UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




x
                                      QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
                                        FOR
      THE QUARTERLY PERIOD ENDED MARCH 31, 2009ORo
                                      TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934FOR THE TRANSITION
      PERIOD From ______________to______________Commission
      file number 000-30104GPS INDUSTRIES,
    INC.(Exact
      name of registrant as specified in its
charter)




Nevada
            
            
            
            88-0350120(State
      or other jurisdiction of
              incorporated
      or organization)
            
            
            
            (I.R.S.
      Employer
              Identification
      No.)






1358 Fruitville Road, Suite 210, Sarasota, Florida
      34236(Address
      of principal executive
      offices)                (Zip
      Code)(941) 364-8180(Registrant’s
      telephone number, including area
code)




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 and 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 x        
No o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o        
No o




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




Large
      accelerated filer   o
                  Accelerated
      Filer o
                  Smaller
      reporting company xNon-accelerated
      Filer (Do not check if a smaller reporting company) o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


oYes                 x No




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.




Class
              
              
              
              Outstanding at May 11,
      2009Class
      A common stock, $.001 par value
              
              
              
              590,832,986
      shares







1




GPS INDUSTRIES, INC.


Index
              
              
              
              
              
              PagePart I.  Financial
      InformationItem 1.
              
              Financial
      Statements (unaudited)Condensed
      Consolidated Balance Sheets – March 31, 2009 (unaudited) and
      December 31, 2008
              
              4Condensed
      Consolidated Statements of Operations – Three-months ended March 31, 2009
      and 2008 (unaudited)
              
              5Condensed
      Consolidated Statements of Cash Flows – Three-months ended March 31, 2009
      and 2008 (unaudited)
              
              6Notes
      to Unaudited Condensed Consolidated Financial Statements
              
              7Item
      2.
              
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              10Item
      3.
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              12Item
      4.T
              
              Controls
      and Procedures
              
              12Part II.  Other
      InformationItem
      2.
              
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              14Item
      5.
              
              Other
      Information
              
              14Item
      6.
              
              Exhibits
              
              14Signatures
              
              15




2




Introductory Note: Caution
Concerning Forward-Looking Statements





This
Report and our other communications and statements may contain “forward-looking
statements,” including statements about our beliefs, plans, objectives, goals,
expectations, estimates, projections and intentions.  The words “may,”
“could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,”
“intend,” “plan,” “target,” “goal,” and similar expressions are intended to
identify forward-looking statements. All forward-looking statements, by their
nature, are subject to risks and uncertainties and are also subject to change
based on various factors, many of which are beyond our control.  Our
actual future results may differ materially from those set forth in our
forward-looking statements. For information concerning these factors and related
matters, see Item 2, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” in this Report, and the following sections
of our Annual Report on Form 10-K for the year ended December 31, 2008:
(a) “Risk Factors” in Part I, Item 1A and (b) “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7. However, other factors besides those referenced could
adversely affect our results, and you should not consider any such list of
factors to be a complete set of all potential risks or uncertainties. Any
forward-looking statements made by us herein speak as of the date of this
Report. We do not undertake to update any forward-looking statement, except as
required by law.





Unless
the context otherwise indicates, all references in this report to the “Company,”
“GPSI,” “we,” “us,” or “our,” or similar words are to GPS Industries, Inc. and
its subsidiaries.




3




Part I. Financial Information





Item
I. Financial Statements Condensed




GPS
      INDUSTRIES INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETSMarch
      31,
                                          
                                          
                                          December
      31,2009
                                          
                                          
                                          2008(Unaudited)ASSETS
                                          
                                          (In
      thousands, expect per share amounts)Current
      Assets:Cash
                                          
                                          $
                                          1,278
                                          
                                          
                                          $
                                          1,823Accounts
      receivable, net
                                          
                                          
                                          537
                                          
                                          
                                          
                                          692Inventories,
      net
                                          
                                          
                                          4,738
                                          
                                          
                                          
                                          4,311Prepaid
      expenses and other current assets
                                          
                                          
                                          271
                                          
                                          
                                          
                                          312Total
      current assets
                                          
                                          
                                          6,824
                                          
                                          
                                          
                                          7,138Property
      and equipment, net
                                          
                                          
                                          943
                                          
                                          
                                          
                                          978Third
      party leases with recourse, net
                                          
                                          
                                          461
                                          
                                          
                                          
                                          492Intangible
      assets, principally patents
                                          
                                          
                                          2,669
                                          
                                          
                                          
                                          2,831Other
      assets, including deposits of $847 and $862 in 2009 and
    2008
                                          
                                          
                                          1,109
                                          
                                          
                                          
                                          1,131Total
      assets
                                          
                                          $
                                          12,006
                                          
                                          
                                          $
                                          12,570LIABILITIES
      AND SHAREHOLDERS’ DEFICITCurrent
      Liabilities:Notes
      payable
                                          
                                          $
                                          1,300
                                          
                                          
                                          $
                                          1,352Current
      maturities of long-term debt
                                          
                                          
                                          3,315
                                          
                                          
                                          
                                          6,818Customer
      deposits
                                          
                                          
                                          5,907
                                          
                                          
                                          
                                          3,534Accounts
      payable
                                          
                                          
                                          5,659
                                          
                                          
                                          
                                          5,522Accrued
      liabilities
                                          
                                          
                                          7,829
                                          
                                          
                                          
                                          8,315Total
      current liabilities
                                          
                                          
                                          24,010
                                          
                                          
                                          
                                          25,541Long-term
      debt, net of current maturities
                                          
                                          
                                          11,258
                                          
                                          
                                          
                                          7,405Other
      accrued liabilities, net of current maturities
                                          
                                          
                                          1,781
                                          
                                          
                                          
                                          1,830Total
      liabilities
                                          
                                          
                                          37,049
                                          
                                          
                                          
                                          34,776SHAREHOLDERS’
      DEFICITSeries
      B convertible preferred stock, $10 par value, 4,000,000 authorized,
      3,244,089 issued and outstanding
                                          
                                          
                                          32,441
                                          
                                          
                                          
                                          32,441Class
      A common stock, $.001 par value, 1,600,000,000 authorized 563,499,653 and
      542,499,653 issued and outstanding, respectively
                                          
                                          
                                          563
                                          
                                          
                                          
                                          543Accumulated
      other comprehensive income
                                          
                                          
                                          722
                                          
                                          
                                          
                                          722Additional
      paid-in capital
                                          
                                          
                                          77,873
                                          
                                          
                                          
                                          77,896Accumulated
      deficit
                                          
                                          
                                          (136,642
                                          )
                                          
                                          
                                          (133,808
                                          )Total
      shareholders deficit
                                          
                                          
                                          (25,043
                                          )
                                          
                                          
                                          (22,206
                                          )$
                                          12,006
                                          
                                          
                                          $
                                          12,570See
      accompanying notes to these condensed consolidated financial
      statements




4




GPS
      INDUSTRIES INC. AND SUBSIDIARIES
              CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS





For
      the Three Months Ended March 31,2009
                                              
                                              2008(In
      thousands, expect per share amounts, unaudited)Revenue
                                              
                                              $
                                              888
                                              
                                              
                                              $
                                              2,267Cost
      of goods sold
                                              
                                              
                                              1,325
                                              
                                              
                                              
                                              2,025Gross
      profit (loss)
                                              
                                              
                                              (437
                                              )
                                              
                                              
                                              242Selling,
      general and administrative expenses
                                              
                                              
                                              1,573
                                              
                                              
                                              
                                              2,155Engineering
      and research and development
                                              
                                              
                                              401
                                              
                                              
                                              
                                              477Depreciation
      and amortization
                                              
                                              
                                              259
                                              
                                              
                                              
                                              5532,233
                                              
                                              
                                              
                                              3,185(2,670
                                              )
                                              
                                              
                                              (2,943
                                              )Other
      Income (Expense):Interest
      expense and finance costs
                                              
                                              
                                              (426
                                              )
                                              
                                              
                                              (266
                                              )Gain
      on foreign exchange
                                              
                                              
                                              226
                                              
                                              
                                              
                                              241Gain
      on settlement of liabilities
                                              
                                              
                                              31
                                              
                                              
                                              
                                              18Other
      Income
                                              
                                              
                                              6
                                              
                                              
                                              
                                              -(163
                                              )
                                              
                                              
                                              (7
                                              )Net
      loss
                                              
                                              $
                                              (2,833
                                              )
                                              
                                              $
                                              (2,950
                                              )Loss
      per common share-
      Basic and diluted
                                              
                                              $
                                              (0.01
                                              )
                                              
                                              $
                                              (0.01
                                              )Weighted
      average number of common shares outstanding-
      Basic and diluted
                                              
                                              
                                              553,088,542
                                              
                                              
                                              
                                              525,809,414





See
      accompanying notes to these condensed consolidated financial
      statements




5




GPS
      INDUSTRIES INC. AND SUBSIDIARIES
              CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
FLOWS





For
      the Three Months EndedMarch
      31,2009
                                                                                
                                                                                
                                                                                2008(In
      thousands, unaudited)Cash
      Flow From Operating ActivitiesNet
      Loss
                                                                                
                                                                                $
                                                                                (2,833
                                                                                )
                                                                                
                                                                                $
                                                                                (2,950
                                                                                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                                                                                
                                                                                
                                                                                91
                                                                                
                                                                                
                                                                                
                                                                                163Provision
      for doubtful accounts
                                                                                
                                                                                
                                                                                67
                                                                                
                                                                                
                                                                                
                                                                                -Amortization
      of convertible debt discount
                                                                                
                                                                                
                                                                                83
                                                                                
                                                                                
                                                                                
                                                                                -Amortization
      of intangibles
                                                                                
                                                                                
                                                                                190
                                                                                
                                                                                
                                                                                
                                                                                605Amortization
      of third party lessor recourse guarantees, net
                                                                                
                                                                                
                                                                                31
                                                                                
                                                                                
                                                                                
                                                                                31Issuance
      of stock for services
                                                                                
                                                                                
                                                                                79
                                                                                
                                                                                
                                                                                
                                                                                -Gain
      on settlement of liabilities
                                                                                
                                                                                
                                                                                (31
                                                                                )
                                                                                
                                                                                
                                                                                (18
                                                                                )Other
                                                                                
                                                                                
                                                                                (123
                                                                                )
                                                                                
                                                                                
                                                                                (525
                                                                                )Changes
      in operating assets and liabilities:Accounts
      receivable
                                                                                
                                                                                
                                                                                88
                                                                                
                                                                                
                                                                                
                                                                                145Inventories
                                                                                
                                                                                
                                                                                (427
                                                                                )
                                                                                
                                                                                
                                                                                (882
                                                                                )Prepaid
      expenses and other assets
                                                                                
                                                                                
                                                                                35
                                                                                
                                                                                
                                                                                
                                                                                58Customer
      deposits
                                                                                
                                                                                
                                                                                2,374
                                                                                
                                                                                
                                                                                
                                                                                410Accounts
      payable and accrued liabilities
                                                                                
                                                                                
                                                                                280
                                                                                
                                                                                
                                                                                
                                                                                1,133Other
      accrued liabilities
                                                                                
                                                                                
                                                                                (338
                                                                                )
                                                                                
                                                                                
                                                                                (315
                                                                                )Net
      Cash Used in Operating Activities
                                                                                
                                                                                
                                                                                (434
                                                                                )
                                                                                
                                                                                
                                                                                (2,145
                                                                                )Cash
      Flow From Investing ActivitiesPurchase
      of property and equipment
                                                                                
                                                                                
                                                                                (56
                                                                                )
                                                                                
                                                                                
                                                                                (60
                                                                                )Cost
      of acquisition of subsidiaries, net of cash acquired
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                (1,658
                                                                                )Net
      Cash Flow Used  In Investing Activities
                                                                                
                                                                                
                                                                                (56
                                                                                )
                                                                                
                                                                                
                                                                                (1,718
                                                                                )Cash
      Flow From Financing ActivitiesProceeds
      from loans
                                                                                
                                                                                
                                                                                3,500
                                                                                
                                                                                
                                                                                
                                                                                1,800Repayments
      on loans and bank indebtedness
                                                                                
                                                                                
                                                                                (3,555
                                                                                )
                                                                                
                                                                                
                                                                                1,424Net
      Cash Flow Provided By (Used In) Financing Activities
                                                                                
                                                                                
                                                                                (55
                                                                                )
                                                                                
                                                                                
                                                                                3,224Net
      Decrease In Cash
                                                                                
                                                                                
                                                                                (545
                                                                                )
                                                                                
                                                                                
                                                                                (639
                                                                                )Cash,
      Beginning of Period
                                                                                
                                                                                
                                                                                1,823
                                                                                
                                                                                
                                                                                
                                                                                1,488Cash,
      End of Period
                                                                                
                                                                                $
                                                                                1,278
                                                                                
                                                                                
                                                                                $
                                                                                849Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                                                                                
                                                                                $
                                                                                79
                                                                                
                                                                                
                                                                                $
                                                                                253Non-Cash
      Investing And Financing Activities:Common
      stock issued to settle liabilities
                                                                                
                                                                                $
                                                                                53
                                                                                
                                                                                
                                                                                $
                                                                                -Common
      stock issued for investments
                                                                                
                                                                                $
                                                                                -
                                                                                
                                                                                
                                                                                $
                                                                                8,034Preferred
      stock issued for investment
                                                                                
                                                                                $
                                                                                -
                                                                                
                                                                                
                                                                                $
                                                                                1,200Note
      payable issued for accrued interest
                                                                                
                                                                                $
                                                                                270
                                                                                
                                                                                
                                                                                $
                                                                                -




See
accompanying notes to these condensed consolidated financial
statements




6




GPS INDUSTRIES, INC.


Notes
to Condensed Consolidated Financial Statements


All
amounts in thousands, except per share amounts




Note
1 – Basis of Presentation





The
accompanying condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.





The
financial statements have been prepared assuming that the Company will continue
as a going concern.  The Company's ability to continue as a going concern
is subject to substantial doubt due to the Company’s history of losses, limited
financial resources and need for additional working capital to implement the
Company's business plan.  At March 31, 2009 the Company has a working
capital deficit.  The Company requires additional funding in order to
repay its debt and to market and distribute its products, exploit the technology
underlying its patents, further develop existing and new products, and pay its
other existing current liabilities.





In the
opinion of management, all material adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2009 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 2009.





The
condensed consolidated balance sheet at December 31, 2008 has been derived
from the audited consolidated financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Certain
reclassifications were made to the 2008 amounts to conform to the 2009
presentation including a reclassification of certain Uplink amortization from
gross margin to selling, general and administrative expenses.  The
impact of this reclassification is as follows:


March
      31, 2008As
      Reported
                                                                                
                                                                                
                                                                                Reclassification
                                                                                
                                                                                
                                                                                As
      RestatedRevenue
                                                                                
                                                                                $
                                                                                2,666
                                                                                
                                                                                
                                                                                $
                                                                                399
                                                                                
                                                                                
                                                                                $
                                                                                2,267Cost
      of Goods Sold
                                                                                
                                                                                
                                                                                2,270
                                                                                
                                                                                
                                                                                
                                                                                245
                                                                                
                                                                                
                                                                                
                                                                                2,025Gross
      profit (loss)
                                                                                
                                                                                
                                                                                396
                                                                                
                                                                                
                                                                                
                                                                                154
                                                                                
                                                                                
                                                                                
                                                                                242Operating
      and other expenses
                                                                                
                                                                                
                                                                                3,346
                                                                                
                                                                                
                                                                                
                                                                                (154
                                                                                )
                                                                                
                                                                                
                                                                                3,192Net
      Loss
                                                                                
                                                                                $
                                                                                (2,950
                                                                                )
                                                                                
                                                                                $
                                                                                -
                                                                                
                                                                                
                                                                                $
                                                                                (2,950
                                                                                )





For
further information, refer to the consolidated financial statements and
footnotes thereto included in the GPS Industries, Inc. Annual Report on Form
10-K for the year ended December 31, 2008.




Note 2 –
Inventory, Net





Inventory
consists of the following:





March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008($000
      omitted)Inventory
      Components
                        
                        $
                        4,172
                        
                        
                        $
                        3,993Completed
      Units
                        
                        
                        817
                        
                        
                        
                        1,111Deferred
      Installation Costs
                        
                        
                        2,093
                        
                        
                        
                        1,5517,082
                        
                        
                        
                        6,655Less:
      Inventory Reserve
                        
                        
                        (2,344
                        )
                        
                        
                        (2,344
                        )$
                        4,738
                        
                        
                        $
                        4,311




7




Note
3 – Accrued Liabilities




Accrued
liabilities consist of the following:





March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008($000
      omitted)Accrued
      restructuring costs
                    
                    $
                    1,238
                    
                    
                    $
                    1,450Accrued
      liability - Optimal acquisition
                    
                    
                    1,160
                    
                    
                    
                    1,307Accrued
      interest
                    
                    
                    1,144
                    
                    
                    
                    887Accrued
      professional fees
                    
                    
                    448
                    
                    
                    
                    669Deferred
      revenue
                    
                    
                    1,455
                    
                    
                    
                    1,597Inventory
      in transit
                    
                    
                    661
                    
                    
                    
                    661Accrued
      payroll related
                    
                    
                    513
                    
                    
                    
                    521Accrued
      warranty costs
                    
                    
                    364
                    
                    
                    
                    430Accrued
      other
                    
                    
                    846
                    
                    
                    
                    793Total
      accrued liabilities
                    
                    $
                    7,829
                    
                    
                    $
                    8,315




Note 4 – Other Accrued Liabilities




Other
accrued liabilities consist of the following:





March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008($000
      omitted)EsEstimated
      recourse liability
                    
                    $
                    1,334
                    
                    
                    $
                    1,428Third-party
      lease rental agreements
                    
                    
                    696
                    
                    
                    
                    747Other
      deferred revenue
                    
                    
                    964
                    
                    
                    
                    855Total
      Other Accrued Liabilities
                    
                    
                    2,994
                    
                    
                    
                    3,030Less:  Current
      portion
                    
                    
                    (1,213
                    )
                    
                    
                    (1,200
                    )Total
      Long-term Other Accrued Liabilities
                    
                    $
                    1,781
                    
                    
                    $
                    1,830




Note
5 - Notes Payable and Long-Term Debt





Notes Payable– Notes payable
consists of the following:




March
      31,
                                  
                                  
                                  December
      31,2009
                                  
                                  
                                  2008($000
      omitted)12.0%
      to 18.0% Term notes, payable on demand
                                  
                                  $
                                  1,244
                                  
                                  
                                  $
                                  1,244Bank
      overdraft credit facility, due on demand, interest only payments at 3.75%
      over
                                    the
      bank’s base rate (7% at December 31, 2008), collateralized by a debenture
                                    comprising
      fixed and floating charges over all the assets and undertakings of GPSI
                                    Europe
                                  
                                  
                                  56
                                  
                                  
                                  
                                  108$
                                  1,300
                                  
                                  
                                  $
                                  1,352




8




Long – Term Debt – Long term
debt consists of the following:





March
      31,
                                
                                
                                December
      31,2009
                                
                                
                                2008($000
      omitted)6%
      Revolving Line of Credit, retired in April 2009
                                
                                $
                                3,000
                                
                                
                                $
                                6,5007%
      Promissory Note to related party, principal and interest due in June
      2011
                                
                                
                                3,500
                                
                                
                                
                                -7%
      Non-negotiable Convertible Promissory Note to related party, convertible
      to Series
                                  C
      Preferred stock, principal and interest due in June 2011, net of
      unamortized discount
                                  of
      $748,000 and $832,000 in 2009 and 2008 respectively.
                                
                                
                                4,752
                                
                                
                                
                                4,6687%
      Promissory Note to related party, principal and interest due in June
      2011
                                
                                
                                2,337
                                
                                
                                
                                2,3377%
      Other Secured Promissory Note to related party, due November 2011,
      convertible to
                                  Series
      C Preferred Stock
                                
                                
                                400
                                
                                
                                
                                4007%
      Note Payable to related party, payable in four equal quarterly
      installments through
                                  September
      30, 2009
                                
                                
                                100
                                
                                
                                
                                100Other
      notes payable maturing through September 2009 with monthly principal and
                                  interest
      payments of $1,287
                                
                                
                                7
                                
                                
                                
                                118%
      Fleet Rental Notes maturing through September 2011, with monthly principal
                                  payment
      ranging from $1,367 to $6,872 over the period
                                
                                
                                207
                                
                                
                                
                                2077%
      Note Payable due December 2010
                                
                                
                                270
                                
                                
                                
                                -Total
      Long-term debt
                                
                                
                                14,573
                                
                                
                                
                                14,223Less:
      Current portion
                                
                                
                                (3,315
                                )
                                
                                
                                (6,818
                                )Long-term
      debt, net of current maturities
                                
                                $
                                11,258
                                
                                
                                $
                                7,405




Note
6- Common Stock





In February 2009, the Company issued
21,000,000 shares of its Class A common stock, at an aggregate value of
$298,000, in settlement of certain obligations.





During April, 2009, the Company issued
27,333,333 shares of common stock and a warrant to purchase up to 6,833,333
shares of the Company’s common stock at $0.122 per share in exchange for
forgiveness of the $820,000 owed to Leisurecorp, LLC.  This amount had
previously been included in current liabilities in the Company’s consolidated
balance sheets at March 31, 2009 and December 31, 2008.  The Company
expects to record a gain on extinguishment of debt of approximately
$400,000.







Note
7- Net Loss per Share





The additional shares arising from the
exercise of the stock option and warrant or the conversion of preferred stock
have been excluded from the computation of diluted net loss per share because
their inclusion would be anti-dilutive.




9




Note
8- Restructuring Costs





In 2007 the Company recorded $1,091,000
in restructuring charges for accrued severance benefits resulting from the
downsizing of current operations, and an acquisition the Company rescinded in
2007.




During
2008 the Company recorded an accrual of $1,476,000 in restructuring charges
which consisted principally of severance benefits resulting from the plan to
downsize and realign the ongoing operations adopted by the new management team
in 2008.





No additional expenses were charged to
these accruals during the three months ended March 31, 2008 and
2009.  The Company paid $237,000 and $212,000 respectively, of these
costs during the three months ending March 31, 2008 and 2009.





Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations




Management’s
Discussion and Analysis of Results of Operations




Three-months
ended March 31, 2009 compared to March 31, 2008





For the
three-months ended March 31, 2009, we recorded total revenue of $888,000
compared to $2,267,000 during the same period in 2008. This $1,379,000 decrease
was due to a decrease in 18-hole equivalent sales at lower average selling price
per 18-hole equivalents.  This decrease in 18-hole equivalent sales
was due to certain technical issues with the new Informer HDmax unit which were
resolved early in the second quarter.  The vast majority of contracted
new installations for 2009 are for the Informer HDmax, therefore revenues from
new system sales were significantly diminished.




Cost of
goods sold in 2009 is lower than 2008 due to the decrease in new system
sales.  Negative gross margin in 2009 is the result of the gross
margin generated by the low sales volume being insufficient to cover the fixed
cost.




Selling,
general and administrative expenses decreased by $582,000 in 2009 to $1,573,000
from $2,155,000 in 2008.  The decrease was primarily a result of the
reduction of payroll of $371,000, tradeshows of $139,000, rent of $67,000, and
legal of $48,000 offset by higher consulting expenses of
$160,000.  The reduction in payroll is attributed to the consolidation
of efforts and attrition from moving corporate headquarters to Sarasota, FL from
Vancouver, BC.  In 2009, the Company’s decision to reduce the
participation level in tradeshows resulted in significant
savings.  During 2008, the company vacated two of the previously
occupied offices and relocated to less expensive locations in both Austin, TX
and Vancouver, BC.  The increase in consulting fees in 2009 is
primarily from an agreement between the Company and GPSI Asia during the second
half of 2008, in which the Company pays GPSI Asia $20,000 per month, $60,000 for
the quarter.  Additionally, an agreement was completed for consulting
services, which the Company paid with stock, valued at $65,000 at the time of
issuance.




Engineering
and research and development expenses for the three-months ending March 31, 2009
decreased by $76,000.  The savings are primarily due to reductions in
staff, resulting in $250,000 decrease in payroll expenses during the first three
months of 2009 compared to the first three months of 2008.  Related
expenses of travel, communications, and general office also decreased by
$65,000.  These savings were offset by the reduction of cost recovery
recognized by the Company as a result of its arrangement with Club
Car.  The Company had entered into an arrangement with Club Car to
develop the Guardian product utilizing IQ Link technology.  The
agreement provides for the Company to recover $750,000 of development costs
during the development phase.  For the three months ended March 31,
2008, the Company had recorded $337,000 in recovery, and for the three months
ended March 31, 2009, the Company recorded $112,000 in recovery.  The
resulting decrease of $225,000 in recovery reduced the impact of the savings
from staff reductions.  The final $25,000 in cost recovery will be
recognized in April 2009.





Depreciation
and amortization expense is primarily due to the amortization of the Company’s
acquired patents, as well as the depreciation of the Company’s property and
equipment. Depreciation and amortization decreased from $553,000 to $259,000.
The decrease is a result of the final valuation and subsequent impairment
assigned to the assets acquired as part of the Uplink and GPSI Europe
transactions including certain patents, fixed assets and goodwill. All patents
are being amortized over the remaining life of the patents.





In
December 2008, the Company’s senior management committed to a restructuring plan
involving the downsizing of the Company’s operations.  This plan
included a process to terminate employees and reduce office
rents.  This restructure plan was begun in January
2009.  For the three months ended March 31, 2009, the Company utilized
$212,000 of the $1,368,000 planned restructure accrual.




10




The
Company’s loss before other income (expense) decreased by $273,000; from
$2,943,000 in 2008 to $2,670,000 in 2009. The decrease in loss before other
income (expense) for 2009 was largely due to efforts to consolidate and
reorganize the Company after the acquisition of Uplink in January
2008.





During
the period ended March 31, 2009, the company incurred a foreign currency
exchange gain of $226,000 compared to a gain of $241,000 in 2008.





Interest
expense and finance costs increased from $266,000 in the first three months of
2008 to $426,000 in 2009.  These costs increased primarily due to the
increase in the Company’s notes payable, including the $5,500,000 borrowing
under a Convertible Promissory Note issued in June 2008 and the $3,500,000
Promissory Note issued in January 2009.





The
Company recorded a gain on extinguishment of debt of $31,000 for the three month
period ended March 31, 2009 versus a gain of $18,000 in the same period in
2008.




As a
result of the above, net loss was $2,833,000 for the three month period ended
March 31, 2009 compared to $2,950,000 for the same period in 2008.




Liquidity
and Capital Resources





We have
incurred losses since our inception and expect to continue to incur losses in
the near future.  Our auditors have issued a going concern opinion as
a result of the Company’s inability to generate sufficient cash from operations
to meet our current obligations.  We need a substantial amount of new
funding to meet our cash requirements, including the repayment of debt, for the
next 12 months and to fully implement our business plan .We currently are
evaluating alternate sources and types of financing. GPSI has undertaken a
restructuring of our operations to increase sales and reduce expenses, with the
goal of reducing and eventually eliminating our operating
losses.  However, there can be no assurance that we will be successful
in these efforts or that we will be able to continue as a going
concern.





At March 31, 2009 the Company had cash
and cash equivalents of $1,278,000 as compared to $1,823,000 as of December 31,
2008.





Net cash
used by operating activities for the three month period ended March 31, 2009 was
$119,000, as compared to $1,528,000 during the three month ended March 31,
2008.  Net cash used in investing activities was $357,000 in the first
three months of 2009 as compared to $814,000 in the same period in
2008.  Net cash used by financing activities was $69,000 for the first
quarter of 2009, as compared to net cash provided of $1,703,000 for the same
quarter of 2008.




As of
March 31, 2009 the Company had a working capital deficiency of $17,186,000
compared to $18,403,000 as of December 31, 2008.





Our
ability to repay our accounts payable and other outstanding indebtedness, and
our ability to maintain sufficient liquidity to continue our operations, is
significantly dependent upon our ability to generate sufficient cash from sales
in 2009 and beyond, supplemented by the Company’s ability to attract additional
investment.  The Company is continuing to work with its existing
investors to obtain further debt or equity funding that will provide longer-term
liquidity although no assurance can be given that such funds will be available
or, if available what the terms might be.





11





Critical
Accounting Policies, Estimates and Assumptions





We
believe the following discussion addresses our most critical accounting
policies, which are those that are most important to the portrayal of our
financial condition and results of operations and require management’s most
difficult, subjective, or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
Accounting policies, in addition to the critical accounting policies referenced
below, are presented in Note 2 to our consolidated financial statement included
in our Annual Report on form 10-K for the year ended December 31, 2008,
“Summary of Significant Accounting Policies.”




Use
of Estimates




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




Revenue
Recognition




The
Company recognizes revenue only when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or determinable, and
collectability is probable. When other significant obligations remain after
products are delivered, associated revenue is recognized only after such
obligations are fulfilled.





System
sales are derived from the sales of the Company’s product lines directly to
end-user customers and third-party equipment lessors. Recurring revenues consist
of (i) transactions which are recognized ratably over the end-user contract term
from equipment sales to third parties that have a recourse component to the
Company , (ii) revenues realized from the rental of Company owned equipment
through either fixed rental payments or actual usage (iii) advertising revenues
and (iv) service revenues. The Company recognizes revenue on certain contracts
based on completion of major project milestones.  These project
contracts are with a related party.





Rental
income arises from the leasing of the Company’s golf equipment to customers.
Lease terms are generally 60 months and are operating leases. Depreciation
expense for assets subject to these operating leases is provided primarily on
the straight-line method over the term of the lease in amounts necessary to
reduce the carrying amount to its estimated residual value.




For
certain long-term equipment lease contracts, the Company utilizes third-party
financing entities to which the Company sells the equipment for a purchase
price. The Company evaluates the rights of the financing entity in these
transactions to determine the proper revenue recognition
treatment.  For instances where the Company has guaranteed the lease
rental payments in the event of customer default, revenue and product cost is
deferred and is recognized ratably over the contract term.





Item 3.
Quantitative and Qualitative Disclosures about Market Risk





The
Company’s operations are principally located in the United States and Canada
and, to a lesser extent,  the United Kingdom. The Company is subject
to business risks inherent in non-U.S. activities, including political and
economic uncertainty, import and export limitations, and market risk related to
changes in interest rates and foreign currency exchange rates. The Company’s
principal currency exposure against the U.S. dollar is the Canadian
dollar.





The
Company had no holdings of derivative financial or commodity interest at March
31, 2009.  Substantially all of the Company’s borrowings at March 31,
2009 bear interest at fixed rates.





Item 4T.
Controls and Procedures





Disclosure Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports that we file with the SEC
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and that such
information is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate, to allow for timely
decisions regarding required disclosure. Disclosure control procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and Management is required to apply
its judgment in evaluating the cost-benefit relationship of controls and
procedures.





12




Management’s
Report on Internal Control Over Financial Reporting





The
Company’s management's is responsible for establishing and maintaining adequate
internal control over financial reporting for the registrant. The Company’s
management, including the Principal Executive Officer and the Chief Financial
Officer, carried out an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures pursuant to
Exchange Act Rule 13a - 15(b). Based upon the evaluation, the Principal
Executive Officer and the Chief Financial Officer concluded that the
Company’s internal controls are not effective and contain significant
deficiencies, in part as a result of the material weakness discussed
below.





The
report entitled Internal Control - Integrated Framework, issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) defines a material
weakness as a control deficiency, or combination of control deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or
detected.




The
Company’s annual report for the year ended December 31, 2008 did not include an
attestation report of the Company's registered public accounting firm regarding
internal control over financial reporting. Management's report was not subject
to attestation by the Company's registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
company to provide only management's report in this annual report.





Management’s
Discussion of Material Weakness





Management
has identified the following groups of control deficiencies, each of which, in
the aggregate, represents a material weakness in the Company’s internal control
over financial reporting as of March 31, 2009:





·
            The
      Company has engaged in a number of related-party
      transactions.  Additionally, certain of the Company’s executive,
      directors and shareholders have outside business interest that could
      conflict with the priorities of the
Company.


·
            The
      Company has not widely circulated a code of ethics beyond the Company’s
      directors and officers, including the Company’s whistle blower
      policy.


·
            The
      Company did not design and implement controls to communicate and monitor
      corporate strategy and objectives or compliance with policies and
      procedures, including expenditure policies at its operation in the United
      Kingdom.


·
            The
      Company has no independent directors on the Board of
      Directors.


·
            There
      has been a temporary degradation of controls, which may or may not have
      reached the level of a material weakness, resulting from the departure of
      certain key personnel arising from the integration of the Uplink
      acquisition into GPS Industries.





Management
of the Company takes very seriously the strength and reliability of the of the
internal control environment for the Company. During 2008 and continuing in
2009, the Company has undertaken steps necessary to improve the control
environment that include:





·
            The
      Company implemented a new accounting system to more effectively manage
      expenditures and analyze results against budgets and
  plans.


·
            Engaged
      Deloitte Touche, LLP to assist in the assessment, development and
      implementation of internal controls and business process
      documentation.  The Company has started to develop a top-down,
      risk-based approach to SOX compliance that focuses on key controls and
      high-risk areas.  This effort was suspended during the third
      quarter of 2008 as the Company focused on the integration of Uplink into
      the GPS Industries organization.


·
            The
      Company has hired a permanent Chief Executive
  Officer.


·
            The
      Company reconstituted and enhanced the Board of Directors with the
      appointment of Tony Sole, CFO of Leisurecorp, Declan Hogan, Senior IT
      Manager, Leisurecorp, and David Chessler, CEO of GPS
      Industries.





Management
acknowledges its responsibility for internal controls over financial reporting
and seeks to continually improve these controls. In order to achieve compliance
with Section 404 of the Sarbanes Oxley Act, we are performing system and process
documentation and evaluation needed to comply with Section 404, which is both
costly and challenging. We believe our process for documenting, evaluating and
monitoring our internal control over financial reporting is consistent with the
objectives of Section 404 of the Act.





13




Changes
in Internal Controls





The
Company has continued to take remediation steps to enhance its internal control
over financial reporting and reduce control deficiencies. Since mid - 2008, the
remediation efforts were slowed as a result of trying to integrate the
operations of the Uplink acquisition and to streamline the resulting
organization.  We will continue to work on the elimination of control
weaknesses and deficiencies noted.





Part II. Other Information





Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds





During
the three months ended March 31, 2009, the Company issued the following
unregistered securities:





·
            On
      February 12, 2009, the Company issued 3,000,000 shares valued at $38,700
      for settlement of trade payables.


·
            On
      February 12, 2009, the Company issued 5,000,000 shares valued at $64,500
      for services rendered.


·
            On
      February 13, 2009, the Company issued 12,000,000 shares valued at $180,000
      as further payment against the liability for the 2004 purchase of Optimal
      Golf Solutions, Inc.


·
            On
      February 16, 2009, the Company issued 1,000,000 shares valued at $15,000
      in settlement of a separation
agreement.





Item 5.
Other Information





In April 2009, the Company entered into
a Master Purchase Agreement with GPS Golf Investors LLC (GGI), a limited
liability company owned or controlled by the Company’s Vice President of Sales
and Chief Executive Officer pursuant to which the Company has the right to
request that GGI purchase equipment of the Company relating to GPS devices for
use on golf courses.  Any purchase will be pursuant to a purchase
supplement, which will cover the terms and conditions of any
purchase.  GGI will lease the purchased equipment to golf
courses.  The Purchase Agreement provides, among other things, that
GGI will receive all equipment lease receipts until their investment in
purchased equipment is recovered; after which subsequent equipment lease
receipts are split with the Company equally.  The Purchase Agreement
also provides for a maintenance agreement between the Company and the
prospective lessee.





Item 6.
Exhibits





(a)
            Exhibits




10.27
                      
                      Master
      Purchase Agreement, dated April 08, 2009, between GPS Golf Investors LLC
      and GPS Industries, Inc.10.28
                      
                      Warrant,
      dated April 23, 2009, Leisurecorp, LLC31.1
                      
                      Certification
      of Chief Executive Officer Pursuant to Rule 13a – 14(a) of the Securities
      Exchange Act of 1934, as amended31.2
                      
                      Certification
      of Chief Financial Officer Pursuant to Rule 13a – 14(a) of the Securities
      Exchange Act of 1934, as amended32
                      
                      Certifications
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.
      S. C. Section
1350.








14




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.




GPS
      INDUSTRIES, INC.May
      15, 2009
                    By:
                    /s/ David
      ChesslerDavid
      Chessler, Chief Executive Officer (Principal

                      Executive
      Officer)




May
      15, 2009
                  By:
                  /s/ Russell
      R. Lee  IIIRussell
      R. Lee, Chief Financial Officer (Principal

                    Financial
      and Accounting Officer)




15