights. If at any time after the execution of this Note there is not an effective registration statement covering all of the Conversion Shares and the Borrower determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Borrower shall send to the Lender written notice of such determination and, if within fifteen calendar days after receipt of such notice, the Lender shall so request in writing, the Borrower shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415). The obligations of the Borrower under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 4. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement. All expenses incurred by the Borrower in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Borrower, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of registrable securities are called "Selling Expenses." The Borrower will pay all Registration Expenses and Selling Expenses in connection with the registration statement under Section 4.

5. Extension Fee. In consideration for offering this extension, the Lender shall receive shares of restricted common stock to be calculated as two (2) shares for every $1.00 owed at the execution of this Agreement and shall also receive additional restricted common stock, calculated as stated under this Section 5, every six (6) months thereafter until all sums owed by Borrower are paid in full.

6. Events of Default. Default in the payment of the principal or unpaid accrued interest of this Note when due and payable shall be deemed an event of default. If any of the events of default specified in this Section 6 shall occur, Lender may, so long as such condition persists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Borrower, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice. Lender may exercise collateral as payment in full for said Note by placing a written request to LBAS transfer agent (www.Broadridge.com) for ownership change upon default.

7. 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 Agreement, 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 Agreement, except as expressly provided herein. The Lender may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Borrower.

8. Taxes. All income shall be subject to withholding for federal, state and local income tax. The Parties agree to abide by all applicable tax laws upon the repayment of the New Principal Sum.

9. 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.

10. 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 Borrower then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Borrower, or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

If to the Borrower:      Location Based Tech Inc

  49 Discovery Suite 260

  Irvine, CA 92618

  Facsimile Number: (714) 200-0287

  E-mail: dave@pocketfinder.com

If to Lender: Desiree Mejia

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

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

13. Full Force and Effect.  Except as otherwise expressly provided herein, the Note shall remain in full force and effect.  Except for any waivers and modifications contained herein, this Agreement shall not in any way waive or prejudice any of the rights or obligations of the Lender or the Borrower under the Note, under any law, in equity or otherwise, and such waivers and modifications shall not constitute a waiver or modification of any other provision of the Note nor a waiver or modification of any subsequent default or breach of any obligation of the Borrower or of any subsequent right of the Lender.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of March 14, 2014.

The “Borrower”

LOCATION BASED TECHNOLOGIES, INC.

David M. Morse

CEO & Co-President  

The “Lender”

Desiree Mejia

EX-10

Exhibit 10.63

LOAN AMENDMENT AND EXTENSION AGREEMENT

This Loan Amendment and Extension Agreement (this “Agreement”), dated as of March 14, 2014, is entered into by and among Location Based Technologies, Inc., a Nevada corporation (“Borrower”) and Gregory Harrison (“Lender”).

RECITALS:

WHEREAS, the Lender provided services to the Borrower and the Borrower was at certain times unable to pay for that service.

WHEREAS, the amounts owed for the unpaid services were classified as “deferred compensation”.

WHEREAS, the Lender chose to convert the amount owed for the unpaid services from deferred compensation into loans under promissory notes.

WHEREAS, the Lender has loaned, under these promissory notes, the following amounts (collectively, “Principal Amount”) to the Borrower:

(a) Forty-Six Thousand Eight Hundred Seventy-Five Dollars ($46,875) as evidenced by a Promissory Note Agreement dated March 13, 2013 with an original maturity date of March 13, 2014; and

(b) Eight Thousand Eight Hundred Seventy-Five Dollars ($8,875) as evidenced by a Promissory Note Agreement dated June 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

(c) Fifteen Thousand Five Hundred Dollars ($15,500) as evidenced by a Promissory Note Agreement dated September 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

(d) Eleven Thousand Eight Hundred and Seventy-Five Dollars ($11,875), which under the terms stated below shall be added to the Principal Sum owed under the Promissory Note Agreement dated September 1, 2013; and

WHEREAS, the Borrower and Lender wish to combine the obligations under the above-referenced Promissory Note Agreements into a single agreement; and

WHEREAS, the Borrower and Lender wish to amend the above-referenced Promissory Note Agreements to include additional terms regarding extension; and

WHEREAS, the Borrower and Lender agree to amend the terms of the above-referenced Promissory Note Agreements in accordance with the provisions hereof.

AGREEMENT:

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the order of Gregory Harrison, his 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 sum of Eighty-Three Thousand One Hundred and Twenty-Five Dollars ($83,125) (the, “New Principal Sum”), which represents the combined amounts of the promissory notes dated March 13, 2013, June 1, 2013, September 1, 2013, and the recently incurred sum of Eleven Thousand Eight Hundred and Seventy-Five Dollars ($11,875). This amount of Eleven Thousand Eight Hundred and Seventy-Five Dollars ($11,875) shall be added to the Principal Sum owed under the Promissory Note Agreement dated September 1, 2013 and subject to the terms and conditions stated herein. These Promissory Note Agreements shall be collectively referred to as “Note” and shall be subject to the terms and conditions as stated below. Should any conflict between the original Note and this Agreement arise, this Agreement shall govern.

1. Terms of Repayment and Prepayment. Principal of and interest on this Note shall be due upon demand by Lender. In additional Borrower reserves the right to prepay this Note (in full or in part) at any time.

2. Interest Rate. This Note shall accrue interest on the principal at a rate of Five Percent (5%) per annum (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.

3. Conversion. 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 $0.10. 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. Piggyback Registration Rights. If at any time after the execution of this Note there is not an effective registration statement covering all of the Conversion Shares and the Company determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Borrower shall send to the Lender written notice of such determination and, if within fifteen calendar days after receipt of such notice, the Lender shall so request in writing, the Borrower shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415). The obligations of the Borrower under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 4. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement. All expenses incurred by the Borrower in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Borrower, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of registrable securities are called "Selling Expenses." The Borrower will pay all Registration Expenses and Selling Expenses in connection with the registration statement under Section 4.

5. Extension Fee. In consideration for offering this extension, the Lender shall receive shares of restricted common stock to be calculated as two (2) shares for every $1.00 owed at the execution of this Agreement and shall also receive additional restricted common stock, calculated as stated under this Section 5, every six (6) months thereafter until all sums owed by Borrower are paid in full.

6. Events of Default. Default in the payment of the principal or unpaid accrued interest of this Note when due and payable shall be deemed an event of default. If any of the events of default specified in this Section 6 shall occur, Lender may, so long as such condition persists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Borrower, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice. Lender may exercise collateral as payment in full for said Note by placing a written request to LBAS transfer agent (www.Broadridge.com) for ownership change upon default.

7. 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 Agreement, 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 Agreement, except as expressly provided herein. The Lender may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Borrower.

8. 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.

9. 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 Borrower then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Borrower, or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

If to the Borrower:	Location Based Tech Inc
	49 Discovery Suite 260 Irvine, CA 92618 Facsimile Number: (714) 200-0287 E-mail: dave@pocketfinder.com
If to Lender:	Gregory Harrison

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

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

12. Full Force and Effect.  Except as otherwise expressly provided herein, the Note shall remain in full force and effect.  Except for any waivers and modifications contained herein, this Agreement shall not in any way waive or prejudice any of the rights or obligations of the Lender or the Borrower under the Note, under any law, in equity or otherwise, and such waivers and modifications shall not constitute a waiver or modification of any other provision of the Note nor a waiver or modification of any subsequent default or breach of any obligation of the Borrower or of any subsequent right of the Lender.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of March 14, 2014.

The “Borrower”

LOCATION BASED TECHNOLOGIES, INC.

David M. Morse

CEO & Co-President  

The “Lender”

Gregory Harrison

EX-10

Exhibit 10.64

LOAN AMENDMENT AND EXTENSION AGREEMENT

This Loan Amendment and Extension Agreement (this “Agreement”), dated as of March 14, 2014, 2014, is entered into by and among Location Based Technologies, Inc., a Nevada corporation (“Borrower”) and David Michael Morse, Jr. (“Lender”).

RECITALS:

WHEREAS, the Lender provided services to the Borrower and the Borrower was at certain times unable to pay for that service.

WHEREAS, the amounts owed for the unpaid services were classified as “deferred compensation”.

WHEREAS, the Lender chose to convert the amount owed for the unpaid services from deferred compensation into loans under promissory notes.

WHEREAS, under these promissory notes, the Lender has loaned the following amounts (collectively, “Principal Amount”) to the Borrower:

(a) Thirty-Seven Thousand Five Hundred Dollars ($37,500) as evidenced by a Promissory Note Agreement dated March 13, 2013 with an original maturity date of March 13, 2014; and

(b) Nine Thousand Three Hundred Seventy Five Dollars ($9,375) as evidenced by a Promissory Note Agreement dated June 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

(c) Fifteen Thousand Dollars ($15,000) as evidenced by a Promissory Note Agreement dated September 1, 2013 with an original maturity date stated as “due upon demand by Lender”; and

(d) Twenty-One Thousand Eight Hundred and Seventy-Five Dollars ($21,875), which under the terms stated below shall be added to the Principal Sum owed under the Promissory Note Agreement dated September 1, 2013; and

WHEREAS, the Borrower and Lender wish to combine the obligations under the above-referenced Promissory Note Agreements into a single agreement; and

WHEREAS, the Borrower and Lender wish to amend the above-referenced Promissory Note Agreements to include additional terms regarding extension; and

WHEREAS, the Borrower and Lender agree to amend the terms of the above-referenced Promissory Note Agreements in accordance with the provisions hereof.

AGREEMENT:

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the Lender in lawful money of the United States at such other address as the Lender may from time to time designate, the sum of Eighty-Three Thousand Seven Hundred and Fifty Dollars ($83,750) (the, “New Principal Sum”), which represents the combined amounts of the promissory notes dated March 13, 2013, June 1, 2013, September 1, 2013, and the recently incurred sum of Twenty-One Thousand Eight Hundred and Seventy-Five Dollars ($21,875). This amount of Twenty-One Thousand Eight Hundred and Seventy-Five Dollars ($21,875) shall be added to the Principal Sum owed under the Promissory Note Agreement dated September 1, 2013 and subject to the terms and conditions stated herein. These Promissory Note Agreements shall be collectively referred to as “Note” and shall be subject to the terms and conditions as stated below. Should any conflict between the original Note and this Agreement arise, this Agreement shall govern.

1. Terms of Repayment and Prepayment. Principal of and interest on this Note shall be due upon demand by Lender. In additional Borrower reserves the right to prepay this Note (in full or in part) at any time.

2. Interest Rate. This Note shall accrue interest on the principal at a rate of Five Percent (5%) per annum (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.

3. Conversion. 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 $0.10. 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. Piggyback Registration Rights. If at any time after the execution of this Note there is not an effective registration statement covering all of the Conversion Shares and the Company determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Borrower shall send to the Lender written notice of such determination and, if within fifteen calendar days after receipt of such notice, the Lender shall so request in writing, the Borrower shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415). The obligations of the Borrower under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 4. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement. All expenses incurred by the Borrower in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Borrower, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of registrable securities are called "Selling Expenses." The Borrower will pay all Registration Expenses and Selling Expenses in connection with the registration statement under Section 4.

5. Extension Fee. In consideration for offering this extension, the Lender shall receive shares of restricted common stock to be calculated as two (2) shares for every $1.00 owed at the execution of this Agreement and shall also receive additional restricted common stock, calculated as stated under this Section 5, every six (6) months thereafter until all sums owed by Borrower are paid in full.

6. Events of Default. Default in the payment of the principal or unpaid accrued interest of this Note when due and payable shall be deemed an event of default. If any of the events of default specified in this Section 6 shall occur, Lender may, so long as such condition persists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Borrower, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice. Lender may exercise collateral as payment in full for said Note by placing a written request to LBAS transfer agent (www.broadridge.com) for ownership change upon default.

7. 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 Agreement, 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 Agreement, except as expressly provided herein. The Lender may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Borrower.

8. Taxes. All income shall be subject to withholding for federal, state and local income tax. The Parties agree to abide by all applicable tax laws upon the repayment of the New Principal Sum.

9. 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.

10. 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 Borrower then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Borrower, or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

If to the Borrower:	Location Based Tech Inc
	49 Discovery Suite 260 Irvine, CA 92618 Facsimile Number: (714) 200-0287 E-mail: dave@pocketfinder.com
If to Lender:	Dave Michael Morse

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

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

13. Full Force and Effect.  Except as otherwise expressly provided herein, the Note shall remain in full force and effect.  Except for any waivers and modifications contained herein, this Agreement shall not in any way waive or prejudice any of the rights or obligations of the Lender or the Borrower under the Note, under any law, in equity or otherwise, and such waivers and modifications shall not constitute a waiver or modification of any other provision of the Note nor a waiver or modification of any subsequent default or breach of any obligation of the Borrower or of any subsequent right of the Lender.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of March 14, 2014.

The “Borrower”

LOCATION BASED TECHNOLOGIES, INC.

David M. Morse

CEO & Co-President  

The “Lender”

David Michael Morse, Jr.

EX-10

Exhibit 10.65

LOAN AMENDMENT AND EXTENSION AGREEMENT

This Loan Amendment and Extension Agreement (this “Agreement”), dated as of March 14, 2014, is entered into by and among Location Based Technologies, Inc., a Nevada corporation (“Borrower”) and Florance Accountancy (“Lender”).

RECITALS:

WHEREAS, the Lender provided services to the Borrower and the Borrower was at certain times unable to pay for that service.

WHEREAS, the amounts owed for the unpaid services were classified as “deferred compensation”.

WHEREAS, the Lender chose to convert the amount owed for the unpaid services from deferred compensation into a loan under a promissory note.

WHEREAS, under that promissory note, the Lender has loaned the following amount (the “Principal Amount”) to the Borrower: Ten Thousand Dollars ($10,000) as evidenced by a Promissory Note Agreement dated March 13, 2013 with an original maturity date of March 13, 2014; and

WHEREAS, the original maturity date is set to expire and the Borrower and Lender wish to amend the above-referenced Promissory Note Agreement to include additional terms regarding extension; and

WHEREAS, Lender has adopted a new format for some of its loan agreements and wishes to use the new format for this Agreement; and

WHEREAS, the Borrower and Lender agree to amend the terms of the above-referenced Promissory Note Agreement in accordance with the provisions hereof.

AGREEMENT:

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the order of Florance Accountancy Corp., 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 sum of Ten Thousand Dollars ($10,000) (the, “Principal Sum”), which represents the amount of the promissory note dated March 13, 2013. This Promissory Note Agreement shall be referred to as “Note” and shall be subject to the terms and conditions as stated below. Should any conflict between the original Note and this Agreement arise, this Agreement shall govern.

1. Terms of Repayment and Prepayment. Principal of and interest on this Note shall be due upon demand by Lender. In additional Borrower reserves the right to prepay this Note (in full or in part) at any time.

2. Interest Rate. This Note shall accrue interest on the principal at a rate of Five Percent (5%) per annum (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.

3.

Conversion. 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 $0.10. 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.

Piggyback Registration Rights. If at any time after the execution of this Note there is not an effective registration statement covering all of the Conversion Shares and the Company determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Borrower shall send to the Lender written notice of such determination and, if within fifteen calendar days after receipt of such notice, the Lender shall so request in writing, the Borrower shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415). The obligations of the Borrower under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 4. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement. All expenses incurred by the Borrower in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Borrower, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of registrable securities are called "Selling Expenses." The Borrower will pay all Registration Expenses and Selling Expenses in connection with the registration statement under Section 4.

5. Extension Fee. In consideration for offering this extension, the Lender shall receive shares of restricted common stock to be calculated as two (2) shares for every $1.00 owed at the execution of this Agreement and shall also receive additional restricted common stock, calculated as stated under this Section 5, every six (6) months thereafter until all sums owed by Borrower are paid in full.

6. Events of Default. Default in the payment of the principal or unpaid accrued interest of this Note when due and payable shall be deemed an event of default. If any of the events of default specified in this Section 6 shall occur, Lender may, so long as such condition persists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Borrower, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice. Lender may exercise collateral as payment in full for said Note by placing a written request to LBAS transfer agent (www.Broadridge.com) for ownership change upon default.

7. 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 Agreement, 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 Agreement, except as expressly provided herein. The Lender may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Borrower.

8. Taxes. All income shall be subject to withholding for federal, state and local income tax. The Parties agree to abide by all applicable tax laws upon the repayment of the Principal Sum.

9. 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.

10. 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 Borrower then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Borrower, or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

If to the Borrower:      Location Based Tech Inc

  49 Discovery Suite 260

  Irvine, CA 92618

  Facsimile Number: (714) 200-0287

  E-mail: desiree@pocketfinder.com

If to Lender:               Tina Florance

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

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

13. Full Force and Effect.  Except as otherwise expressly provided herein, the Note shall remain in full force and effect.  Except for any waivers and modifications contained herein, this Agreement shall not in any way waive or prejudice any of the rights or obligations of the Lender or the Borrower under the Note, under any law, in equity or otherwise, and such waivers and modifications shall not constitute a waiver or modification of any other provision of the Note nor a waiver or modification of any subsequent default or breach of any obligation of the Borrower or of any subsequent right of the Lender.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of March 14, 2014.

The “Borrower”

LOCATION BASED TECHNOLOGIES, INC.

Desiree Mejia

COO & Director  

The “Lender”

Florance Accountancy Corp.

By: Tina Florance

EX-10

Exhibit 10.66

LOAN AMENDMENT AND EXTENSION AGREEMENT

This Loan Amendment and Extension Agreement (this “Agreement”), dated as of March 14, 2014, is entered into by and among Location Based Technologies, Inc., a Nevada corporation (“Borrower”) and Eric Fronk (“Lender”).

RECITALS:

WHEREAS, the Lender provided services to the Borrower and the Borrower was at certain times unable to pay for that service.

WHEREAS, the amounts owed for the unpaid services were classified as “deferred compensation”.

WHEREAS, the Lender chose to convert the amount owed for the unpaid services from deferred compensation into a loan under a promissory note.

WHEREAS, under that promissory note, the Lender has loaned the following amounts (the “Principal Amount”) to the Borrower:

(a) Seventeen Thousand Five Hundred Dollars ($17,500) as evidenced by a Promissory Note Agreement dated March 13, 2013 with an original maturity date of March 13, 2014;

(b) Three Thousand Dollars ($3,000) as evidenced by a Promissory Note Agreement dated June 1, 2013 due on demand; and

(a) Eight Thousand Dollars ($8,000), which under the terms stated below shall be added to the Principal Sum owed under the Promissory Note Agreement dated March 13, 2013; and

WHEREAS, the Borrower and Lender wish to combine the obligations above into a single agreement; and

WHEREAS, the original maturity date is set to expire and the Borrower and Lender wish to amend the above-referenced Promissory Note Agreement to include additional terms regarding extension; and

WHEREAS, Lender has adopted a new format for some of its loan agreements and wishes to use the new format for this Agreement; and

WHEREAS, the Borrower and Lender agree to amend the terms of the above-referenced Promissory Note Agreement in accordance with the provisions hereof.

AGREEMENT:

NOW THEREFORE, in consideration of the foregoing promises and the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

FOR VALUE RECEIVED, the undersigned, Location Based Technologies Inc. (referred to herein as the “Borrower”), hereby unconditionally promises to pay to the order of Eric Fronk, his 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 sum of Twenty-Eight Thousand Five Hundred Dollars ($28,500) (the, “New Principal Sum”), which represents the combined amounts of the promissory notes dated March 13, 2013, June 1, 2013 and the recently incurred sum of Eight Thousand Dollars ($8,000). This amount of Eight Thousand Dollars ($8,000) shall be added to the Principal Sum owed under the Promissory Note Agreements dated March 13, 2013 and June 1, 2013 , subject to the terms and conditions stated herein. This Promissory Note Agreement shall be referred to as “Note” and shall be subject to the terms and conditions as stated below. Should any conflict between the original Note and this Agreement arise, this Agreement shall govern.

1. Terms of Repayment and Prepayment. Principal of and interest on this Note shall be due upon demand by Lender. In additional Borrower reserves the right to prepay this Note (in full or in part) at any time.

2. Interest Rate. This Note shall accrue interest on the principal at a rate of Five Percent (5%) per annum (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.

3. Conversion. 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 $0.10. 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. Piggyback Registration Rights. If at any time after the execution of this Note there is not an effective registration statement covering all of the Conversion Shares and the Company determines to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, but excluding Forms S-4 or S-8 and similar forms which do not permit such registration, then the Borrower shall send to the Lender written notice of such determination and, if within fifteen calendar days after receipt of such notice, the Lender shall so request in writing, the Borrower shall include in such registration statement all or any part of the Conversion Shares such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and any cutbacks in accordance with guidance provided by the Securities and Exchange Commission (including, but not limited to, Rule 415). The obligations of the Borrower under this Section may be waived by any holder of any of the Securities entitled to registration rights under this Section 4. The holders whose Conversion Shares and Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities included in such registration statement. All expenses incurred by the Borrower in complying with Section 4, including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for the Borrower, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions applicable to the sale of registrable securities are called "Selling Expenses." The Borrower will pay all Registration Expenses and Selling Expenses in connection with the registration statement under Section 4.

5. Extension Fee. In consideration for offering this extension, the Lender shall receive shares of restricted common stock to be calculated as two (2) shares for every $1.00 owed at the execution of this Agreement and shall also receive additional restricted common stock, calculated as stated under this Section 5, every six (6) months thereafter until all sums owed by Borrower are paid in full.

6. Events of Default. Default in the payment of the principal or unpaid accrued interest of this Note when due and payable shall be deemed an event of default. If any of the events of default specified in this Section 6 shall occur, Lender may, so long as such condition persists, declare the entire principal and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Borrower, and any other obligations of the Borrower to the Lender, shall become due immediately, without demand or notice. Lender may exercise collateral as payment in full for said Note by placing a written request to LBAS transfer agent (www.Broadridge.com) for ownership change upon default.

7. 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 Agreement, 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 Agreement, except as expressly provided herein. The Lender may not assign this Note or any of the rights or obligations referenced herein without the prior written consent of Borrower.

8. Taxes. All income shall be subject to withholding for federal, state and local income tax. The Parties agree to abide by all applicable tax laws upon the repayment of the Principal Sum.

9. 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.

10. 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 Borrower then at its principal place of business, or if addressed to the Lender, then the last known address on file with the Borrower, or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties.

If to the Borrower:	Location Based Tech Inc
	49 Discovery Suite 260 Irvine, CA 92618 Facsimile Number: (714) 200-0287 E-mail: desiree@pocketfinder.com
If to Lender:	Erik Fronk

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

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

13. Full Force and Effect.  Except as otherwise expressly provided herein, the Note shall remain in full force and effect.  Except for any waivers and modifications contained herein, this Agreement shall not in any way waive or prejudice any of the rights or obligations of the Lender or the Borrower under the Note, under any law, in equity or otherwise, and such waivers and modifications shall not constitute a waiver or modification of any other provision of the Note nor a waiver or modification of any subsequent default or breach of any obligation of the Borrower or of any subsequent right of the Lender.  

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of March 14, 2014.

The “Borrower”

LOCATION BASED TECHNOLOGIES, INC.

Desiree Mejia

COO & Director  

The “Lender”

Eric Fronk

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:  July 11, 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, Gregory Andrews, 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:  July 11, 2014	By:	/s/ Gregory Andrews
		Gregory Andrews
		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 February 28, 2014 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:  July 11, 2014	By:	/s/ David M. Morse
		Name: David M. Morse
		Co-President and Chief Executive Officer

I, Gregory Andrews, 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 February 28, 2014 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:  July 11, 2014	By:	/s/ Gregory Andrews
		Gregory Andrews
		Chief Financial Officer

XML

Note 6 - Convertible Notes Payable (Details) - Principal Maturities of Convertible Notes Payable (Convertible Note Payable [Member], USD $)	May 31, 2014
Convertible Note Payable [Member]
Note 6 - Convertible Notes Payable (Details) - Principal Maturities of Convertible Notes Payable [Line Items]
May 31, 2015	$ 3,994,439
May 31, 2016	3,325,000
Total	$ 7,319,439

XML

Note 10 - Provision for Income Taxes (Details) - Reconciliation of Combined Federal and State Statutory Income Taxes Rate and the Effective Rate	9 Months Ended	12 Months Ended
	May 31, 2014	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 10 - Provision for Income Taxes (Details) (USD $)	May 31, 2014	Aug. 31, 2013	Feb. 28, 2013
Income Tax Disclosure [Abstract]
Operating Loss Carryforwards	$ 51,934,091	$ 48,074,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	$ 0		$ 0

XML

Note 3 - Property and Equipment (Details) - Property and Equipment (USD $)	May 31, 2014	Aug. 31, 2013
Property, Plant and Equipment [Line Items]
Equipment	$ 296,640	$ 268,898
Less: accumulated depreciation	(200,210)	(158,085)
Total property and equipment	96,430	110,813
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Equipment	139,821	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	29,537	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 8 - Commitments and Contingencies (Tables)

9 Months Ended

May 31, 2014

Commitments and Contingencies Disclosure [Abstract]

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

For the Years Ending:
May 31, 2015	$	93,130
May 31, 2016		7,193
Total	$	100,323

XML

Note 8 - Commitments and Contingencies (Details) (USD $)	3 Months Ended		9 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013	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	$ 19,202	$ 19,202	$ 57,607	$ 57,931
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

Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (USD $)	May 31, 2014	Aug. 31, 2013
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Long-term Convertible Notes Payable, Net and Accrued Interest	$ 806,615
JMJ Financial [Member] | V Warrants [Member] | Due On September 16, 2012 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description		555,000
JMJ Financial [Member] | W Warrants [Member] | Due On November 1, 2012 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description		550,000
Related Party [Member] | DD Warrants [Member] | Due On December 20, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	100,000
Related Party [Member] | Price Per Share - $0.10 [Member] | Related Party [Member] | Due On Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	1,114,487
Related Party [Member] | Due on June 30, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	100,000
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 October 15, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	100,000	100,000
Z Warrants [Member] | Due On January 21, 2016 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	75,000	75,000
BB Warrants [Member] | Price per Share - $0.20 [Member] | Due On September 30, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	600,000
DD Warrants [Member] | Due On January 21, 2016 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	150,000
Accrued Interest	365,037	287,827
Total Convertible Notes Payable, Net	3,855,268	3,585,225
DD Warrants [Member] | Total Convertible Notes Payable [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	3,576,452	3,423,500
Unamortized Debt and Beneficial Conversion Feature Discounts	(86,221)	(126,102)
Less Current Portion	(3,048,653)	(3,585,225)
Long-term Convertible Notes Payable, Net and Accrued Interest	806,615
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	300,000
Warrant Series EE [Member] | Related Party [Member] | Due on March 5, 2016 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	200,000
Price Per Share - $0.10 [Member] | Related Party [Member] | Due On Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	1,114,487
Accrued Interest	63,653
Price Per Share - $0.10 [Member] | Related Party [Member] | Related Party Convertible Demand Notes Payable and Accrued Interest [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	1,178,140
Related Party [Member] | Due On September 30, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	1,900,000	1,900,000
Related Party [Member] | Total Convertible Notes Payable [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	2,600,000	2,925,737
Related Party [Member] | Due On Demand [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description		28,750
Unamortized Debt and Beneficial Conversion Feature Discounts	(186,609)	(254,827)
Accrued Interest	234,986	97,716
Total Convertible Notes Payable, Net	2,648,377	2,768,626
Less Current Portion	(104,466)	(1,049,590)
Long-term Convertible Notes Payable, Net and Accrued Interest	2,543,911	1,719,036
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
Two Notes [Member] | Due On July 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	150,000	150,000
Convertible Demand Notes Payable [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	28,500
Accrued Interest	1,303
Convertible Demand Notes Payable and Accrued Interest [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	29,803
Less Current Portion	(29,803)
Due On April 10, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	25,000	25,000
Due On July 9, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	75,000	75,000
Due On July 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	300,000	300,000
Due On August 9, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	76,452	68,500
Accrued Interest	7,952
Due on September 21, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	500,000
Due on October 10, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable [Line Items]
Convertible Notes Payable Description	25,000	25,000
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

XML

Note 10 - Provision for Income Taxes (Details) - Components of Deferred Tax Assets (USD $)	May 31, 2014	Aug. 31, 2013
Components of Deferred Tax Assets [Abstract]
Net operating loss carry forward and deductible temporary differences	$ 20,674,563	$ 19,904,000
Valuation allowance	(20,674,563)	(19,904,000)
Net deferred tax asset	$ 0	$ 0

XML

Note 4 - Intangible Assets

9 Months Ended

May 31, 2014

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

4.             INTANGIBLE ASSETS

Intangible assets at May 31, 2014 and August 31, 2013 consisted of the following:

	May 31, 2014			August 31, 2013
Patents	$	742,945		$	742,945
Trademarks		52,539			59,470
		795,484			802,415
Less: accumulated amortization		(136,894	)		(86,683	)
Total intangible assets	$	658,590		$	715,732

Amortization expense totaled $16,921 and $16,938 for the three months ended May 31, 2014 and 2013, respectively. Amortization expense totaled $50,211 and $50,100 for the nine months ended May 31, 2014 and 2013, respectively.

As of May 31, 2014, Company estimates amortization expense approximating $67,000 each year for the next five years and $324,000 thereafter.

XML

Note 8 - Commitments and Contingencies (Details) - Future Minimum Operating Lease Payments (USD $)	Feb. 28, 2014
Future Minimum Operating Lease Payments [Abstract]
May 31, 2015	$ 93,130
May 31, 2016	7,193
Total	$ 100,323

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) - Antidilutive Securities Excluded from Earnings Per Share	9 Months Ended	12 Months Ended
	May 31, 2014	Aug. 31, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive Potential Common Shares	60,735,511	44,232,067
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive Potential Common Shares	17,956,715	15,456,715
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive Potential Common Shares	2,925,000	3,475,000
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive Potential Common Shares	39,853,796	25,300,352

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		9 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013	Aug. 31, 2013
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Retained Earnings (Accumulated Deficit)	$ (59,996,870)		$ (59,996,870)		$ (56,064,465)
Working Capital	(6,719,787)		(6,719,787)
Cash, FDIC Insured Amount	250,000		250,000
Allowance for Doubtful Accounts Receivable	9,000		9,000		3,000
Inventory Adjustments	989,881		989,881
Inventory Write-down			(86,605)	206,120
Inventory, Noncurrent	892,434		892,434		893,401
Asset Impairment Charges				455,916
Finite-Lived Patents, Gross	742,945		742,945
Finite-Lived Trademarks, Gross	52,539		52,539		59,470
Finite-Lived Intangible Assets, Accumulated Amortization	136,894		136,894		86,683
Deferred Revenue	21,464		21,464		25,371
Beneficial Conversion Feature, Accumulated Amortization	440	85,530	50,693	219,669
Marketing and Advertising Expense	19,807	51,327	486,269	420,023
State and Local Income Tax Expense (Benefit), Continuing Operations			800	800
Employee Stock Option [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Allocated Share-based Compensation Expense	3,443	30,122	36,575	131,341
Recognized Amount [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Asset Impairment Charges			0
Largest Customer [Member] | Sales Revenue, Net [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Revenues			187,621	882,569
Concentration Risk, Percentage			27.00%	57.00%
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%	2.00%
Largest Customer [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Accounts Receivable, Net	54,275	1,517	54,275	1,517
Allowance for Sales Returns [Member]
Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details) [Line Items]
Valuation Allowances and Reserves, Balance	$ 16,431		$ 16,431		$ 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

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Note 9 - Equity (Details) (USD $)		0 Months Ended				0 Months Ended			9 Months Ended						3 Months Ended
	May 31, 2014	Jan. 12, 2012 Options Granted to Each of Three Officers [Member] Stock Incentive Plan 2007 [Member]	Aug. 30, 2007 Options Granted to Each of Three Officers [Member] Outside of 2007 Plan [Member]	Jan. 12, 2012 Options Granted to Three Officers [Member] Stock Incentive Plan 2007 [Member]	May 31, 2014 Options Granted to Three Officers [Member] Stock Incentive Plan 2007 [Member]	Aug. 30, 2007 Options Granted to Three Officers [Member] Outside of 2007 Plan [Member]	Mar. 15, 2012 Options Granted to Three Officers and One Employee [Member] Stock Incentive Plan 2007 [Member]	May 31, 2014 Options Granted to Three Officers and One Employee [Member] Stock Incentive Plan 2007 [Member]	May 31, 2014 Advisory Services [Member]	May 31, 2014 Note Payable Issuance [Member]	May 31, 2014 Conversion of Accrued Finder's Fees and Accounts Payable [Member]	May 31, 2014 In Connection with Note Payable Extension [Member]	May 31, 2014 In Connection With Board Members [Member]	May 31, 2014 As Collateral For Note Payable [Member]	May 31, 2014 Stock Incentive Plan 2007 [Member]	Jan. 12, 2012 Stock Incentive Plan 2007 [Member]
Note 9 - Equity (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services									3,192,709		5,250,000
Stock Issued During Period, Value, Issued for Services (in Dollars)									$ 192,670		$ 315,000
Stock Issued During Period, Shares, New Issues										5,203,667		1,913,601		20,000,000
Stock Issued During Period, Value, New Issues (in Dollars)										$ 364,830			$ 80,000	$ 500,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	17,956,715
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)	$ 0.20
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	6,000,000	12,000,000		18,000,000	6,500,000								18,500,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)				$ 0.31		$ 0.33	$ 0.31
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			1,425,000

XML

Note 2 - Inventory (Details) (USD $)	May 31, 2014	Aug. 31, 2013
Inventory Disclosure [Abstract]
Inventory, Noncurrent	$ 892,434	$ 893,401

XML

Note 2 - Inventory (Details) - Inventory (USD $)	May 31, 2014	Aug. 31, 2013
Current:
Inventories, noncurrent	$ 892,434	$ 893,401
Inventories, current	629,235	788,470
Finished Goods [Member] | Current [Member]
Current:
Inventory Valuation Reserve	(412,504)	(498,483)
Device Components [Member] | Noncurrent [Member]
Current:
Device components	1,469,811	1,471,404
Inventory Valuation Reserve	(577,377)	(578,003)
Current [Member]
Current:
Finished goods	1,041,739	1,286,953
Inventories, current	$ 629,235	$ 788,470

XML

Note 3 - Property and Equipment

9 Months Ended

May 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

  3.           PROPERTY AND EQUIPMENT

Property and equipment at May 31, 2014 and August 31, 2013 consisted of the following:

	May 31, 2014			August 31, 2013
Machinery and equipment	$	139,821		$	106,354
Computer software (mobile apps)		82,999			66,999
Computer software (internal)		29,537			51,263
Computer and video equipment		19,756			19,756
Office furniture	$	24,526		$	24,526
		296,640			268,898
Less: accumulated depreciation		(200,210	)		(158,085	)
Total property and equipment	$	96,430		$	110,813

Depreciation expense for the three months ended May 31, 2014 and 2013 amounted to $10,076 and $13,476, respectively. Depreciation expense for the nine months ended May 31, 2014 and 2013 amounted to $42,125 and $35,519, respectively.

XML

Note 3 - Property and Equipment (Details) (USD $)	3 Months Ended		9 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013
Property, Plant and Equipment [Abstract]
Depreciation	$ 10,076	$ 13,476	$ 42,125	$ 35,519

XML

Note 7 - Line of Credit and Term Loans (Details) (USD $)						0 Months Ended
	May 31, 2014 Loan Agreement [Member]	Aug. 31, 2013 Loan Agreement [Member]	Jan. 05, 2011 Loan Agreement [Member]	Jan. 05, 2011 Loan Agreement [Member] Minimum [Member]	Jan. 05, 2011 Loan Agreement [Member] Maximum [Member]	Dec. 12, 2013 Settlement Agreement [Member]
Note 7 - Line of Credit and Term Loans (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity			$ 1,000,000
Debt Instrument, Interest Rate, Stated Percentage				2.50%	6.50%
Long-term Line of Credit	1,000,000	1,000,000
Interest Payable	9,042	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

Condensed Consolidated Balance Sheets (Unaudited) (USD $)	May 31, 2014	Aug. 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 150,802	$ 680,914
Accounts receivable, net of allowances	97,793	77,584
Inventory, net of reserves	629,235	788,470
Prepaid expenses and other assets	35,468	47,976
Deferred financing costs	94,150	25,827
Total current assets	1,007,448	1,620,771
Property and equipment, net of accumulated depreciation	96,430	110,813
OTHER ASSETS
Intangible assets, net of accumulated amortization	658,590	715,732
Inventory, net of reserves	892,434	893,401
Deposits	30,000	30,000
Total other assets	1,581,024	1,639,133
TOTAL ASSETS	2,684,902	3,370,717
CURRENT LIABILITIES
Current portion of term loans and accrued interest	1,165,159
Derivative liabilities		745,148
Total current liabilities	7,727,234	8,410,439
Convertible term notes payable	806,615
Related party convertible term notes payable and accrued interest, net of unamortized discounts	2,543,911	1,719,036
Term loans	842,083
TOTAL LIABILITIES	11,919,843	10,129,475
Accounts payable and accrued expenses	2,011,951	1,699,114
Deferred compensation	141,410	267,730
Deferred revenue	21,464	25,371
Line of credit and accrued interest		1,009,042
Advances from officer and accrued interest	26,188	29,219
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value; 300,000,000 shares authorized; 228,160,821 and 211,917,511 shares issued and outstanding at May 31, 2014 and August 31, 2013, respectively	228,161	211,917
Additional paid-in capital	50,639,692	49,388,375
Prepaid services paid in common stock	(105,924)	(294,585)
Accumulated deficit	(59,996,870)	(56,064,465)
Total stockholders' deficit	(9,234,941)	(6,758,758)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	2,684,902	3,370,717
Convertible Demand Notes Payable and Accrued Interest [Member]
CURRENT LIABILITIES
Convertible notes payable and accrued interest	29,803
Related Party Convertible Demand Notes Payable and Accrued Interest [Member]
CURRENT LIABILITIES
Related party convertible notes payable and accrued interest	1,178,140
Convertible Term Notes Payable and Accrued Interest [Member]
CURRENT LIABILITIES
Convertible notes payable and accrued interest	3,048,653	3,585,225
Related Party Convertible Term Notes Payable and Accrued Interest [Member]
CURRENT LIABILITIES
Related party convertible notes payable and accrued interest	$ 104,466	$ 1,049,590

XML

Note 9 - Equity (Details) - Warrants (USD $)			9 Months Ended
	May 31, 2014	Aug. 31, 2013	May 31, 2014 Warrant Series BB [Member]	May 31, 2014 Warrant Series CC [Member]	May 31, 2014 Warrant Series DD [Member]	May 31, 2014 Warrant Series EE [Member]
Class of Warrant or Right [Line Items]
Outstanding warrants	17,956,715	15,456,715
Warrants granted:
Warrants Granted - Number of Shares			1,200,000	600,000	500,000	200,000
Warrants Granted - Exercise Price Per Share (in Dollars per share)	$ 0.20		$ 0.20	$ 0.20	$ 0.15	$ 0.15
Warrants Granted - Expiration			Aug. 29, 2016	Nov. 06, 2016	Jan. 21, 2017	Mar. 04, 2017

XML

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

9 Months Ended

May 31, 2014

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 nine months ended May 31, 2014, 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 May 31, 2014, had an accumulated deficit of $59,996,870 and negative working capital of $6,719,787. 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 May 31, 2014 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 nine months ended May 31, 2014, revenue from the Company’s largest customer amounted to $187,621 or 27% of total net revenue. Accounts receivable from this customer amounted to $54,275 or 56% of total accounts receivable at May 31, 2014.

For the nine months ended May 31, 2013, revenue from the Company’s largest customer amounted to $882,569 or 57% of total net revenue. Accounts receivable from this customer amounted to $1,517 or 2% of total accounts receivable at May 31, 2013.

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 May 31, 2014 and August 31, 2013, the allowance for doubtful accounts amounted to $9,000 and $3,000, respectively.

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 May 31, 2014 and August 31, 2013, the allowance for sales returns amounted to $16,431 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. An inventory valuation reserve approximating $989,881 was recorded to reduce the value of the inventory to the current selling price. Management estimates the current selling price as the realizable value of the inventory. No inventory obsolescence reserve was recorded during the nine months ended May 31, 2013. Management estimated sales for the next 24 month period based on historical sales data and prospective sales trends and determined that all inventory is expected to be sold in the next two years. Management analyzed and tested certain components that could possibly become obsolete and determined that the useful life exceeded the two year estimate to sell the inventory. In addition, the components inventory, net of the LCM valuation reserve, totaling $892,434 is classified as a noncurrent asset at May 31, 2014 (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 nine months ended May 31, 2013, the Company recorded an impairment of certain patents amounting to $455,916. There was no such impairment recognized during the nine months ended May 31, 2014.

Intangible Assets – Patents and Trademarks

The Company capitalizes internally developed assets related to certain costs associated with patents and trademarks. These costs include legal and registration fees needed to apply for and secure patents. The intangible assets acquired from other enterprises or individuals in an “arms-length” transaction are recorded at cost. As of May 31, 2014 and August 31, 2013, the Company capitalized $742,945 for patent related expenditures. As of May 31, 2014 and August 31, 2013, the Company capitalized $52,539 and $59,470 for trademark related expenditures, respectively. Accumulated amortization of intangible assets was $136,894 and $86,683 at May 31, 2014 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.

Deferred Revenue

Deferred revenue is a liability related to revenue producing activity for which revenue has not yet been recognized. As of May 31, 2014 and August 31, 2013, deferred revenue amounted to $21,464 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 $440 and $85,530 during the three months ended May 31, 2014 and 2013, respectively. The Company recognized amortization expense related to the beneficial conversion features on convertible notes payable totaling $50,693 and $219,669 during the nine months ended May 31, 2014 and 2013, 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.

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 the month the service is provided. Service revenue is recognized upon collecting the monthly service fee from 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 May 31, 2014 and 2013, the Company incurred $19,807 and $51,327 of advertising costs, respectively. For the nine months ended May 31, 2014 and 2013, the Company incurred $486,269 and $420,023 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 May 31, 2014 and 2013, stock-based compensation expense associated with stock options totaled $3,443 and $30,122, respectively. For the nine months ended May 31, 2014 and 2013, stock-based compensation expense associated with stock options totaled $36,575 and $131,341 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 nine months ended May 31, 2014 and 2013.

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.

	May 31, 2014		August 31, 2013
Warrants		17,956,715		15,456,715
Stock options		2,925,000		3,475,000
Convertible notes payable		39,853,796		25,300,352
Dilutive potential common shares		60,735,511		44,232,067

XML

Note 4 - Intangible Assets (Details) - Intangible Assets (USD $)	May 31, 2014	Aug. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Intangible Assets	$ 795,484	$ 802,415
Less: accumulated amortization	(136,894)	(86,683)
Total intangible assets	658,590	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)

9 Months Ended

May 31, 2014

Disclosure Text Block [Abstract]

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

	May 31, 2014			August 31, 2013
Patents	$	742,945		$	742,945
Trademarks		52,539			59,470
		795,484			802,415
Less: accumulated amortization		(136,894	)		(86,683	)
Total intangible assets	$	658,590		$	715,732

XML

Note 5 - Related Party Transactions (Details) (USD $)	9 Months Ended
	May 31, 2014	May 31, 2013	Aug. 31, 2013
Note 5 - Related Party Transactions (Details) [Line Items]
Proceeds from Related Party Debt	$ 1,450,000	$ 800,000
Repayments of Related Party Debt		100,000
Due to Related Parties, Current	26,188		29,219
Accounts Payable, Related Parties	328,000		105,000
Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	8.00%
Co-President [Member] | Accrued Interest [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Due to Related Parties	1,188
Co-President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Proceeds from Related Party Debt	151,000
Repayments of Related Party Debt	154,825
Due to Related Parties, Current	$ 25,000

XML

Note 7 - Line of Credit and Term Loans (Tables)

9 Months Ended

May 31, 2014

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

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

For the Years Ending:
May 31, 2015	$	3,994,439
May 31, 2016		3,325,000
Total	$	7,319,439

Term Loan [Member]

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

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

For the Years Ending:
May 31, 2015	$	1,156,117
May 31, 2016		758,750
May 31, 2017		83,333
Total term loans		1,998,200
Less current portion of term loans		(1,156,117	)
Long-term term loans	$	842,083

XML

Note 2 - Inventory

9 Months Ended

May 31, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

2.             INVENTORY

Inventory at May 31, 2014 and August 31, 2013 consisted of the following:

	May 31, 2014			August 31, 2013
Current:
Finished goods	$	1,041,739		$	1,286,953
Inventory valuation reserve for finished goods		(412,504	)		(498,483	)
Inventories, current	$	629,235		$	788,470
Noncurrent:
Device components	$	1,469,811		$	1,471,404
Inventory valuation reserve for components		(577,377	)		(578,003	)
Inventories, noncurrent	$	892,434		$	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. The Company expects that it will take approximately one year to sell finished goods inventory on hand at May 31, 2014. Following the sale of all finished goods inventory, components inventory will be utilized to manufacture additional devices that are expected to be sold in year 2. Inventories totaling $892,434 and $893,401 which may not be realized within a 12-month period have been reclassified as long-term as of May 31, 2014 and August 31, 2013, respectively.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	May 31, 2014	Aug. 31, 2013
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock,shares issued	228,160,821	211,917,511
Common stock,shares outstanding	228,160,821	211,917,511

XML

Note 12 - Subsequent Events

9 Months Ended

May 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

12.          SUBSEQUENT EVENTS

On June 4, 2014, the Company issued 702,341 shares of common stock in connection with the conversion of notes payable valued at $21,000 on the award date.

On June 18, 2014, the Company issued 720,000 shares of common stock in connection with the conversion of notes payable valued at $18,000 on the award date. A total of 360,000 common shares were issued in satisfaction of the May 15, 2014 principal payment. As of June 18, 2014, the Company was in full compliance on the JMJ notes payable.

XML

Document And Entity Information	9 Months Ended
	May 31, 2014	Jul. 09, 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		229,583,162
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	May 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

XML

Accounting Policies, by Policy (Policies)

9 Months Ended

May 31, 2014

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 nine months ended May 31, 2014, 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 May 31, 2014, had an accumulated deficit of $59,996,870 and negative working capital of $6,719,787. 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 May 31, 2014 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 nine months ended May 31, 2014, revenue from the Company’s largest customer amounted to $187,621 or 27% of total net revenue. Accounts receivable from this customer amounted to $54,275 or 56% of total accounts receivable at May 31, 2014.

For the nine months ended May 31, 2013, revenue from the Company’s largest customer amounted to $882,569 or 57% of total net revenue. Accounts receivable from this customer amounted to $1,517 or 2% of total accounts receivable at May 31, 2013.

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 May 31, 2014 and August 31, 2013, the allowance for doubtful accounts amounted to $9,000 and $3,000, respectively.

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 May 31, 2014 and August 31, 2013, the allowance for sales returns amounted to $16,431 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. An inventory valuation reserve approximating $989,881 was recorded to reduce the value of the inventory to the current selling price. Management estimates the current selling price as the realizable value of the inventory. No inventory obsolescence reserve was recorded during the nine months ended May 31, 2013. Management estimated sales for the next 24 month period based on historical sales data and prospective sales trends and determined that all inventory is expected to be sold in the next two years. Management analyzed and tested certain components that could possibly become obsolete and determined that the useful life exceeded the two year estimate to sell the inventory. In addition, the components inventory, net of the LCM valuation reserve, totaling $892,434 is classified as a noncurrent asset at May 31, 2014 (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 nine months ended May 31, 2013, the Company recorded an impairment of certain patents amounting to $455,916. There was no such impairment recognized during the nine months ended May 31, 2014.

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 May 31, 2014 and August 31, 2013, the Company capitalized $742,945 for patent related expenditures. As of May 31, 2014 and August 31, 2013, the Company capitalized $52,539 and $59,470 for trademark related expenditures, respectively. Accumulated amortization of intangible assets was $136,894 and $86,683 at May 31, 2014 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.

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 May 31, 2014 and August 31, 2013, deferred revenue amounted to $21,464 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 $440 and $85,530 during the three months ended May 31, 2014 and 2013, respectively. The Company recognized amortization expense related to the beneficial conversion features on convertible notes payable totaling $50,693 and $219,669 during the nine months ended May 31, 2014 and 2013, 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.

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 the month the service is provided. Service revenue is recognized upon collecting the monthly service fee from 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 May 31, 2014 and 2013, the Company incurred $19,807 and $51,327 of advertising costs, respectively. For the nine months ended May 31, 2014 and 2013, the Company incurred $486,269 and $420,023 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 May 31, 2014 and 2013, stock-based compensation expense associated with stock options totaled $3,443 and $30,122, respectively. For the nine months ended May 31, 2014 and 2013, stock-based compensation expense associated with stock options totaled $36,575 and $131,341 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 nine months ended May 31, 2014 and 2013.

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.

	May 31, 2014		August 31, 2013
Warrants		17,956,715		15,456,715
Stock options		2,925,000		3,475,000
Convertible notes payable		39,853,796		25,300,352
Dilutive potential common shares		60,735,511		44,232,067

XML

Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013
Net revenue
Devices	$ 216,223	$ 643,696	$ 567,196	$ 1,260,828
Services	238,916	111,483	637,837	294,063
Total net revenue	455,139	755,179	1,205,034	1,554,891
Cost of revenue
Devices	182,960	923,560	418,929	1,583,849
Services	234,122	205,025	727,365	571,748
Total cost of revenue	417,082	1,128,585	1,146,294	2,155,597
Gross profit (loss)	38,057	(373,406)	58,740	(600,706)
Operating expenses
General and administrative	341,138	486,947	1,360,347	1,539,038
Officer compensation	142,000	253,835	621,746	798,465
Professional fees	285,717	1,004,725	834,674	1,861,706
Rent	19,202	19,202	57,607	57,931
Research and development		112,511	99,548	257,797
Salaries and wages	85,763	73,252	195,585	224,453
Loss on asset impairment				455,916
Total operating expenses	873,819	1,950,472	3,169,507	5,195,307
Net operating loss	(835,762)	(2,323,878)	(3,110,767)	(5,796,013)
Other income (expense)
Financing costs	(105,875)	(96,634)	(359,755)	(456,734)
Amortization of beneficial conversion feature	(440)	(85,530)	(61,388)	(219,669)
Amortization of deferred financing costs	(343,805)	(39,749)	(452,155)	(172,257)
Amortization of debt discount	(55,026)	(53,757)	(260,196)	(53,757)
Gain (Loss) on change in fair value of derivative liabilities		123,460		(517,055)
Interest expense, net	(203,554)	(107,734)	(524,991)	(220,611)
Gain on debt settlement		(521,820)	886,548	(521,820)
Loss on debt extinguishment		(521,820)	886,548	(521,820)
Gain (Loss) on asset disposals		631	(48,431)	631
Foreign currency gain (loss), net		(400)	(470)	41
Total other income (expense)	(708,700)	(781,533)	(820,838)	(2,161,231)
Net loss before income taxes	(1,544,462)	(3,105,411)	(3,931,605)	(7,957,244)
Provision for income taxes			800	800
Net Loss	$ (1,544,462)	$ (3,105,411)	$ (3,932,405)	$ (7,958,044)
Basic and Diluted - Earnings (loss) Per Share (in Dollars per share)	$ (0.01)	$ (0.01)	$ (0.02)	$ (0.04)
Basic and Diluted - Weighted Average Number of Shares Outstanding (in Shares)	226,146,263	207,493,355	218,181,673	203,331,478

XML

Note 7 - Line of Credit and Term Loans

9 Months Ended

May 31, 2014

Debt Disclosure [Abstract]

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.

On May 30, 2014, the Company entered into a Sixth Amendment to the Loan and Security Agreement with Silicon Valley Bank to defer the principal payments due on the first day of May, June and July until August 1, 2014. The deferred payments will be due in full on August 1, 2014.

As of May 31, 2014, the outstanding balance on the term loan and accrued interest totaled $1,000,000 and $9,042, 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 over a period of 16 months. Under the payment terms of the Settlement, $1,105,000 previously classified as convertible notes were reclassified as a term loan on the settlement date. 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.

JMJ Notes Payable (Continued)

As of May 31, 2014, the principal maturities of the SVB and JMJ term loans are as follows:

For the Years Ending:
May 31, 2015	$	1,156,117
May 31, 2016		758,750
May 31, 2017		83,333
Total term loans		1,998,200
Less current portion of term loans		(1,156,117	)
Long-term term loans	$	842,083

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Note 6 - Convertible Notes Payable

9 Months Ended

May 31, 2014

Convertible Notes Payable [Abstract]

Convertible Notes Payable [Text Block]

6.     CONVERTIBLE NOTES PAYABLE

	May 31, 2014		August 31, 2013
Convertible Demand Notes Payable
Note payable in the amount of $28,500 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.10 per share. In connection with the extension of the due date and consolidation of notes on March 14, 2014, 51,000 shares of the Company’s stock valued at $3,060 were awarded.	$	28,500	$	-
Total convertible demand notes payable		28,500		-
Accrued interest		1,303		-
Total convertible demand notes payable and accrued interest	$	29,803	$	-

Convertible Term 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 $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. As of May 31, 2014 the note was not renewed and is due on demand.		500,000		500,000
Note payable in the amount of $25,000 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. As of May 31, 2014, the note was not renewed and is due on demand.		25,000		25,000

	May 31, 2014		August 31, 2013
Convertible Term Notes Payable
Two notes payable in the amount of $75,000 due on July 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, 150,000 shares of the Company’s stock valued at $15,000 were awarded in January 2014.	$	75,000	$	75,000
Two notes payable in the amount of $150,000 due on July 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 $30,000 were awarded in January 2014.		150,000		150,000
Note payable in the amount of $300,000 due on July 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 on January 22, 2014, 600,000 shares of the Company’s stock valued at $60,000 were awarded.		300,000		300,000
Two notes payable in the amount of $68,500, plus accrued interest of $7,952, were combined into a new note due on August 9, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. In connection with the combination of the notes and the extension of due dates, 137,000 shares of the Company’s stock valued at $12,330 were awarded in January 2014.		76,452		68,500
Note payable in the amount of $500,000 due on September 21, 2014 at an interest rate of 36% per annum. The note is collateralized by 20,000,000 shares of common stock.		500,000		-

	May 31, 2014		August 31, 2013
Convertible Term Notes Payable (Continued)
Note payable in the amount of $25,000 due on October 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. In connection with the extension of the due date, 50,000 shares of the Company’s stock valued at $2,450 were awarded in April 2014.	$	25,000	$	25,000
Note payable in the amount of $100,000 due on October 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. In connection with the extension of the due date, 200,000 shares of the Company’s stock valued at $7,340 were awarded in April 2014.		100,000		100,000
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
Two notes payable in the amount of $600,000 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. “BB warrants” to purchase 1,000,000 shares of the Company’s common stock valued at $133,001 were issued in connection with the extension of the notes during 2013.		600,000		-
Note payable in the amount of $75,000 due on January 21, 2016 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

	May 31, 2014			August 31, 2013
Convertible Term Notes Payable (Continued)
Note payable in the amount of $150,000 due on January 21, 2016 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. “DD warrants” to purchase 300,000 shares of the Company’s common stock valued at $25,971 were issued in connection with the note.	$	150,000		$	-
Total convertible notes payable		3,576,452			3,423,500
Unamortized debt and beneficial conversion feature discounts		(86,221	)		(126,102	)
Accrued interest		365,037			287,827
Total convertible notes payable, net and accrued interest		3,855,268			3,585,225
Less current portion		(3,048,653	)		(3,585,225	)
Long-term convertible notes payable, net and accrued interest	$	806,615		$	-

Related Party Convertible Demand Notes Payable
Five notes payable in the amount of $1,114,587 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.10 per share.	$	1,114,487	$	-
Total related party convertible demand notes payable		1,114,487		-
Accrued interest		63,653		-
Total related party convertible demand notes payable and accrued interest	$	1,178,140	$	-

	May 31, 2014		August 31, 2013
Related Party Convertible Term Notes Payable
Note payable in the amount of $100,000 due on June 30, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. In connection with the note, 100,000 shares of the Company’s stock valued at $6,000 were awarded in January 2014. In connection with the extension of the due date on March 31, 2014, 200,000 shares of the Company’s stock valued at $20,000 were awarded.	$	100,000	$	-
Seven notes payable in the amount of $1,900,000 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.		1,900,000		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		-
Note payable in the amount of $100,000 due on December 20, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. “DD warrants” to purchase 200,000 shares of the Company’s common stock valued at $10,085 were issued in connection with the note.		100,000		-
Note payable in the amount of $200,000 due on March 5, 2016 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “EE warrants” to purchase 200,000 shares of the Company’s common stock valued at $11,508 were issued in connection with the note.		200,000		-

	May 31, 2014			August 31, 2013
Related Party Convertible Notes Payable (Continued)
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
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
Total related party convertible notes payable		2,600,000			2,925,737
Unamortized debt and beneficial conversion feature discounts		(186,609	)		(254,827	)
Accrued interest		234,986			97,716
Total related party convertible notes payable, net and accrued interest		2,648,377			2,768,626
Less current portion		(104,466	)		(1,049,590	)
Long-term related party convertible notes payable, net and accrued interest	$	2,543,911		$	1,719,036

As of May 31, 2014, the principal maturities of the convertible notes payable and related party convertible notes payable are as follows:

For the Years Ending:
May 31, 2015	$	3,994,439
May 31, 2016		3,325,000
Total	$	7,319,439

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Note 6 - Convertible Notes Payable (Tables)

9 Months Ended

May 31, 2014

Convertible Notes Payable [Abstract]

Convertible Debt [Table Text Block]

	May 31, 2014		August 31, 2013
Convertible Demand Notes Payable
Note payable in the amount of $28,500 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.10 per share. In connection with the extension of the due date and consolidation of notes on March 14, 2014, 51,000 shares of the Company’s stock valued at $3,060 were awarded.	$	28,500	$	-
Total convertible demand notes payable		28,500		-
Accrued interest		1,303		-
Total convertible demand notes payable and accrued interest	$	29,803	$	-

Convertible Term 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 $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. As of May 31, 2014 the note was not renewed and is due on demand.		500,000		500,000
Note payable in the amount of $25,000 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. As of May 31, 2014, the note was not renewed and is due on demand.		25,000		25,000

	May 31, 2014		August 31, 2013
Convertible Term Notes Payable
Two notes payable in the amount of $75,000 due on July 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, 150,000 shares of the Company’s stock valued at $15,000 were awarded in January 2014.	$	75,000	$	75,000
Two notes payable in the amount of $150,000 due on July 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 $30,000 were awarded in January 2014.		150,000		150,000
Note payable in the amount of $300,000 due on July 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 on January 22, 2014, 600,000 shares of the Company’s stock valued at $60,000 were awarded.		300,000		300,000
Two notes payable in the amount of $68,500, plus accrued interest of $7,952, were combined into a new note due on August 9, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. In connection with the combination of the notes and the extension of due dates, 137,000 shares of the Company’s stock valued at $12,330 were awarded in January 2014.		76,452		68,500
Note payable in the amount of $500,000 due on September 21, 2014 at an interest rate of 36% per annum. The note is collateralized by 20,000,000 shares of common stock.		500,000		-

	May 31, 2014		August 31, 2013
Convertible Term Notes Payable (Continued)
Note payable in the amount of $25,000 due on October 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. In connection with the extension of the due date, 50,000 shares of the Company’s stock valued at $2,450 were awarded in April 2014.	$	25,000	$	25,000
Note payable in the amount of $100,000 due on October 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. In connection with the extension of the due date, 200,000 shares of the Company’s stock valued at $7,340 were awarded in April 2014.		100,000		100,000
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
Two notes payable in the amount of $600,000 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. “BB warrants” to purchase 1,000,000 shares of the Company’s common stock valued at $133,001 were issued in connection with the extension of the notes during 2013.		600,000		-
Note payable in the amount of $75,000 due on January 21, 2016 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

	May 31, 2014			August 31, 2013
Convertible Term Notes Payable (Continued)
Note payable in the amount of $150,000 due on January 21, 2016 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. “DD warrants” to purchase 300,000 shares of the Company’s common stock valued at $25,971 were issued in connection with the note.	$	150,000		$	-
Total convertible notes payable		3,576,452			3,423,500
Unamortized debt and beneficial conversion feature discounts		(86,221	)		(126,102	)
Accrued interest		365,037			287,827
Total convertible notes payable, net and accrued interest		3,855,268			3,585,225
Less current portion		(3,048,653	)		(3,585,225	)
Long-term convertible notes payable, net and accrued interest	$	806,615		$	-

Related Party Convertible Demand Notes Payable
Five notes payable in the amount of $1,114,587 due on demand at an interest rate of 5% per annum and convertible into shares of the Company’s common stock at $0.10 per share.	$	1,114,487	$	-
Total related party convertible demand notes payable		1,114,487		-
Accrued interest		63,653		-
Total related party convertible demand notes payable and accrued interest	$	1,178,140	$	-

	May 31, 2014		August 31, 2013
Related Party Convertible Term Notes Payable
Note payable in the amount of $100,000 due on June 30, 2014 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. In connection with the note, 100,000 shares of the Company’s stock valued at $6,000 were awarded in January 2014. In connection with the extension of the due date on March 31, 2014, 200,000 shares of the Company’s stock valued at $20,000 were awarded.	$	100,000	$	-
Seven notes payable in the amount of $1,900,000 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.		1,900,000		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		-
Note payable in the amount of $100,000 due on December 20, 2015 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.15 per share. “DD warrants” to purchase 200,000 shares of the Company’s common stock valued at $10,085 were issued in connection with the note.		100,000		-
Note payable in the amount of $200,000 due on March 5, 2016 at an interest rate of 10% per annum and convertible into shares of the Company’s common stock at $0.20 per share. “EE warrants” to purchase 200,000 shares of the Company’s common stock valued at $11,508 were issued in connection with the note.		200,000		-

	May 31, 2014			August 31, 2013
Related Party Convertible Notes Payable (Continued)
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
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
Total related party convertible notes payable		2,600,000			2,925,737
Unamortized debt and beneficial conversion feature discounts		(186,609	)		(254,827	)
Accrued interest		234,986			97,716
Total related party convertible notes payable, net and accrued interest		2,648,377			2,768,626
Less current portion		(104,466	)		(1,049,590	)
Long-term related party convertible notes payable, net and accrued interest	$	2,543,911		$	1,719,036

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

For the Years Ending:
May 31, 2015	$	3,994,439
May 31, 2016		3,325,000
Total	$	7,319,439

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

9 Months Ended

May 31, 2014

Accounting Policies [Abstract]

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

	May 31, 2014		August 31, 2013
Warrants		17,956,715		15,456,715
Stock options		2,925,000		3,475,000
Convertible notes payable		39,853,796		25,300,352
Dilutive potential common shares		60,735,511		44,232,067

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Note 10 - Provision for Income Taxes

9 Months Ended

May 31, 2014

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 May 31, 2014and August 31, 2013 are as follows:

	May 31, 2014			August 31, 2013
Net operating loss carry forward and deductible temporary differences		20,674,563			19,904,000
Valuation allowance	$	(20,674,563	)	$	(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:  

	May 31, 2014			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 May 31, 2014 and August 31, 2013, the Company had federal and state net operating loss carryforwards of approximately $51,934,091 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 May 31, 2014 and 2013, 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.

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Note 8 - Commitments and Contingencies

9 Months Ended

May 31, 2014

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 each of the three months ended May 31, 2014 and 2013 totaled $19,202. Total rental expense on operating leases for the nine months ended May 31, 2014 and 2013 totaled $57,607 and $57,931, respectively.

As of May 31, 2014, the future minimum lease payments are as follows:

For the Years Ending:
May 31, 2015	$	93,130
May 31, 2016		7,193
Total	$	100,323

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Note 9 - Equity

9 Months Ended

May 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

9.            EQUITY

Common Stock 

The Company issued 3,192,709 shares of common stock to consultants in exchange for various advisory services during the nine months ended May 31, 2014. The shares were valued at $192,670, which represents the fair market value of the shares provided on the award date.

The Company issued 5,203,667 shares of common stock in connection with note payable extensions during the nine months ended May 31, 2014. The shares were valued at $364,830, which represents the fair market value of the note payable extension costs on the award date.

The Company issued 5,250,000 shares of common stock for the conversion of $315,000 in accounts payable. The shares were valued at $315,000, which represents the fair market value of the conversion costs on the award date.

The Company issued 1,913,601 shares of common stock for the payment pursuant the JMJ Settlement during the nine months ended May 31, 2014. The shares were valued at $80,000, which represents the fair market value of the principal payments on the award date.

The Company issued 20,000,000 shares of common stock as collateral for a $500,000 prommissory note, during the nine months ended May 31, 2014.

Warrants

Warrants to purchase up to 17,956,715 shares of the Company’s common stock are outstanding at May 31, 2014.

	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
DD warrants		500,000	$	0.15	January 21, 2017
EE warrants		200,000	$	0.15	March 4, 2017
Outstanding warrants as of May 31, 2014		17,956,715

The weighted average exercise price of outstanding warrants was $0.20 at May 31, 2014, with expiration dates ranging from December 16, 2014 to March 4, 2017.

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 May 31, 2014.

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 May 31, 2014, 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 May 31, 2014, there were 1,500,000 options that were vested and presently exercisable. No options were exercised as of May 31, 2014.

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 May 31, 2014, there were 1,425,000 options that were vested and presently exercisable. No options were exercised as of May 31, 2014.

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Note 11 - Recent Accounting Pronouncement

9 Months Ended

May 31, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

11.         RECENT ACCOUNTING PRONOUNCEMENT

In May 2014, the FASB, jointly with the International Accounting Standards Board, issued a comprehensive new standard on revenue recognition from contracts with customers. The standard's core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its scope, an entity will: (1) identify the contract(s) with a customer, (2) identify the performance obligation in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, this new guidance would require significantly expanded disclosures about revenue recognition. Provisions of this new standard are effective for annual reporting periods (including interim reporting periods within those annual periods) beginning after December 15, 2016. Early application is not permitted. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt this new guidance. The Company is currently evaluating the potential effect on its consolidated financial position, results of operations and cash flows from adoption of this standard.

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Note 4 - Intangible Assets (Details) (USD $)	3 Months Ended		9 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013
Disclosure Text Block [Abstract]
Amortization of Intangible Assets	$ 16,921	$ 16,938	$ 50,211	$ 50,100
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	67,000		67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	67,000		67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	67,000		67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	67,000		67,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	67,000		67,000
Finite-Lived Intangible Assets, Amortization Expense, after Year Five	$ 324,000		$ 324,000

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Note 3 - Property and Equipment (Tables)

9 Months Ended

May 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	May 31, 2014			August 31, 2013
Machinery and equipment	$	139,821		$	106,354
Computer software (mobile apps)		82,999			66,999
Computer software (internal)		29,537			51,263
Computer and video equipment		19,756			19,756
Office furniture	$	24,526		$	24,526
		296,640			268,898
Less: accumulated depreciation		(200,210	)		(158,085	)
Total property and equipment	$	96,430		$	110,813

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Note 9 - Equity (Tables)

9 Months Ended

May 31, 2014

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
DD warrants		500,000	$	0.15	January 21, 2017
EE warrants		200,000	$	0.15	March 4, 2017
Outstanding warrants as of May 31, 2014		17,956,715

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Note 12 - Subsequent Events (Details) (Subsequent Event [Member], USD $)	0 Months Ended	1 Months Ended
	Jun. 04, 2014	Jun. 18, 2014
Note 12 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, Conversion of Convertible Securities	702,341	720,000
Stock Issued During Period, Value, Conversion of Convertible Securities (in Dollars)	$ 21,000	$ 18,000
Due on May 15, 2014 [Member]
Note 12 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues		360,000

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Note 7 - Line of Credit and Term Loans (Details) - Principal Maturities of the Term Loan (USD $)	May 31, 2014
Note 7 - Line of Credit and Term Loans (Details) - Principal Maturities of the Term Loan [Line Items]
Less current portion of term loans	$ (1,165,159)
Long-term term loans	842,083
Term Loan [Member]
Note 7 - Line of Credit and Term Loans (Details) - Principal Maturities of the Term Loan [Line Items]
May 31, 2015	1,156,117
May 31, 2016	758,750
May 31, 2017	83,333
Total term loans	1,998,200
Less current portion of term loans	(1,156,117)
Long-term term loans	$ 842,083

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Condensed Consolidated Statements of Cash Flows (unaudited) (USD $)	9 Months Ended
	May 31, 2014	May 31, 2013
Cash Flows from Operating Activities
Net loss	$ (3,932,405)	$ (7,958,044)
Adjustment to reconcile net loss to net cash used in operating activities:
Loss on change in fair value of derivative liabilities		517,055
Loss (Gain) on asset disposal	48,431	(631)
Gain on debt settlement	(886,548)	521,820
Loss on asset impairment		455,916
Provision for doubtful accounts and sales returns	13,931	(31,343)
Provision for inventory reserve	(86,605)	206,120
Depreciation and amortization	92,336	85,619
Amortization of beneficial conversion feature	61,388	219,669
Amortization of deferred financing costs	452,155	172,257
Amortization of prepaid services paid in common stock	389,111	877,706
Amortization of debt discount	260,196	53,757
Warrants issued for services and financing costs		99,873
Stock options issued for services	36,575	131,341
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(34,140)	65,045
(Increase) decrease in inventory	246,807	336,690
(Increase) decrease in prepaid expenses and other assets	12,508	80,829
Increase (decrease) in accounts payable and accrued expenses	368,239	467,546
Increase (decrease) in accrued officer compensation	(9,070)	212,849
Increase (decrease) in deferred revenue	(3,907)	39,207
Increase (decrease) in accrued interest	420,783	156,581
Net cash used in operating activities	(2,389,045)	(2,547,470)
Cash Flows from Investing Activities
Purchase of property and equipment	(76,742)	(146,098)
Cash Flows from Financing Activities
Advances / (repayments) from officers, net	(3,825)
Payments for deferred financing costs		(6,000)
Payments on term loans	(18,000)
Proceeds from convertible term notes payable	500,000	1,791,000
Proceeds from related party convertible term notes payable	1,450,000	800,000
Repayments of related party convertible term notes payable		(100,000)
Net cash provided by financing activities	1,928,175	2,485,000
Net decrease in cash and cash equivalents	(530,112)	(208,568)
Cash and cash equivalents, beginning of year	680,914	376,554
Cash and cash equivalents, end of year	150,802	167,986
Non-Cash Financing Activities:
Conversion of accrued compensation into convertible notes payable	117,250	996,987
Conversion of accounts payable into common stock	315,000
Issuance of warrants for financing costs classified as debt discount	213,486
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	(69,242)	(146,098)
Stock Issued for Services/Financing Costs [Member]
Adjustment to reconcile net loss to net cash used in operating activities:
Stock Issued for Services/Financing Costs	161,170	742,667
Stock Issued for Services/Financing Costs [Member]
Adjustment to reconcile net loss to net cash used in operating activities:
Stock Issued for Services/Financing Costs	357,330
Stock Issued for Payment on Term Loan [Member]
Non-Cash Financing Activities:
Issuance of common stock for payment on term loan	$ 80,000

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Note 5 - Related Party Transactions

9 Months Ended

May 31, 2014

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 nine months ended May 31, 2014, there were advances from our Co-President totaling $151,000 and $154,825 of repayments. As of May 31, 2014, there was $25,000 of outstanding advances and $1,188 of related accrued interest.

Accounts Payable

Amounts payable to related parties totaled $328,000 and $105,000 as of May 31, 2014 and August 31, 2013, respectively.

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Note 10 - Provision for Income Taxes (Tables)

9 Months Ended

May 31, 2014

Income Tax Disclosure [Abstract]

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

	May 31, 2014			August 31, 2013
Net operating loss carry forward and deductible temporary differences		20,674,563			19,904,000
Valuation allowance	$	(20,674,563	)	$	(19,904,000	)
Net deferred tax asset	$	-		$	-

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

	May 31, 2014			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%	)
		-			-

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Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) (USD $)	9 Months Ended	12 Months Ended
	May 31, 2014	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)	17,956,715
JMJ Financial [Member] | V Warrants [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
JMJ Financial [Member] | W Warrants [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
Related Party [Member] | DD Warrants [Member] | Due On December 20, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.15	$ 0.15
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	200,000	200,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	10,085	10,085
Convertible Notes Payable, Due Date	Dec. 20, 2015	Dec. 20, 2015
Related Party [Member] | Awarded January 2014 [Member] | Due on June 30, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	100,000	100,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	6,000	6,000
Related Party [Member] | Awarded in Connection with Extension of Due Date [Member] | Due on June 30, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	200,000
Related Party [Member] | Due on June 30, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.15	$ 0.15
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	20,000
Convertible Notes Payable, Due Date	Jun. 30, 2014	Jun. 30, 2014
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, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.2	$ 0.2
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
Z Warrants [Member] | Due On March 25, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.2	$ 0.2
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
Z Warrants [Member] | Due on October 15, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.2	$ 0.2
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	200,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	7,340
Convertible Notes Payable, Due Date	Oct. 15, 2014	Oct. 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
Z Warrants [Member] | Due On January 21, 2016 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.2	$ 0.2
Convertible Notes Payable, Due Date	Jan. 21, 2016	Jan. 21, 2016
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
BB Warrants [Member] | Price per Share - $0.20 [Member] | Due On September 30, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.20	$ 0.20
Number of Shares Called by Warrants in Connection with Convertible Notes Payable (in Shares)	1,000,000
Warrant Issued in Connection with Convertible Notes Payable (in Dollars)	133,001
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
DD Warrants [Member] | Due On January 21, 2016 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.15	$ 0.15
Convertible Notes Payable, Due Date	Jan. 21, 2016	Jan. 21, 2016
Number of Shares Called by Warrants in Connection with Convertible Notes Payable (in Shares)	300,000	300,000
Warrant Issued in Connection with Convertible Notes Payable (in Dollars)	25,971	25,971
Accrued Interest (in Dollars)	365,037	287,827
CC Warrants [Member] | Related Party [Member] | Due On November 6, 2015 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.20	$ 0.20
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
Warrant Series EE [Member] | Related Party [Member] | Due on March 5, 2016 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.20	$ 0.20
Convertible Notes Payable, Due Date	Mar. 05, 2016	Mar. 05, 2016
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)	11,508	11,508
Price Per Share - $0.10 [Member] | 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)	$ 0.10	$ 0.10
Accrued Interest (in Dollars)	63,653
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
Accrued Interest (in Dollars)	234,986	97,716
Related Party [Member] | Due On March 13, 2014 [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)	$ 0.2	$ 0.2
Convertible Notes Payable, Due Date	Mar. 13, 2014	Mar. 13, 2014
Two Notes [Member] | Due On July 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.30	$ 0.30
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	300,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	30,000
Convertible Notes Payable, Due Date	Jul. 13, 2014	Jul. 13, 2014
Convertible Demand Notes Payable [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	5.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.10
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	51,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	3,060
Accrued Interest (in Dollars)	1,303
Due On April 10, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.20	$ 0.20
Convertible Notes Payable, Due Date	Apr. 10, 2014	Apr. 10, 2014
Due On July 9, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
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 Date, Shares (in Shares)	150,000	150,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	15,000	15,000
Convertible Notes Payable, Due Date	Jul. 09, 2014	Jul. 09, 2014
Due On July 13, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
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 Date, Shares (in Shares)	600,000	600,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	60,000	60,000
Convertible Notes Payable, Due Date	Jul. 13, 2014	Jul. 13, 2014
Due On August 9, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.2	$ 0.2
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	137,000	137,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	12,330	12,330
Convertible Notes Payable, Due Date	Aug. 09, 2014	Aug. 09, 2014
Accrued Interest (in Dollars)	7,952
Due on September 21, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	36.00%
Convertible Notes Payable, Due Date	Sep. 21, 2014
Shares Held as Collateral (in Shares)	20,000,000
Due on October 10, 2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	10.00%	10.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.20	$ 0.20
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	50,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	2,450
Convertible Notes Payable, Due Date	Oct. 10, 2014	Oct. 10, 2014
Due On December 30,2014 [Member]
Note 6 - Convertible Notes Payable (Details) - Convertible Notes Payable (Parentheticals) [Line Items]
Convertible Notes Payable, Interest Rate	8.00%	8.00%
Convеrtiblе Notеs Payablе, Convеrsion Pricе (in Dollars per share)	$ 0.2	$ 0.2
Common Stock Issued in Connection With Extension Date, Shares (in Shares)	4,000,000	4,000,000
Common Stock Issued in Connection With Extension Date, Value (in Dollars)	$ 240,000	$ 240,000
Convertible Notes Payable, Due Date	Dec. 30, 2014	Dec. 30, 2014

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Note 2 - Inventory (Tables)

9 Months Ended

May 31, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	May 31, 2014			August 31, 2013
Current:
Finished goods	$	1,041,739		$	1,286,953
Inventory valuation reserve for finished goods		(412,504	)		(498,483	)
Inventories, current	$	629,235		$	788,470
Noncurrent:
Device components	$	1,469,811		$	1,471,404
Inventory valuation reserve for components		(577,377	)		(578,003	)
Inventories, noncurrent	$	892,434		$	893,401