UNITED
      STATES




**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-Q**





(MARK
      ONE)





x 
QUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
      EXCHANGE ACT OF 1934





FOR
      THE
      QUARTERLY PERIOD ENDED March 31, 2008





OR





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





COMMISSION
      FILE NUMBER: 000-30104







**GPS
      INDUSTRIES, INC.**


(Exact
      name of registrant as specified in its charter)





**Nevada**
            
            **88-0350120**(State or other jurisdiction of incorporation organization)
            
            (IRS
                Employer Identification No.)





5500
                152nd Street, Suite 214
              Surrey,
                B.C. Canada
            
            V3S
                5J9(Address
                of principal executive offices)
            
            (Zip
                Code)





(604)
      576-7442


(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 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
      the number of shares outstanding of each of the registrant's classes of common
      stock, as of the latest practicable date. On May 15, 2008, there were 541,686,703 shares
      of common stock issued and outstanding.





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  Yes
o
      No o


Non-accelerated
      filer Yes
o
      No o


Accelerated
      filer Yes
o
      No o


Smaller
      reporting company Yes
x
      No o





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












**GPS
      INDUSTRIES, INC.**


**For
      the period ended March 31, 2008**


**FORM
      10-Q**





**PAGE NO.****PART
                I. FINANCIAL INFORMATION**Item
                1.
            Consolidated
                Financial Statements (unaudited):
            
            1Consolidated
                Balance Sheets at March 31, 2008 and December 31, 2007
                (audited)
            
            1Consolidated
                Statements of Operations for the three months ended March 31, 2008
                and
                2007
            
            2Consolidated
                Statements of Cash Flows for the three months ended March 31, 2008
                and
                2007
            
            3Notes
                to Consolidated Financial Statements
            
            4Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of Operations
            
            16Item
                3.
            Quantitative
                and Qualitative Disclosure About Market Risk
            
            21Item
                4.
            Controls
                and Procedures
            
            21PART
                II. OTHER INFORMATION
            
            23Item
                1.
            Legal
                Proceedings
            
            23Item
                1A.
            Risk
                Factors
            
            24Item
                2.
            Unregistered
                Sales of Equity and Use of Proceeds
            
            30Item
                3.
            Defaults
                Upon Senior Securities
            
            30Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            30Item
                5.
            Other
                Information
            
            30Item
                6.
            Exhibits
            
            31SIGNATURES
            
            32









**PART
      I**





**ITEM
      1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):**




**GPS
      INDUSTRIES INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**





**(000's except per share data and number of shares)**
              
              **March 31, 2008**
              
              **December 31, 2007****(unaudited)**
              
              **(audited)****Assets****Current
                  assets**Cash
              
              $
              849
              
              $
              1,488Accounts
                  receivable
              
              
              1,349
              
              
              1,493Inventories
              
              
              4,682
              
              
              3,011Short-term
                  corporate loan
              
              
              -
              
              
              946Prepaid
                  expenses and other current assets
              
              
              443
              
              
              459Total
                  current assets
              
              
              7,323
              
              
              7,397**Property
                  and equipment, net**
              
              
              1,290
              
              
              1,139**GPS
                  system assets under third party leases with recourse,
                  net**
              
              
              3,375
              
              
              617**Other
                  assets**
              
              
              1,318
              
              
              423**Patents/designs,
                  net plus goodwill**
              
              
              17,972
              
              
              2,414$
              31,278
              
              $
              11,990**Liabilities
                  and Stockholders' Equity/(Deficit)****Current
                  liabilities**Short
                  term debt
              
              $
              5,206
              
              $
              3,379Short
                  term deferred revenue
              
              
              1,973
              
              
              847Accounts
                  payable
              
              
              7,091
              
              
              5,078Accrued
                  liabilities
              
              
              3,819
              
              
              1,948Current
                  maturities of long-term debt
              
              
              233
              
              
              -18,322
              
              
              11,252Long-term
                  debt, net of current maturities
              
              
              1,642
              
              
              -Deferred
                  revenue
              
              
              6,161
              
              
              1,252Total
                  liabilities
              
              
              26,125
              
              
              12,504**Stockholders'
                  equity/(deficit)**Series
                  B Convertible Preferred Shares, $10 par value, 4,000,000 authorized,
                  3,244,089 issued and outstanding
              
              
              32,441
              
              
              31,241Class
                  A common stock, $.001 par value, 1,600,000,000 authorized 541,686,703
                  issued and outstanding and 399,203,369 issued and
                  outstanding
              
              
              542
              
              
              399Accumulated
                  other comprehensive income
              
              
              722
              
              
              722Additional
                  paid-in capital
              
              
              77,325
              
              
              70,052Accumulated
                  deficit
              
              
              (105,877
              )
              
              (102,928
              )Total
                  Stockholder's Equity/(Deficit)
              
              
              5,153
              
              
              (514
              )$
              31,278
              
              $
              11,990





*See
      accompanying notes to these unaudited consolidated financial
      statements*




1




**GPS
      INDUSTRIES INC. AND SUBSIDIARIES**


**UNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**For the Three Months Ended March 31**
              
              **2008**
              
              **2007****(000's except per share data and number of shares) (unaudited)**
              
              
              
              **(restated)****Revenue**
              
              $
              2,666
              
              $
              2,093**Cost
                      of goods sold**
              
              
              2,270
              
              
              1,805**Gross
                  profit**
              
              
              396
              
              
              288**Operating
                  Expenses**Selling,
                  general and administrative expenses
              
              
              2,309
              
              
              2,201Research
                  and development
              
              
              477
              
              
              993Amortization
                  of intellectual property
              
              
              553
              
              
              923,339
              
              
              3,286**Loss
                  Before Other Income (Expense)**
              
              
              (2,943
              )
              
              (2,998
              )**Other
                  Income (Expense)**Finance
                  costs
              
              
              (12
              )
              
              (22
              )Interest
                  expense
              
              
              (254
              )
              
              (294
              )Gain
                  on foreign exchange
              
              
              241
              
              
              14Gain
                  on extinguishment of debt
              
              
              18
              
              
              108(7
              )
              
              (194
              )**Net
                  Loss**
              
              $
              (2,950
              )
              $
              (3,192
              )**Loss
                  per common share - basic and diluted**$
              (0.01
              )
              $
              (0.01
              )**Weighted
                  average number of common shares outstanding - basic and
                  diluted**
              
              
              525,809,414
              
              
              368,430,929




*See
      accompanying notes to these unaudited consolidated financial
      statements*





2





**GPS
      INDUSTRIES INC. AND SUBSIDIARIES**


**UNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**For the Three Months Ended March 31**
              
              **2008**
              
              **2007****(000's except per share data and number of shares) (unaudited)**
              
              
              
              **(restated)****Cash
                  Flow From Operating Activities**Net
                  loss from operations
              
              $
              (2,950
              )
              $
              (3,192
              )Adjustments
                      to reconcile net loss to net cash used in operating
                      activities:Depreciation
                  and amortization
              
              
              949
              
              
              92Amortization
                  of deferred compensation
              
              
              -
              
              
              56Gain
                  on extinguishment of debt
              
              
              (18
              )
              
              -Expenses
                  paid by issuance of stock
              
              
              18
              
              
              -Expenses
                  paid by issuance of stock options
              
              
              -
              
              
              49Unrealized
                  foreign exchange losses
              
              
              (240
              )
              
              -Amortization
                  of finance costs
              
              
              -
              
              
              2Changes
                  in operating assets and liabilities:Inventories
              
              
              (882
              )
              
              (311
              )Accounts
                  receivable
              
              
              170
              
              
              (1,497
              )Prepaid
                  expenses and deposits
              
              
              42
              
              
              196Other
                  assets
              
              
              (33
              )
              
              16Accounts
                  payable and accrued liabilities
              
              
              780
              
              
              (184
              )Discontinued
                  operations - accounts payable and accrued liabilities
              
              
              -
              
              
              (108
              )Deferred
                  Revenue
              
              
              636
              
              
              361**Net
                  Cash Used In Operating Activities**
              
              
              (1,528
              )
              
              (4,520
              )**Cash
                  Flow From Investing Activities**Purchase
                  of property and equipment
              
              
              (60
              )
              
              (
                  8
              )Investment
                  in Optimal Golf Solutions Inc.
              
              
              -
              
              
              (807
              )Investment
                  in Patents
              
              
              (3
              )
              
              -**Net
                  Cash Flow Used In Investing Activities**
              
              
              (63
              )
              
              (815
              )Changes
                  in non-cash working capital related to investing
                  activities
              
              
              (751
              )
              
              -(814
              )
              
              (
                  815
              )**Cash
                  Flow From Financing Activities**Subscription
                  receivable - Preferred Stock
              
              
              -
              
              
              5,000Proceeds
                  (payments) - short term loans
              
              
              1,703
              
              
              (1,816
              )**Net
                  Cash Flow Provided By Financing Activities**
              
              
              1,703
              
              
              3,184**Net
                  Decrease In Cash**
              
              
              (639
              )
              
              (2,151
              )**Cash,
                  Beginning Of Period**
              
              
              1,488
              
              
              2,196**Cash,
                  End Of Period**
              
              $
              849
              
              $
              45**Supplemental
                  disclosure of cash flow information:**Cash
                  paid for interest
              
              $
              253
              
              $
              294Cash
                  paid for taxes
              
              $
              -
              
              $
              -**Non-Cash
                  Investing And Financing Activities**Common
                  stock issued for investments
              
              $
              8,034
              
              $
              1,653Preferred
                  stock issued for investment
              
              $
              1,200
              
              $
              -




*See
      accompanying notes to these unaudited consolidated financial
      statements*




3




**GPS
      Industries, Inc.**




Notes
      to
      Consolidated Financial Statements




Three
      months ended March 31, 2008 and 2007




(Amounts
      in thousands of dollars, except per share data)




(Unaudited)




**1.
      Organization and Basis of Presentation**




Basis
      of
      Presentation - The consolidated financial statements include the operations
      of
      GPS Industries, Inc. and its wholly-owned subsidiaries (collectively, the
      "Company"). All significant intercompany transactions and balances have been
      eliminated in consolidation.




The
      interim consolidated financial statements are unaudited, but in the opinion
      of
      management of the Company, contain all adjustments, which include normal
      recurring adjustments, necessary to present fairly the financial position of
      the
      Company at March 31, 2008 and December 31, 2007, the results of operations
      for
      the three months ended March 31, 2008 and 2007, and the cash flows for the
      three
      months ended March 31, 2008 and 2007. The results of operations for the three
      months ended March 31, 2008 are not necessarily indicative of the results of
      operations to be expected for the full fiscal year ending December 31,
      2008.




Certain
      information and footnote disclosures normally included in financial statements
      that have been presented in accordance with generally accepted accounting
      principles have been condensed or omitted pursuant to the rules and regulations
      of the Securities and Exchange Commission with respect to interim financial
      statements, although management of the Company believes that the financial
      statements provide a
      fair
      presentation of the periods presented .
      For
      further information, refer to the consolidated financial statements and notes
      thereto included in the Company's Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 2007, as filed with the Securities and Exchange
      Commission.




Business – GPS
      Industries, Inc. (GPSI or the Company) is a global technology solutions provider
      with customizable, patent-protected applications in GPS and Wi-Fi software
      and
      hardware for use with golf course operations and residential community
      developments. With the development of the Inforemer HDX largely complete, GPSI
      is transitioning away from a research and development focus; however, GPSI
      will
      continue to dedicate resources to new opportunities where market potential
      and
      economics justify investment. GPSI’s primary business is the development,
      manufacture and sale of the Inforemer HDX mobile display units (“MDU”) in both
      cart mounted and hand held product lines along with the related
      infrastructure.  In
      late
      2007, GPSI reorganized its various product offerings and divisions to more
      accurately reflect how GPSI manages its internal operations whereby Inforemedia,
      Wi Stream and Fire at the Flag are peripheral to the core Inforemer product
      and
      hence the management of these divisions have been collapsed into its core
      Inforemer business. GPSI has offices in the United States, Canada and United
      Kingdom in order to focus on the geographic markets including North America,
      Europe and the Middle East with exclusive distributor arrangements covering
      Asia, South Africa, Australia and New Zealand. Corporate activities are divided
      between its Vancouver, Canada and Austin, Texas offices with software
      development, research and development, manufacturing and finance located in
      Canada and sales, customer service and installation and repairs and maintenance
      in Austin, Texas.




GPS
      Industries, Inc. was originally incorporated as Diversified Marketing Services
      Ltd. in 1996, subsequently changed its name to Inforetech Wireless Technology
      Inc. in 1999 and then to GPS Industries, Inc in 2004. GPSI common stock was
      first publicly traded on the OTC Bulletin Board in January 2000 as Inforetech
      Wireless Technology and is currently trading on the OTC Bulletin Board under
      the
      symbol "GPSN."




4




In
      January 2001, Inforetech Wireless Technology Inc. acquired 100% of the
      outstanding capital stock of ProShot Golf, Inc. through a wholly owned
      subsidiary, Inforetech Golf Technology 2000 Inc. (IGT). IGT filed for relief
      under Chapter 7 of the U.S. Bankruptcy Court on December 19, 2002 and ProShot
      filed for relief under Chapter 7 of the U.S Bankruptcy Court on May 31,
      2002.





In
      October 2007, GPSI acquired 100% of the outstanding capital stock of Direct
      Golf
      Services Inc. and Golf Academies Ltd., now operating as GPSI Europe and owns
      17.5% of GPSI Asia, its Asian distributor.




On
      January 18, 2008, GPSI’s wholly owned subsidiary, GPS IT, LLC, acquired the
      assets and assumed certain liabilities of UpLink Corporation.




Restatement
      of 2007 Quarterly Comparative Consolidated Financial Statements
      (Unaudited)





As
      a
      result of an in-depth review of certain sales and installation agreements and
      course installations that occurred in the first three quarters of 2007, the
      Company determined that it had incorrectly accounted for the related revenues,
      cost of goods sold, course assets, accrued liabilities and deferred revenues.
      Therefore, the Company’s management, its Audit Committee and its Board of
      Directors determined that, the Company’s financial statements for the quarters
      ended March 31, 2007, June 30, 2007 and September 30, 2007 initially filed
      with
      the Securities and Exchange Commission (the SEC) on May 21, 2007, August 14,
      2007 and November 19, 2007 should no longer be relied upon. The Company’s
      financial statements presented in this report for the period ended March 31,
      2007 reflects these restatements.




The
      following tables present selected consolidated statement of operations
      information for the quarter ended March 31, 2007 as previously reported and
      as
      restated ($000s, except per share data) (unaudited):





Quarter Ended March 31, 2007
            
            ReportedTotal
                revenue
            
            $
            2,257Total
                cost of goods sold
            
            
            1,657Gross
                margin (loss)
            
            
            600Operating
                expense
            
            
            3,286Loss
                from operations
            
            
            (2,686
            )Net
                loss
            
            
            (2,880
            )Basic
                and diluted loss per share
            
            $
            (0.01
            )




Quarter Ended March 31, 2007
            
            Adjustments[1]Total
                revenue
            
            $
            (164
            )Total
                cost of goods sold
            
            
            148Gross
                margin (loss)
            
            
            (312
            )Operating
                expense
            
            
            -Loss
                from operations
            
            
            (312
            )Net
                loss
            
            
            (312
            )Basic
                and diluted loss per share
            
            $
            -




5




Quarter Ended March 31, 2007
            
            RestatedTotal
                revenue
            
            $
            2,093Total
                cost of goods sold
            
            
            1,805Gross
                margin (loss)
            
            
            288Operating
                expense
            
            
            3,286Loss
                from operations
            
            
            (2,998
            )Net
                loss
            
            
            (3,192
            )Basic
                and diluted loss per share
            
            $
            (0.01
            )





[1]
      The
      primary basis for the corrections is to recognize a further performance
      obligation whereby GPSI had sold the HDX Inforemer System to the customer but
      was unable to deliver and instead provided the HD Inforemer system. This created
      a further obligation to deliver the HDX when available. Additionally, the
      Company failed to recognize expense for 1st year warranty and service costs
      on
      sales during the period.





**2.
      Acquisitions**





UpLink
      operations, assets and certain assumed liabilities





Effective
      January 18, 2008, the Company acquired the operations, assets and certain
      assumed liabilities of UpLink Corporation (UpLink), a Texas corporation that
      produces and sells global positioning satellite distance measuring systems,
      associated software, software development and service and maintenance contracts
      to golf course owners and operators. In particular, the acquisition enhanced
      the
      GPSI patent portfolio through the addition of UpLink’s patents for
      position-based advertising on a golf course, “IQ Link” cart control and
      monitoring technology and added over 200 customers to GPSI’s customer base. For
      these factors, the Company purchased the UpLink business at a premium over
      the
      fair value of the net assets acquired.





In
      consideration for the net assets acquired, GPSI paid $11.837 million including
      Notes Payable of $1.521 million, 142.100 million Common Shares valued at $7.814
      million, 120 thousand Series B Preferred Shares with a par value of $1.200
      million and 4.918 million common stock warrants at an exercise price of $0.122
      per share valued at $219 thousand. The Company incurred transaction costs of
      $1.083 million including the elimination of inter-company loans to UpLink.
      The
      shares of common stock issued were valued at the average market price of GPSI
      common shares ($0.055) for the 2 trading days before and after the announcement
      of closing of the acquisition on January 18, 2008.





Upon
      closing the common shares issued were held in escrow as security of
      representations and warranties. The Company retains the option to re-purchase
      up
      to 59.7 million common shares at a fixed price of $0.12 per share. If GPSI
      does
      not exercise its right to repurchase approximately 30 million of the shares
      after the first anniversary of the acquisition, then all of the shares in escrow
      will be released. If the Company, exercises its repurchase rights at the first
      anniversary, then 112.3 million shares will be released from escrow at that
      time
      with the remaining shares being released upon the second
      anniversary.





As
      a
      result of the acquisition, UpLink’s results of operations have been included in
      the Company’s Consolidated Financial Statements from the date of acquisition.
      The business combination was accounted for under Financial Accounting Standard
      Board (FASB) Statement No. 141, “Business Combinations.” The application of
      purchase accounting under Statement No. 141 requires the total purchase price
      be
      allocated to the fair value of the assets acquired and liabilities assumed
      based
      on their fair values at the acquisition date, with amounts exceeding fair value
      being recorded as goodwill. The Company is currently in the process of assessing
      and finalizing the fair values of the assets acquired and liabilities assumed
      but the following table summarizes the Company’s best estimate of the purchase
      accounting at this time; however, due to the inherent difficulty in assessing
      the fair value of patents, trademarks and other intangibles acquired, the
      Company was not able to allocate to those items at this time.




6




Amount(unaudited)Assets Acquired
            
            ($000's)Cash
            
            $
            21Accounts
                receivable
            
            
            30Inventory
            
            
            789Prepaid
                expenses
            
            
            25Fixed
                assets
            
            
            254GPS
                system assets under third party leases with recourse, net
            
            
            3,096Deposits/other
                assets
            
            
            861Patents/designs,
                plus goodwill
            
            
            16,004Total
                assets acquired
            
            $
            21,080Liabilities
                assumedAccounts
                payable
            
            $
            1,881Accrued
                liabilities
            
            
            1,361Deferred
                revenue
            
            
            267Long-term
                debt
            
            
            478Long-term
                deferred revenue
            
            
            5,256Total
                liabilities assumed
            
            $
            9,243Net
                assets acquired
            
            $
            11,837Funded
                by:Restricted
                shares issued
            
            $
            7,814Series
                B shares issued
            
            
            1,200Common
                stock warrants issued
            
            
            219Secured
                promissory notes issued
            
            
            1,521Intercompany
                loans extinguished
            
            
            1,083$
            11,837




The
      following pro forma condensed combined Statements of Income and notes thereto,
      assume the Acquisition occurred at the beginning of the periods presented except
      for the application of FASB Statement 141. These condensed financial statements
      should be read in conjunction with the consolidated financial statements of
      GPSI
      for the 12 months ended December 31, 2007 and the year ended December 31,
      2006.





The
      following pro forma financial information is presented for illustrative purposes
      only and is not necessarily indicative of:





i.
            The
                results of operations that would have occurred had the acquisition
                taken
                place on the dates indicated or,ii.
            The
                future operations of the combined
                business.





The
      following information should be relied on only for the limited purpose of
      presenting what the financial results of operations of the combined businesses
      might have looked like had the Acquisition taken place at an earlier
      date.




7




**For the three month period ended March 31, 2008,**
            
            **GPSI**
            
            **UpLink**
            
            **Adjustments**
            
            **Proforma**
              **Combined****(000's except per share data and number of shares) (unaudited)****Revenue**
            
            $
            1,995
            
            $
            743
            
            $
            (72)
            (a)
            $
            2,666**Cost
                of goods sold**
            
            
            1,714
            
            
            556
            
            
            -
            
            
            2,270**Gross
                profit**
            
            $
            281
            
            $
            187
            
            $
            (72
            )
            $
            396**Operating
                Expense**Selling,
                general and administrative
            
            
            1,985
            
            
            324
            
            
            -
            
            
            2,309Research
                and development
            
            
            416
            
            
            61
            
            
            -
            
            
            477Amortization
                of intellectual property
            
            
            95
            
            
            158
            
            
            300
            (b)
            
            553$
            2,496
            
            $
            543
            
            $
            300
            
            $
            3,339**Loss
                Before Other Income (Expense)**
            
            
            (2,215
            )
            
            (356
            )
            
            (372
            )
            
            (2,943
            )Other
                Income (Expense)
            
            
            42
            
            
            (
                49
            )
            
            -
            
            
            (7
            )**Net
                Loss**
            
            $
            (2,173
            )
            $
            (405
            )
            $
            (372
            )
            $
            (2,950
            )**Net
                loss per common share, basic and diluted**
            
            $
            (0.01
            )
            
            
            
            $
            (0.00
            )
            $
            (0.01
            )**Weighted
                    average common shares outstanding, basic and
                    diluted**
            
            
            397,778,277
            
            
            
            
            
            142,083,334
            (c)
            
            539,861,611





**For the three month period ended March 31, 2007,**
            
            **GPSI**
            
            **UpLink**
            
            **Adjustments**
            
            **Proforma**
              **Combined****(000's except per share data and number of shares) (unaudited)**
            
            **(restated)****Revenue**
            
            $
            2,093
            
            
            3,305
            
            $
            (72)
            (a)
            $
            5,326**Cost
                of goods sold**
            
            
            1,805
            
            
            2,079
            
            
            -
            
            
            3,884**Gross
                profit**
            
            $
            288
            
            $
            1,226
            
            $
            (72
            )
            $
            1,442**Operating
                Expense**Selling,
                general and administrative
            
            
            2,201
            
            
            1,341
            
            
            -
            
            
            3,542Research
                and development
            
            
            993
            
            
            259
            
            
            -
            
            
            1,252Amortization
                of intellectual property
            
            
            92
            
            
            160
            
            
            300
            (b)
            
            552$
            3,286
            
            $
            1,760
            
            $
            300
            
            $
            5,346**Loss
                Before Other Income (Expense)**
            
            
            (2,998
            )
            
            (534
            )
            
            (372
            )
            
            (3,904
            )Other
                Income (Expense)
            
            
            (
                194
            )
            
            (129
            )
            
            -
            
            
            (323
            )**Net
                Loss**
            
            $
            (3,192
            )
            $
            (663
            )
            $
            (372
            )
            $
            (4,227
            )**Net
                loss per common share, basic and diluted**
            
            $
            (0.01
            )
            
            
            
            $
            (0.00
            )
            $
            (0.01
            )**Weighted
                      average common shares outstanding, basic and
                      diluted**
            
            
            368,430,929
            
            
            
            
            
            142,083,334
            (c)
            
            510,514,263




(a)
            Elimination
                of inter-company revenues and expenses related to the settlement
                and
                acquisition of Patent Licenses by UpLink Corporation from
                GPSI





(b)
            Amortization
                of the estimated amount of value ascribed to intangible assets and
                patents. For this purpose, it was assumed that approximately $8.150
                million would be allocated under FASB Statement 141 to such assets.
                It was
                further estimated that the useful life of these acquired assets would
                approximate 5 years. As such, for the purpose of the pro forma
                presentation, we estimated amortization expense of $300 thousand
                for the
                each of the three month periods ended March 31, 2008 and March 31,
                2007.





(c)
            Adjustment
                to reflect shares issued on acquisition for the period presented
                as if
                acquisition happened at the beginning of
                period.




8


**3.
        Going Concern**
  Going
        Concern - The consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern, which contemplates the realization
        of assets and the satisfaction of liabilities in the normal course of business.
        The carrying amounts of assets and liabilities presented in the consolidated
        financial statements do not purport to represent the realizable or settlement
        values. The Company has incurred significant losses and had a working capital
        deficit at March 31, 2008 and December 31, 2007. The continued commercialization
        of the Company's technology is dependent on the Company's ability to
        successfully finance its working capital requirements through a combination
        of
        debt and equity financings, sales of its GPS systems and payments from
        distributors and potential strategic partners. The Company's independent
        registered certified public accountants, in their independent auditors' report
        on the consolidated financial statements as of and for the year ended December
        31, 2007, have expressed substantial doubt about the Company's ability to
        continue as a going concern.
  The
        Company’s operations currently do not generate sufficient cash to internally
        fund its working capital needs. Accordingly, to date, its operating deficits
        have been funded by outside sources of funding, including funds raised from
        (i)
        the sale of shares of its common stock and preferred stock, (ii) the issuance
        of
        debentures, (iii) the issuance of shares as payment for services and in
        satisfaction of indebtedness, (iv) bank lines of credit, and (v) short-term
        loans made to it by the Company’s affiliates and by third parties. For at least
        the next twelve months, the Company anticipates that such funding activities
        must continue in order for the Company to maintain its operations. Based
        on its
        currently projected revenues and its existing lines of credit the Company
        does
        not have sufficient capital resources to fund its anticipated working capital
        needs. The Company is currently working with its existing investors to obtain
        additional debt or equity funding.
  Two
        of
        the Company’s investors have provided additional funding subsequent to March 31,
        2008. On April 10, 2008, Leisurecorp LLC, a major stockholder of the Company
        that has the ability to exercise significant influence over the Company,
        advanced the Company $477 thousand against a contract between the two parties
        whereby GPSI will design, supply, deliver and install a Wi-Fi network and
        GPS
        management system for a golf estates project in Dubai. These funds were advanced
        so the Company could meet its immediate working capital requirements. In
        addition, on May 2, 2008, GPSI and Silicon Valley Bank (SVB) entered into
        an
        amendment to a Loan and Security Agreement (Loan Agreement) dated
        February 28, 2008 pursuant to which SVB agreed to make available to the
        Company advances under a revolving line of credit up to $6.5 million, an
        increase of $3.5 million from the existing Loan Agreement. The increased
        obligations of the Company under the Loan Agreement are guaranteed by Great
        White Shark Enterprises LLC, a stockholder, whereby GWSE has pledged cash
        collateral in the form of certificates of deposit placed on deposit at SVB.
        The
        increase is initially limited to $2.0 million with the ability to increase
        to $3.5 million with a corresponding amount of additional security to be
        pledged
        by GWSE.
 
 The
        Company’s ability to repay its accounts payable and other outstanding
        indebtedness and the Company’s ability to maintain sufficient liquidity to
        continue its operations is significantly dependent upon its ability to generate
        sufficient sales in the second and third quarters of 2008 and beyond further
        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. At this time,
        the
        Company is unable to determine if it will be successful in obtaining this
        funding or any other. Should the Company not be able to obtain sufficient
        funding, the Company will not be able to meet its working capital needs in
        the
        near future.
  **4.
        Summary of Significant Accounting Policies**
 
 The
        accompanying consolidated financial statements have been prepared in accordance
        with U.S. generally accepted accounting principles and include the accounts
        of
        the Company and its consolidated subsidiaries. In the opinion of management,
        the
        accompanying unaudited consolidated financial statements contain all adjustments
        necessary to present fairly the consolidated financial position of the Company
        and its consolidated results of operations and cash flows. These interim
        consolidated financial statements and notes should be read in conjunction
        with
        the financial statements and accompanying notes included in the Company’s Annual
        Report on Form 10-KSB for the year ended December 31, 2007.
 
 9
  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 (as described below), (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. Major projects revenues consist
        of transactions involving long-term contracts. The Company recognizes revenue
        on
        long-term contracts using the percentage of completion method and measures
        the
        extent of work accomplished by performance of critical project
        milestones.
 
 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 is recognized ratably over the contract
        term.
  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.
 
 Foreign
        Currency Translation - Assets and liabilities of subsidiaries operating in
        foreign countries are translated into U.S. dollars using the exchange rate
        in
        effect at the balance sheet date or historical rate, as applicable. Results
        of
        operations are translated using the average exchange rates prevailing throughout
        the year. Both the effects of exchange rate fluctuations on translating foreign
        currency assets and liabilities into U.S. dollars and gains and losses resulting
        from foreign currency transactions are included in operations.
  Net
        Loss
        Per Common Share - Basic loss per common share is calculated by dividing
        net
        loss by the weighted average number of common shares outstanding during the
        period. Diluted loss per common share reflects the potential dilution that
        would
        occur if dilutive stock options and warrants were exercised. These potentially
        dilutive securities were not included in the calculation of loss per share
        for
        the periods presented because the Company incurred a loss during such periods
        and thus their effect would have been anti-dilutive. Accordingly, basic and
        diluted loss per common share is the same for all periods
        presented.
 
 Stock-Based
        Compensation - The Company periodically issues shares of common stock for
        services rendered or for financing costs. Such shares are valued based on
        the
        market price on the transaction date.
 
 The
        Company periodically issues stock options and warrants to employees and
        non-employees in non-capital raising transactions for services and for financing
        costs.
  10
  The
        Company expenses stock options and warrants under the provisions of Statement
        of
        Financial Accounting Standards (SFAS) No. 123(R), "Share-Based Payment" (SFAS
        123(R)). Stock-based compensation represents the cost related to stock-based
        awards granted to employees and others. The Company measures stock-based
        compensation cost at grant date, based on the estimated fair value of the
        award,
        and recognizes the cost as expense on a straight-line basis (net of estimated
        forfeitures) over the requisite service period. The Company estimates the
        fair
        value of stock options using a Black-Scholes valuation model. The expense
        is
        recorded in the Consolidated Statements of Operations.
 
 The
        Black-Scholes option valuation model was developed for use in estimating
        the
        fair value of traded options that have no vesting restrictions and are fully
        transferable. In addition, option valuation models require the input of highly
        subjective assumptions including the expected stock price
        volatility.
  Income
        Taxes **-** The
        Company records a valuation allowance to reduce its deferred tax assets arising
        from net operating loss carry forwards to the amount that is more likely
        than
        not to be realized. In the event the Company was to determine that it would
        be
        able to realize its deferred tax assets in the future in excess of its recorded
        amount, an adjustment to the deferred tax assets would be credited to operations
        in the period such determination was made. Likewise, should the Company
        determine that it would not be able to realize all or part of its deferred
        tax
        assets in the future, an adjustment to the deferred tax assets would be charged
        to operations in the period such determination was made.
  Reclassifications
        - Certain reclassifications of items in the prior period's financial statements
        have been made to conform to the current year's presentation.
  **Recent
        Accounting Pronouncements**
 In
        March
        2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”)
        No. 161, Disclosures about Derivative Instruments and Hedging Activities,
        an amendment of FASB Statement No. 133, which requires additional
        disclosures about the objectives of the derivative instruments and hedging
        activities, the method of accounting for such instruments under SFAS
        No. 133 and its related interpretations, and a tabular disclosure of the
        effects of such instruments and related hedged items on our financial position,
        financial performance, and cash flows. SFAS No. 161 is effective for the
        Company beginning January 1, 2009. Management believes that, for the
        foreseeable future, this Statement will have no impact on the financial
        statements of the Company once adopted.
 
 In
        December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
        Combinations. This Statement replaces FASB Statement No. 141, Business
        Combinations. This Statement retains the fundamental requirements in
        Statement 141 that the acquisition method of accounting (which Statement
        141 called the purchase method) be used for all business combinations and
        for an
        acquirer to be identified for each business combination. This Statement defines
        the acquirer as the entity that obtains control of one or more businesses
        in the
        business combination and establishes the acquisition date as the date that
        the
        acquirer achieves control. This Statement’s scope is broader than that of
        Statement 141, which applied only to business combinations in which control
        was
        obtained by transferring consideration. By applying the same method of
        accounting—the acquisition method—to all transactions and other events in which
        one entity obtains control over one or more other businesses, this Statement
        improves the comparability of the information about business combinations
        provided in financial reports. This Statement requires an acquirer to recognize
        the assets acquired, the liabilities assumed, and any non-controlling interest
        in the acquiree at the acquisition date, measured at their fair values as
        of
        that date, with limited exceptions specified in the Statement. That replaces
        Statement 141’s cost-allocation process, which required the cost of an
        acquisition to be allocated to the individual assets acquired and liabilities
        assumed based on their estimated fair values. This Statement applies to all
        transactions or other events in which an entity (the acquirer) obtains control
        of one or more businesses (the acquirer), including those sometimes referred
        to
        as “true mergers” or “mergers of equals” and combinations achieved without the
        transfer of consideration, for example, by contract alone or through the
        lapse
        of minority veto rights. This Statement applies to all business entities,
        including mutual entities that previously used the pooling-of-interests method
        of accounting for some business combinations. It does not apply to: (a) The
        formation of a joint venture, (b) The acquisition of an asset or a group
        of
        assets that does not constitute a business, (c) A combination between entities
        or businesses under common control, (d) A combination between not-for-profit
        organizations or the acquisition of a for-profit business by a not-for-profit
        organization. This Statement applies prospectively to business combinations
        for
        which the acquisition date is on or after the beginning of the first annual
        reporting period beginning on or after December 15, 2008. An entity may not
        apply it before that date. We are currently evaluating the potential impact
        of
        Statement 141 (revised 2007) on our financial statements.
 
 11
  In
        December 2007, the FASB issued FASB Statement No. 160 - Noncontrolling Interests
        in Consolidated Financial Statements - an amendment of ARB No. 51. This
        Statement applies to all entities that prepare consolidated financial
        statements, except not-for-profit organizations, but will affect only those
        entities that have an outstanding noncontrolling interest in one or more
        subsidiaries or that deconsolidate a subsidiary. This Statement amends ARB
        51 to
        establish accounting and reporting standards for the noncontrolling interest
        in
        a subsidiary and for the deconsolidation of a subsidiary. It clarifies that
        a
        noncontrolling interest in a subsidiary is an ownership interest in the
        consolidated entity that should be reported as equity in the consolidated
        financial statements. Before this Statement was issued, limited guidance
        existed
        for reporting noncontrolling interests. As a result, considerable diversity
        in
        practice existed. So-called minority interests were reported in the consolidated
        statement of financial position as liabilities or in the mezzanine section
        between liabilities and equity. This Statement improves comparability by
        eliminating that diversity. A noncontrolling interest, sometimes called a
        minority interest, is the portion of equity in a subsidiary not attributable,
        directly or indirectly, to a parent. The objective of this Statement is to
        improve the relevance, comparability, and transparency of the financial
        information that a reporting entity provides in its consolidated financial
        statements by establishing accounting and reporting standards that require:
        (a)
        The ownership interests in subsidiaries held by parties other than the parent
        be
        clearly identified, labeled, and presented in the consolidated statement
        of
        financial position within equity, but separate from the parent’s equity, (b) The
        amount of consolidated net income attributable to the parent and to the
        noncontrolling interest be clearly identified and presented on the face of
        the
        consolidated statement of income, (c) Changes in a parent’s ownership interest
        while the parent retains its controlling financial interest in its subsidiary
        be
        accounted for consistently. A parent’s ownership interest in a subsidiary
        changes if the parent purchases additional ownership interests in its subsidiary
        or if the parent sells some of its ownership interests in its subsidiary.
        It
        also changes if the subsidiary reacquires some of its ownership interests
        or the
        subsidiary issues additional ownership interests. All of those transactions
        are
        economically similar, and this Statement requires that they be accounted
        for
        similarly, as equity transactions, (d) When a subsidiary is deconsolidated,
        any
        retained noncontrolling equity investment in the former subsidiary be initially
        measured at fair value. The gain or loss on the deconsolidation of the
        subsidiary is measured using the fair value of any noncontrolling equity
        investment rather than the carrying amount of that retained investment, (e)
        Entities provide sufficient disclosures that clearly identify and distinguish
        between the interests of the parent and the interests of the noncontrolling
        owners. This Statement is effective for fiscal years, and interim periods
        within
        those fiscal years, beginning on or after December 15, 2008 (that is, January
        1,
        2009, for entities with calendar year-ends). Earlier adoption is prohibited.
        This Statement shall be applied prospectively as of the beginning of the
        fiscal
        year in which this Statement is initially applied, except for the presentation
        and disclosure requirements. The presentation and disclosure requirements
        shall
        be applied retrospectively for all periods presented. We are currently
        evaluating the potential impact of Statement 141 (revised 2007) on our financial
        statements.
 
 **5.
        Supplemental Balance Sheet Information**
 
 **Other
        Assets**
 Other
        assets consist of the following items ($000’s):
 
 March 31, 2008
              
              December 31, 2007Other
                  assetsLong-term
                  receivables
              
              $
              244
              
              $
              223Deferred
                  development costs
              
              
              104
              
              
              104Deferred
                  acquisition costs
              
              
              -
              
              
              96Deferred
                  costs - major projects
              
              
              108
              
              
              -Deposits
              
              
              862
              
              
              -Total
                  other assets
              
              $
              1,318
              
              $
              423
  **Bank
        Indebtedness**
 At
        December 31, 2007, the Company had borrowed $183 thousand under a line of
        credit. The line of credit bore interest at prime plus 0.5%, and was repayable
        in full on demand and was secured by a one year standby bank letter of credit
        for $1.500 million that was provided by a third party, Hansen Inc. This standby
        letter of credit from Hansen Inc. expired on March 31, 2008 at which point
        the
        line of credit was removed. All funds borrowed under this line of credit
        were
        repaid at March 31, 2008.
  12
 
 On
        February 29, 2008, the Company and Silicon Valley Bank (SVB) entered into
        a Loan
        and Security Agreement (Loan Agreement) pursuant to which the SVB agreed
        to make
        available to the Company advances under a revolving line of credit up to
        $3.000
        million. At March 31, 2008, the Company has drawn $3.000 million on the line
        of
        credit. The Loan Agreement terminates in February 2010 at which time all
        advances and unpaid interest are due. The principal amount outstanding accrues
        interest at a floating rate per annum of the greater of 1% above the prime
        rate
        or 6%, with interest payable monthly. $1.500 million of the obligations of
        the
        Company under the Loan Agreement are guaranteed by Douglas Wood, the Company’s
        interim Chief Executive Officer, member of the board of directors and a
        shareholder. On March 30, 2008, Douglas Wood passed away. On his passing,
        the
        Company triggered an event of default in the Loan Agreement whereby the bank
        could demand repayment of $1.500 million secured by Mr. Wood. SVB is currently
        forbearing such demand as it negotiates with the estate of Mr. Wood. The
        obligations of the Company under the Loan Agreement are also secured by a
        first
        priority security interest (subject to permitted liens) on the assets of
        the
        Company, and certificates of deposit in the principal amount of $1.500 million
        provided by Hansen, Inc. The Loan Agreement provides for customary covenants.
        On
        March 31, 2008, the Company used $1.500 million of the Loan Agreement to
        repay a
        credit facility from HSBC Bank which was secured by a letter of credit from
        Hansen, Inc.
 
 The
        Company’s 100% wholly owned subsidiary, GPSI Europe (formerly Golf Academies
        Limited and Direct Golf Services) has an overdraft facility with their bank
        comprised of both a Sterling overdraft, a Euro overdraft and a USD overdraft
        with a combined limit of £35 thousand (an amount equivalent to $70 thousand USD
        at March 31, 2008). As of March 31, 2008, GPSI Europe had drawn a net amount
        equivalent to $8 thousand USD on this facility. The bank may at anytime demand
        repayment as such amounts owing have been classified as current liabilities.
        Interest is to be charged at the rate of 3.75% per annum over the bank’s base
        rate as published from time to time. The facility is secured by a debenture
        comprising fixed and floating charges over all the assets and undertaking
        of
        GPSI Europe and personal guarantee limited to £15 thousand   (an amount
        equivalent to $30 thousand USD at March 31, 2008) given by GPSI Europe’s board
        of directors.
 
 As
        part
        of the Company’s acquisition of Golf Academies (now part of GPSI Europe), the
        Company assumed current liabilities which included a small firms loan. The
        loan
        is a four year fixed term facility with principal balance of £9 thousand (an
        amount equivalent to $18 thousand USD at March 31, 2008) outstanding at March
        31, 2008. The principal and interest under the term loan is payable in monthly
        installments of £3 thousand (an amount equivalent to $6 thousand USD at March
        31, 2008). Interest is to be charged at the rate of 2.5% per annum over the
        lender’s base rate. The facility is secured by a debenture including legal
        mortgage over specified property; fixed equitable charge over all present
        and
        future freehold and leasehold property; first fixed charge over among other
        things books and debts, chattels, goodwill and uncalled capital both present
        and
        future; and first floating charge over all the assets and undertaking both
        present and future of GPSI Europe.
  **Short-Term
        Loans**
  As
        of
        March 31, 2008, the Company has $3.563 million owing on short term notes.
        These
        notes consist of the following:
  a)
              Secured
                  promissory notes with a balance of $761 thousand outstanding at
                  March 31,
                  2008 ($nil at December 31, 2007). These notes were entered into
                  pursuant
                  to the UpLink Asset Purchase Agreement. They bear interest ranging
                  from
                  prime plus 1% to 18% per annum with principal and interest due
                  in six
                  equal monthly installments beginning January 31, 2008 and fully
                  repayable
                  by June 30, 2008.
  b)
              Purchase
                  order financing whereby the Company has entered into agreements
                  with
                  several entities and individuals to provide purchase order financing
                  on
                  confirmed sales orders. Amounts advanced at March 31, 2008 are
                  $1.230
                  million ($1.520 million at December 31, 2007). The Company pays
                  interest
                  ranging from 12% to 18% per annum for the period of these advances.
  13
  c)
              Short-term
                  loan for $1.572 million at March 31, 2008 ($1.572 million at December
                  31,
                  2007) from Douglas Wood, the Company’s former interim Chief Executive
                  Officer, board of director member and a shareholder who passed
                  away on
                  March 30, 2008. This loan is repayable on demand and bears interest
                  at 8%
                  per annum.
  **Acquisition
        of Optimal Golf Solutions, Inc.**
 
 On
        November 19, 2004 the Company acquired 100% of the common shares of Optimal
        Golf
        Solutions, Inc. (Optimal), a Texas corporation for a total of $5,250,000
        plus
        interest of 4.75% on the principal balance outstanding payable by a combination
        of cash and stock. In January 2007 the Company paid $807 thousand cash and
        issued 30.392 million shares to satisfy the remaining liability for the
        purchase. Full satisfaction of this liability will depend on the Optimal
        shareholders receiving sufficient funds from the sale of the issued shares,
        which equates to $0.054 per share issued, to pay down the remaining liability
        in
        full. Assuming that the remaining shares are sold at the market price of
        the
        Company's stock at March 31, 2008, the remaining liability would not be
        satisfied in full from the sale of the shares issued. Therefore, on March
        31,
        2008, the Company recorded an additional $635 thousand in liability offset
        by a
        decrease in paid-in capital associated with the Optimal acquisition due to
        the
        decrease in the stock price below $0.054 to $0.033 on March 31, 2008.
  **6.
        Related Party Transactions**
  On
        November 5, 2007, the Company entered into a contract with Leisurecorp LLC,
        a
        major stockholder of the Company that has the ability to exercise significant
        influence over the Company, to design, supply, deliver and install a Wi-Fi
        network and GPS management system for a golf estates project in Dubai. The
        contract calls for payments from Leisurecorp LLC in excess of $2.000 million
        upon achievement of specific milestones as defined in the contract. This
        transaction is in the normal course of operations and will be measured at
        the
        exchange amount, which is the amount of consideration established and agreed
        to
        by the related parties. For the period ended March 31, 2008, no amounts for
        this
        transaction have been recognized in the financial statements of the Company.
  As
        of
        March 31, 2008, the Company owed approximately $2.295 thousand to the estate
        of
        Doug Wood and the Wood Family Trust. This amount includes $31 thousand recorded
        as interest expense during the three months ended March 31, 2008. Interest
        is
        payable at 8% per annum. This interest was earned on loans provided to the
        Company by Mr. Wood. Prior to his passing, Mr. Wood was the Company’s Chief
        Executive Officer and Chairman of the Board.
  For
        the
        three months ended March 31, 2008, the Company has recorded $11 thousand
        in
        interest expense due to Great White Shark Enterprises for interest on balances
        owing to Great White Shark Enterprises. Great White Shark Enterprises is
        a
        stockholder of the Company and has appointed a member of the Company's Board
        of
        Directors. Included in accounts payable and accrued liabilities at March
        31,
        2008 is $1.124 million due to Great White Shark Enterprises.
  **7.
        Legal Proceedings**
 
 On
        August
        1, 2007, CCG Investor Relations, Inc. ("CCG"), filed a complaint against
        the
        Company, in the Los Angeles Superior Court for alleged breach of contract.
        CCG
        claims that the Company breached a consulting agreement by failing to pay
        monthly consulting fees. In May 2008, the Company and CCG agreed to terms
        of
        settlement of the dispute between the parties. The Company has agreed to
        pay CCG
        an amount of $25 thousand to resolve the matter.
  On
        February 5, 2007, David Stratton filed a lawsuit against the Company in the
        Supreme Court of British Columbia, Vancouver, Canada. Mr. Stratton entered
        into
        a written employment agreement with us on June 12, 2006 pursuant to which
        we
        employed Mr. Stratton as our Vice President, Sales. On March 20, 2008 the
        Company and David Stratton agreed to terms of settlement of the dispute between
        the parties. The Company has agreed to pay Mr. Stratton an amount of $83
        thousand to resolve the matter. This amount was recorded in Accounts Payable
        and
        Accrued Liabilities in the Company’s balance sheet as at March 31,
        2008.
  14
  On
        November 1, 2007, ProLink Holdings, a provider of GPS golf course management
        systems and on-course advertising, filed a patent infringement lawsuit against
        the Company and Uplink Corporation, a company that the Company has agreed
        to
        purchase. The compliant alleges that Uplink and one of its customers have
        infringed U.S. Patent No. 6,525,690, which is directed to a method of
        determining locations and distances using specific GPS-based methodologies.
        The
        complaint also charged Uplink with infringement of U.S. Patent No. 6,236,940
        and
        6,470,242 which relate to a monitor for displaying distances and other golf
        course information. The complaint further alleges that the Company and one
        of
        its customers have infringed the 6,525,690 patent and further seeks a
        declaratory judgment that ProLink has not infringed U.S. Patent No. 5,685,786
        acquired by the Company as a result of the UpLink acquisition and that this
        patent is invalid. ProLink seeks injunctive relief and damages against the
        Company and Uplink, enhanced damages for alleged willful infringement and
        recover of ProLink’s attorneys’ fees and litigation costs. By virtue of the
        Asset Purchase Agreement between the Company and Uplink, as amended effective
        January 18, 2008, the Company has assumed liability of Uplink and has agreed
        to
        defend and indemnify Uplink at the Company’s expense. In addition, the Company
        intends to indemnify and defend both our customer and Uplink’s customer in
        connection with the litigation. The Company intends to vigorously defend
        this
        lawsuit.
  On
        October 29, 2007, Optimal I.P.. Holdings, L.P. initiated arbitration proceedings
        against the Company alleging breach of a Patent Enforcement Cooperation
        Agreement between the two companies. Optimal I.P. Holdings, L.P. seeks a
        declaration of the scope of its rights under the Agreement and actual damages,
        together with its costs and legal fees associated with the action. On November
        16, 2007 the Company responded to the arbitration demand by objecting to
        the
        jurisdiction of the American Arbitration Association over the dispute and
        further denying all material allegations of the demand. The matter is currently
        in an early stage awaiting appointment of a mutually acceptable arbitrator.
        The
        Company intends to contest the matters raised in the arbitration
        vigorously.
  The
        Company may occasionally become subject to legal proceedings and claims that
        arise in the ordinary course of business. It is impossible to predict with
        any
        certainty the outcome of any disputes that may arise, and the Company cannot
        predict whether any liability arising from claims and litigation will be
        material in relation to the consolidated financial position or results of
        operations.
  **8.
        Subsequent Events**
 
 On
        April
        10, 2008, Leisurecorp LLC, a major stockholder of the Company that has the
        ability to exercise significant influence over the Company, advanced the
        Company
        $477 thousand against a contract between the two parties whereby GPSI will
        design, supply, deliver and install a Wi-Fi network and GPS Management System
        for a Golf Estates project in Dubai. These funds were advanced so the Company
        could meet its immediate working capital requirements.
  On
        May 2,
        2008, the Company and Silicon Valley Bank (SVB) entered into an amendment
        to a
        Loan and Security Agreement (Loan Agreement) dated February 28, 2008
        pursuant to which SVB agreed to make available to the Company advances under
        a
        revolving line of credit up to $6.5 million, an increase of $3.5 million
        from
        the original Loan Agreement. In the amendment, SVB agreed to forbear from
        exercising its rights and remedies against the Company relating to the current
        default on the Loan Agreement due to the death of Douglas Wood until July
        31,
        2008. All other terms and conditions remain the same as in the Loan Agreement.
        The increased obligations of the Company under the Loan Agreement are guaranteed
        by Great White Shark Enterprises LLC, (“GWSE”), a shareholder, whereby GWSE has
        pledged cash collateral in the form of certificates of deposit placed on
        deposit
        at SVB. The increase is initially limited to $2.0 million with the ability
        to increase to $3.5 million with a corresponding amount of additional security
        to be pledged by GWSE. Interest on the loan from SVB bears interest at prime
        plus 1%, but no less than 6%, payable monthly. Bart Collins, the President
        of
        GWSE, is a member of the board of directors of the Company.
 
 As
        consideration for GWSE pledging the security pursuant to a pledge agreement,
        the
        Company and GWSE have entered a facility fee agreement whereby the Company
        agrees to pay to GWSE all fees and other amounts payable under the terms
        of the
        Loan Agreement including a facility fee equal to the difference between the
        interest yield earned on all the certificates of deposit purchased by GWSE
        and
        pledged to SVB pursuant to the pledge agreement and 7%, such that GWSE insures
        a
        net annual interest rate of 7%. The facility fee accrues monthly and is payable
        quarterly beginning July 31, 2008.  In
        addition, pursuant to an intercreditor agreement, GWSE, Hansen Inc. and the
        estate of Douglas Wood have agreed to share pari passu a security position
        in
        the event of default by the Company. Funds under the Loan Agreement will
        be used
        for general working capital purposes.
  15


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




The
      following discussion should be read in conjunction with, and is qualified in
      its
      entirety to, the financial statements and notes thereto included in Item 1
      of
      this Form 10-Q and the financial statements and notes thereto and our
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operation for the year ended December 31, 2007 included in our 2007 Annual
      Report on Form 10-K. Throughout this quarterly report on Form 10-Q, the
      terms “we,” “us,” “our,” and “our company” refer to GPS Industries, Inc. (GPSI),
      a Nevada corporation, and, unless the context indicates otherwise, also includes
      our subsidiaries, Optimal Golf Solutions Ltd., Direct Golf Services Inc., Golf
      Academies Ltd. (collectively GPSI Europe) and GPS IT, LLC (which owns the assets
      and assumed the liabilities acquired per the UpLink Asset Purchase Agreement
      including the rights to the UpLink name).




This
      report contains forward-looking statements, within the meaning of Section 27A
      of
      the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
      1934, that involve risks and uncertainties. Our expectations with respect to
      future results of operations that may be embodied in oral and written
      forward-looking statements, including any forward looking statements that may
      be
      included in this report, are subject to risks and uncertainties that must be
      considered when evaluating the likelihood of our realization of such
      expectations. Our actual results could differ materially. The words “believe,”
“expect,” “intend,” “plan,” “project,” “will” and similar phrases as they relate
      to us are intended to identify such forward-looking statements. In addition,
      please see the “Risk Factors” in Part II, Item 1A of this Form 10-Q for a
      discussion of items that may affect our future results.





**RESTATEMENT
      OF CONSOLIDATED 2007 QUARTERLY COMPARATIVE RESULTS**





As
      a
      result of an in-depth review of certain sales and installation agreements and
      course installations that occurred in 1st, 2nd and 3rd quarters of 2007, the
      company determined that it had incorrectly accounted for the related revenues,
      cost of goods sold, course assets, accrued liabilities and deferred revenues.
      Accordingly, the Company announced on April 15, 2008 that previously filed
      quarterly reports on Form 10-QSB for the quarters ended March 31, 2007, June
      30,
      2007 and September 30, 2007 initially filed with the Securities and Exchange
      Commission (the “SEC”) on May 21, 2007, August 14, 2007 and November 19, 2007
      (the “Original Filings”), should no longer be relied upon. The Company’s
      consolidated financial statements presented in this report as at and for the
      period ended March 31, 2007 reflects these restatements.




16




Effect
      on
      Financial Statements:





The
      following table summarizes the impact on the quarterly results for the period
      ($000s) (unaudited):





Restatement
      of Financial Results for the three months ended March 31, 2007 and financial
      position at March 31, 2007





Increase
      (decrease)





Condensed
                statement of operations:
            
            Quarter 1Revenue
            
            $
            (164,000
            )Expense
            
            
            148,000Operating
                income
            
            $
            (312,000
            )Condensed
                balance sheet:Assets
            
            $
            -Liabilities
            
            
            312,000Accumulated
                deficit
            
            
            (312,000
            )




The
      primary basis for the corrections is as follows:





To
      recognize a further performance obligation whereby GPSI had sold the HDX
      Inforemer System to the customer, was unable to deliver and instead provided
      the
      HD Inforemer system. This created a further obligation to deliver the HDX when
      available. Additionally, the Company failed to recognize expense for 1st year
      warranty and service costs on sales during the period.





**Overview**




GPS
      Industries, Inc.(GPSI or the Company) is a global technology solutions provider
      with customizable, patent-protected applications in GPS and Wi-Fi software
      and
      hardware for use with golf course operations and residential community
      developments. With the development of the Inforemer HDX largely complete, GPSI
      is transitioning away from a research and development focus; however, GPSI
      will
      continue to dedicate resources to new opportunities where market potential
      and
      economics justify investment. Our primary business is the development,
      manufacture and sale of the Inforemer HDX mobile display units (MDU) in both
      cart mounted and hand held product lines along with the related
      infrastructure.





On
      January 18, 2008, the Company acquired the operations, assets and assumed
      certain liabilities of UpLink Corporation (UpLink), a Texas corporation that
      produces and sells global positioning satellite distance measuring systems,
      associated software, software development and service and maintenance contracts
      to golf course owners and operators. In consideration for the net assets
      acquired, the Company paid approximately $11.837 million including secured
      promissory notes of $1.521 million, 142.100 million Common Shares valued at
      $7.814 million, Series B Preferred Shares with a par value of $1.200 million,
      4.918 million common stock warrants at an exercise price of $0.122 per share
      valued at $219 thousand and the extinguishment of $1.083 million of intercompany
      loans. The net assets acquired consisted of total assets of approximately
      $21.080 million less approximately $9.243 million in assumed
      liabilities.




17




GPSI
      has
      offices in the United States, Canada and United Kingdom in order to focus on
      the
      geographic markets including North America, Europe and the Middle East with
      exclusive distributor arrangements covering Asia, South Africa, Australia and
      New Zealand.





Corporate
      activities are divided between our Vancouver, Canada and Austin, Texas offices
      with software development, research and development, manufacturing and finance
      located in Canada and sales, customer service and installation and repairs
      and
      maintenance in Austin, Texas.




Critical
      Accounting Policies





Management’s
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires management to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses, and related disclosures of contingent assets and
      liabilities. On an ongoing basis, management evaluates its estimates, including
      those related to impairment of long-lived assets, including finite lived
      intangible assets, accrued liabilities and certain expenses. We base our
      estimates on historical experience and on various other assumptions that we
      believe to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      materially from these estimates under different assumptions or
      conditions.





Our
      significant accounting policies are summarized in Note 4 of our consolidated
      financial statements for the period ended March 31, 2008.





**Results
      of Operations**




**Comparison
      of Three Months Ended March 31, 2008 vs. Three Months Ended March 31,
      2007**




Revenue -
      Revenue during these two periods has been comprised of (i) sales generated
      from
      our GPS system products,(ii) service contract fees we received in connection
      with the GPS system sales, (iii) fees we received from certain programs such
      as
      advertising , (iv) patent license fees received by us for the right to use
      certain of our patented technologies, and (v) revenues generated from the
      completion of milestones by our Major Projects division.





The
      Major
      Projects division, which generated revenues during the year ended December
      31,
      2007 for providing GPS tracking advisory and design services and Wi-Fi Network
      design services to our customers, did not generate any revenue for the three
      month periods ending March 31, 2008 and 2007. This was a result of no
      significant deliverable, in the long-term contract with our customers, being
      due
      or being completed during this period.





For
      the
      three month period ended March 31, 2008, the Company recorded revenues from
      its
      wholly owned subsidiary GPSI Europe (formerly Golf Academies Limited and Direct
      Golf Services) and revenues from the newly acquired operations and assets of
      UpLink Corporation for which no revenues were reported during the same three
      month period in 2007. GPSI Europe generates revenues through the rental of
      GPS
      systems, operation of the hole-in-one program Fire At the Flag (TM) and GPS
      system sales throughout the United Kingdom, Europe, South Africa and the Middle
      East. The prior UpLink related operations generated revenues through the rental
      and leasing of GPS systems, service maintenance contracts and parts sales and
      repair service activities throughout North America.





For
      the
      three months ended March 31, 2008 (the period), we recorded total revenue of
      $  2.666
      million, compared to $2.093 million during the three months ended March 31,
      2007. This 27% increase in revenue is attributable to the results of the
      Company’s recent acquisitions of GPSI Europe and the operations and assets of
      UpLink Corporation. The Company’s average selling price per 18-hole equivalent
      system did increase slightly in comparison to the same period in 2007. During
      the period, the Company successfully completed its single largest installation
      to date which was a four course 18-hole equivalent installation for one of
      North
      America’s premier golf resort destinations.




18





Patent
      license revenue earned by GPSI in the three months ended March 31, 2008 was
      $127
      thousand compared to $199 thousand during the same period in 2007. The decrease
      is due to the elimination of intercompany revenues resulting from the UpLink
      operations and asset purchase.





Cost
      of Goods Sold - Cost
      of goods sold represent the costs associated with the production of our products
      and the installation costs of delivering and installing our equipment at our
      customers' sites which often include costs of third party services we incur
      in
      the installation of systems that we sell to our customers. Cost of goods sold
      also includes the appropriate percentage of costs associated with the completion
      of terms of contracts undertaken by the Major Projects division. No costs,
      associated with the completion of terms of contracts undertaken by the Major
      Projects division, were included in cost of goods sold for the three months
      ended March 31, 2008 as no terms or deliverables were due or completed during
      the period. Costs of goods sold, on a dollar basis, increased due to increased
      revenues but decreased slightly as a percentage of revenues on a quarter over
      quarter comparison. Actual dollar increase quarter over quarter was $465
      thousand or 26% in comparison to a 27% increase in revenue during the three
      months period ended March 31, 2008. Reduction of cost of goods sold as a
      percentage of revenue is a key target for the Company throughout the remainder
      of 2008.





Selling,
      General and Administrative Expenses – Selling,
      general and administrative expenses increased to $2.309 million for the three
      month period ended March 31, 2008 compared to $2.201 million for the same period
      in 2007 ($108 thousand increase or 5%). The increase was due to the inclusion
      of
      the results of operations of GPSI Europe and UpLink Corporation during the
      2008
      period but not 2007 as these acquisition transactions occurred in late 2007
      and
      early 2008. Nonetheless, the increase was significantly less than the combined
      entities expenses prior to the acquisition due to reductions in all aspects
      of
      the operations. $158 thousand of the 2008 quarter expenses were one time charges
      taken by the Company associated with restructuring activities. The Company’s
      restructuring activities involved the downsizing of current operations and
      the
      costs associated with the rescission of the “Golf IT” Asset Purchase Agreement.
      The Company significantly reduced costs in advertising and promotion, travel,
      contract and consulting services, professional services, stock option
      compensation and the expiration of our marketing agreement with Great White
      Shark Enterprises. A new agreement is currently under negotiation. These cost
      savings were offset by slightly higher personnel related costs and higher rent.
      Personnel related costs, in 2007, had not increased significantly until the
      second and third quarters of 2007. The Company spent the fourth quarter of
      2007
      and early part of the first quarter of 2008 establishing what it believes is
      the
      appropriate staffing levels for this area of the business to function
      effectively under current circumstances.





Research
      and Development Expenses – Research
      and development expenses for the three month period ended March 31, 2008
      decreased by $516 thousand over the same period in 2007. During the first
      quarter of 2007, the Company incurred significant product development costs
      for
      the development of the next generation of the Inforemer product, which was
      subsequently introduced to the market during the first quarter of 2008. In
      addition, the Company recognized product development cost recoveries per a
      development agreement between the Company and one its strategic development
      partners during the 2008 period. These lower expenses were offset by an increase
      in personnel related costs due to the acquisition of the operations of UpLink
      Corporation.





Amortization
      of Intellectual Property – This
      expense is primarily due to the amortization of the Company’s acquired patents.
      Secondarily, it also includes the depreciation of the Company’s property and
      equipment. Depreciation and amortization increased from $92 thousand for the
      three month period ended March 31, 2007 to $553 thousand for the three month
      period ended March 31, 2008. 75% of the expense during this quarter in 2008
      is
      attributable to patent amortization. The increase is a result of the
      amortization of the fair value 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.





Loss
      from Operations - The
      Company’s loss from operations decreased slightly from $2.998 million for the
      three month period ended March 31, 2007 to $2.943 million for the period ended
      March 31, 2008. The decrease in loss from operations was due to a $108 thousand
      improvement in gross margin offset by a $53 thousand increase in operating
      expenses. Higher operating expenses were due to $461 thousand increase in
      amortization of intellectual property and a $108 thousand increase in selling,
      general and administrative expenses offset by a $516 thousand decrease in
      research and development expenses.





19




Finance
      Costs -
      Finance costs decreased in the 2008 three month fiscal period ended March 31,
      2008 by $10 thousand as a result of a reduction in the use of the line of credit
      and a reduction in the number of warrants issued in the current fiscal
      period.





Interest
      Expense -
      Interest expense decreased by 14 % in the three month period ended March 31,
      2008 compared to the same three month period in 2007. Although, the Company
      has
      more interest-bearing debt at March 31, 2008 than we had at March 31, 2007,
      the
      Company had more interest-bearing debt throughout the three month period ended
      March 31, 2007 then the same three month period in 2008. As a result, our
      interest expense in the fiscal quarter ended March 31, 2008 decreased.





Loss
      on Foreign Exchange - During
      the three month period ended March 31, 2008 we incurred a currency exchange
      gain
      of $241 thousand, compared to a currency exchange gain of $14 thousand during
      the same period in 2007. The significant increase in our gain on foreign
      exchange is due to the fact that most of our revenues are collected in U.S.
      dollars, and many of our expenses are paid in Canadian dollars. Therefore we
      are
      subject to currency fluctuation risks. During the three month period ended
      March
      31, 2008, the value of the U.S. dollar increased compared to the Canadian
      dollar, thereby causing us to record a substantial gain on our currency
      exchange.





Gain
      on Extinguishment of Debt - Gain
      on extinguishment of debt decreased from $108 thousand in the period ended
      March
      31, 2007 to $18 thousand for the same period ended in 2008. This decrease was
      due to the write off of liabilities associated with discontinued operations
      at
      December 31, 2007. Monthly write off of these liabilities ceased for the periods
      ending December 31, 2007.





Net
      Loss - Net
      loss was $ 2.950 million for the three months ended March 31, 2008 compared
      to
      $3.192 million for the three months ended March 31, 2008. The Company’s net loss
      decreased during the 2008 period as a result of a slight decrease in loss from
      operations, a decrease in interest expense, and an increase in gain on foreign
      exchange offset by a decrease in gain on extinguishment of debt.





**Liquidity
      And Capital Resources**




To
      date,
      we have incurred significant losses from operations. As of March 31, 2008,
      we
      had a working capital deficit of $11.0 million. Our operations currently do
      not
      generate sufficient cash to internally fund our working capital needs.
      Accordingly, to date, our operating deficits have been funded by outside sources
      of funding, including funds raised from (i) the sale of shares of our common
      stock and preferred stock, (ii) the issuance of debentures, (iii) the issuance
      of shares as payment for services and in satisfaction of indebtedness, (iv)
      bank
      lines of credit, and (v) short-term loans made to us by our affiliates and
      by
      third parties. For at least the next twelve months, the Company anticipates
      that
      such funding activities must continue in order for the Company to maintain
      its
      operations. Based on our currently projected revenues and our existing lines
      of
      credit the Company does not have sufficient capital resources to fund our
      anticipated working capital needs. The Company is currently working with its
      existing investors to obtain additional debt or equity funding.





Two
      of
      our investors have provided additional funding subsequent to March 31, 2008.
      On
      April 10, 2008, Leisurecorp LLC, a major stockholder of the Company that has
      the
      ability to exercise significant influence over the Company, advanced the Company
      $477 thousand against a contract between the two parties whereby GPSI will
      design, supply, deliver and install a Wi-Fi network and GPS systems for a golf
      estates project in Dubai. These funds were advanced so the Company could meet
      its immediate working capital requirements.





In
      addition, on May 2, 2008, GPS Industries, Inc and Silicon Valley Bank (SVB)
      entered into an amendment to a Loan and Security Agreement (Loan Agreement)
      dated February 28, 2008 pursuant to which SVB agreed to make available to
      the Company advances under a revolving line of credit of up to $6.5 million,
      an
      increase of $3.5 million from the Loan Agreement. The increased obligations
      of
      the Company under the Loan Agreement are guaranteed by Great White Shark
      Enterprises LLC, a stockholder, whereby GWSE has pledged cash collateral in
      the
      form of certificates of deposit placed on deposit at SVB. The increase is
      initially limited to $2.0 million with the ability to increase to $3.5
      million with a corresponding amount of additional security to be pledged by
      GWSE.




20




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 sales in the
      second and third quarters of 2008 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. At this time, we are unable to determine if
      we
      will be successful in obtaining this funding or any other. Should the Company
      not be able to obtain sufficient funding, the Company cannot be assured of
      meeting its working capital needs during the near future.





Effective
      January 18, 2008, the Company acquired the operations, assets and certain
      assumed liabilities of UpLink Corporation (UpLink), a Texas corporation that
      produces and sells global positioning satellite distance measuring systems,
      associated software, software development and service and maintenance contracts
      to golf course owners and operators. In addition, do to the elimination of
      the
      intercompany loans and the increase in liabilities resulting from this
      transaction, the purchase may continue to negatively impact the Company’s
      on-going liquidity in 2008 as the Company incurs costs to integrate the acquired
      assets and to meet the settlement terms of the secured promissory notes.





In
      October 2007, we purchased Direct Golf Services, Inc. and Golf Academies
      Limited. Operations of these two businesses are being conducted through GPSI
      Europe (formerly Golf Academies Limited and Direct Gold Services). The
      additional overhead costs related to the operations of GPSI Europe currently
      negatively affects our liquidity.




Operating
      Activities - During
      the fiscal quarter ended March 31, 2008, our operations utilized cash of $1.528
      million as compared to $4.520 million during the same period in 2007. The
      decrease in cash utilized in operations in the 2008 period as compared to the
      2007 period was primarily a result of the decrease in the loss from operations,
      adjusted for non-cash items and by positive changes to operating assets and
      liabilities. Positive changes to operating assets and liabilities was a result
      of significant increases to both accounts payable and accrued liabilities and
      deferred revenue.




Investing
      Activities - Net
      cash used in investing activities was $63 thousand and $815 thousand for the
      three months ended March 31, 2008 and 2007, respectively. In the 2008 period,
      investing activities consisted of the purchase of equipment and
      patents.




Financing
      Activities - Net
      cash provided by financing activities was $1.703 million for the 2008 fiscal
      quarter ended March 31, 2008, as compared to $3.184 million for the fiscal
      quarter ended March 31, 2007. Financing activities during the quarter consisted
      of receipt of bank loans offset by repayments of bank indebtedness and
      short-term loans.




We
      do not believe that inflation has had a material impact on our business or
      operations.




We
      are not a party to any off-balance sheet arrangements and do not engage in
      trading activities involving non-exchange traded contracts. In addition, we
      believe we have no financial guarantees, debt or lease agreements or other
      arrangements that we have not provided for or disclosed in our financial
      statements and notes




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




Not
      applicable.





**ITEM
      4. 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. In designing and evaluating the
      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.





21




As
      of the
      date of this report, 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 disclosure controls and procedures are not
      effective in timely alerting them to material information required to be
      included in periodic SEC filings.




As
      reported in Company's Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 2007, as filed with the Securities and Exchange Commission, our
      management, with the participation of our Principal Executive Officer and Chief
      Financial Officer, has assessed and reported on the effectiveness of our
      internal control over financial reporting as of December 31, 2007, based on
      the
      control criteria established in a report entitled Internal Control - Integrated
      Framework, issued by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO). That framework 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. Based on such
      evaluation, we have concluded that our internal control over financial reporting
      was not effective and contained significant deficiencies which represent a
      material weakness in the Company’s internal control over financial reporting as
      of December 31, 2007.





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, 2008:


·
              The
                  Company has engaged in a number of related-party transactions.
                  Additionally, certain of the Company’s executive, directors and
                  shareholders have outside business interests 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, and has just recently drafted and implemented
                  a
                  whistle blower channel.
 
 ·
              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.




Management
      of the Company takes very seriously the strength and reliability of the of
      the
      internal control environment for the Company. During the fourth quarter of
      2007
      and continuing in 2008, the Company has undertaken steps necessary to improve
      the control environment that include:


·
              Hired
                  new accounting and finance staff with experience and skills more
                  appropriate for a publicly traded
                  company.
 
 ·
              The
                  Company has plans to implement 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 developed a top-down, risk based approach to SOX compliance
                  that focuses on key controls and high risk
                  areas.
 
 ·
              The
                  Company has plans to hire a permanent Chief Executive Officer to
                  change
                  the “tone at the top” with the necessary expertise for a publicly traded
                  company.
 
 ·
              Initiation
                  of a cascading sub-certification process among process owners and
                  managers.
 
 ·
              More
                  actively engaging the Board of
                  Directors.




22




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.





Changes
      in Internal Controls





During
      the fiscal quarter ended March 31, 2008, the Company has continued taking
      remediation steps to enhance its internal control over financial reporting
      and
      reduce control deficiencies. We are working to eliminate the control weaknesses
      and deficiencies noted by strengthening management and by documenting and
      testing the control environment and process controls.




**PART
      II. OTHER INFORMATION**




**ITEM
      1. LEGAL PROCEEDINGS**





On
      August
      1, 2007, CCG Investor Relations, Inc. ("CCG"), filed a complaint against the
      Company, in the Los Angeles Superior Court for alleged breach of contract.
      CCG
      claims that the Company breached a consulting agreement by failing to pay
      monthly consulting fees. In May 2008, the Company and CCG agreed to terms of
      settlement of the dispute between the parties. The Company has agreed to pay
      CCG
      an amount of $25 thousand to resolve the matter.




On
      February 5, 2007, David Stratton filed a lawsuit against the Company in the
      Supreme Court of British Columbia, Vancouver, Canada. Mr. Stratton entered
      into
      a written employment agreement with us on June 12, 2006 pursuant to which we
      employed Mr. Stratton as our Vice President, Sales. On March 20, 2008 the
      Company and David Stratton agreed to terms of settlement of the dispute between
      the parties. The Company has agreed to pay Mr. Stratton an amount of $83
      thousand to resolve the matter. This amount was recorded in Accrued Liabilities
      in the Company’s balance sheet as of March 31, 2008.




On
      November 1, 2007, ProLink Holdings, a provider of GPS golf course management
      systems and on-course advertising, filed a patent infringement lawsuit against
      the Company and UpLink Corporation, a company that the Company subsequently
      purchased. The compliant alleges that UpLink and one of its customers have
      infringed U.S. Patent No. 6,525,690, which is directed to a method of
      determining locations and distances using specific GPS-based methodologies.
      The
      complaint also charged UpLink with infringement of U.S. Patent No. 6,236,940
      and
      6,470,242 which relate to a monitor for displaying distances and other golf
      course information. The complaint further alleges that the Company and one
      of
      its customers have infringed the 6,525,690 patent and further seeks a
      declaratory judgment that ProLink has not infringed U.S. Patent No. 5,685,786
      acquired by the Company as a result of the UpLink acquisition and that this
      patent is invalid. ProLink seeks injunctive relief and damages against the
      Company and UpLink, enhanced damages for alleged willful infringement and
      recover of ProLink’s attorneys’ fees and litigation costs. By virtue of the
      Asset Purchase Agreement between the Company and UpLink, as amended effective
      January 18, 2008, the Company has assumed the liability of UpLink in the lawsuit
      and has agreed to defend and indemnify UpLink at the Company’s expense. In
      addition, the Company intends to indemnify and defend both our customer and
      UpLink’s customer in connection with the litigation. The Company intends to
      vigorously defend this lawsuit.




On
      October 29, 2007, Optimal I.P.. Holdings, L.P. initiated arbitration proceedings
      against the Company alleging breach of a Patent Enforcement Cooperation
      Agreement between the two companies. Optimal I.P. Holdings, L.P. seeks a
      declaration of the scope of its rights under the agreement and actual damages,
      together with its costs and legal fees associated with the action. On November
      16, 2007 the Company responded to the arbitration demand by objecting to the
      jurisdiction of the American Arbitration Association over the dispute and
      further denying all material allegations of the demand. The matter is currently
      in an early stage awaiting appointment of a mutually acceptable arbitrator.
      The
      Company intends to vigorously contest the matters raised in the
      arbitration.





23




The
      Company may occasionally become subject to legal proceedings and claims that
      arise in the ordinary course of business. It is impossible to predict with
      any
      certainty the outcome of any disputes that may arise, and the Company cannot
      predict whether any liability arising from claims and litigation will be
      material in relation to the consolidated financial position or results of
      operations.





**ITEM
      1A. RISK FACTORS**





You
      should carefully consider the risks described below before deciding to invest
      in
      or maintain your investment in GPS Industries, Inc. The risks described below
      and described in our 2007 Annual Report are not intended to be an all-inclusive
      list of the potential risks relating to an investment in our securities.
      Additional risks and uncertainties that we do not presently know, or that we
      currently view as immaterial, may also impair our business operations. If any
      of
      the following or other risks actually occurs, our business, financial condition
      or operating results and the trading price or value of our securities could
      be
      materially adversely affected. The following factors should be considered in
      connection with the other information contained in this quarterly report on
      Form
      10-Q. This report is qualified in its entirety by these risk factors.




**Risks
      Related To Our Business**




**We
      have a history of losses, and our auditors have issued a going concern opinion.**




We
      have a
      history of losses, and our auditors have issued a going concern opinion as
      a
      result of an inability to generate sufficient cash from operations to meet
      our
      current obligations. GPSI has undertaken a restructuring of our operations
      in
      order to reduce and ultimately eliminate the operating losses incurred. In
      addition, GPSI is evaluating alternate sources and types of financing to
      generate sufficient liquidity to maintain operations for the foreseeable future.
      However there can be no assurance that we will be successful in these efforts.
      Our operating losses are attributable to the developing nature of our business
      and have resulted primarily from:




·
            significant
                costs associated with the development of our products;




·
            marketing
                and distribution costs of our products;
                and




·
            limited
                sales history of our recently developed products.




**We
      will need additional financial support in order to continue to operate and
      grow,
      and cannot be certain that additional funds will be available when needed on
      satisfactory terms, if at all.**




Our
      operations currently do not generate sufficient cash to internally fund our
      working capital needs. Accordingly, to date, our operating deficits have been
      funded by outside sources of funding, including funds raised from (i) the sale
      of shares of our common stock and preferred stock, (ii) the issuance of
      debentures, (iii) the issuance of shares as payment for services and in
      satisfaction of indebtedness, (iv) bank lines of credit, and (v) short-term
      loans made to us by our affiliates and by third parties. For at least the next
      twelve months, the Company anticipates that such funding activities must
      continue in order for the Company to maintain its operations. Based on our
      currently projected revenues and our existing lines of credit the Company does
      not have sufficient capital resources to fund our anticipated working capital
      needs. The Company is currently working with its existing investors to obtain
      additional debt or equity funding. At this time, we are unable to determine
      if
      we will be successful in obtaining this funding or any other. Should the Company
      not be able to obtain sufficient funding, the Company will not be able to meet
      its working capital needs.  If
      the
      Company were unable to continue as a going concern, investors risk losing their
      investment in GPSI.




**We
      depend on GPS technology owned and controlled by others. If we do not have
      continued access to GPS technology and satellites, we will be unable to deliver
      our services and our revenues will decrease.**




Our
      services rely on signals from GPS satellites built and maintained by the U.S.
      Department of Defense. GPS satellites and their ground support systems are
      subject to electronic and mechanical failures and sabotage. If one or more
      satellites malfunction, there could be a substantial delay before they are
      repaired or replaced, if at all, and our services may cease and customer
      satisfaction would suffer.




24




In
      addition, the U.S. government could decide not to continue to operate and
      maintain GPS satellites over a long period of time or to charge for the use
      of
      GPS. Furthermore, because of ever-increasing commercial applications of GPS,
      other U.S. government agencies may become involved in the administration or
      the
      regulation of the use of GPS signals in the future. If the foregoing factors
      affect GPS, such as by affecting the availability and pricing of GPS technology,
      our business will suffer.




**Our
      GPS technology depends on the use of radio frequency spectrum controlled by
      others.**




Our
      GPS
      technology is dependent on the use of radio frequency spectrum. The assignment
      of spectrum is controlled by an international organization known as the
      International Telecommunications Union or ITU. The Federal Communications
      Commission or FCC is responsible for the assignment of spectrum for
      non-government use in the United States in accordance with ITU regulations.
      Any
      ITU or FCC reallocation of radio frequency spectrum, including frequency band
      segmentation or sharing of spectrum, could cause interference with the reception
      of GPS signals and may materially and adversely affect the utility and
      reliability of our products, which would, in turn, cause a material adverse
      effect on our operating results. In addition, emissions from mobile satellite
      service and other equipment operating in adjacent frequency bands or inband
      may
      materially and adversely affect the utility and reliability of our products,
      which could result in a material adverse effect on our operating results.




On
      May
      11, 2000, the FCC issued a Notice of Proposed Rulemaking that proposes rules
      for
      the operation of Ultra-Wideband or UWB radio devices on an unlicensed basis
      in
      the frequency bands allocated to GPS. If the FCC issues final rules authorizing
      such operation, UWB devices might cause interference with the reception of
      GPS
      signals. Such interference could reduce demand for GPS products in the future.
      Any resulting change in market demand for GPS products could have an adverse
      effect on our financial results.




**Speculative
      Nature of Business.**




There
      is
      sufficient evidence to determine that there is in fact a market for our
      products. It is less than certain that the market is deep enough to generate
      revenues of sufficient magnitude to cover all costs associated with the
      manufacture, sales, marketing, general and administrative nature of the
      business.




**Government
      regulations and standards may harm our business and could increase our costs
      or
      reduce our opportunities to earn revenues.**




In
      addition to regulations applicable to businesses in general, we may also be
      subject to direct regulation by governmental agencies, including the FCC and
      Department of Defense. A number of legislative and regulatory proposals under
      consideration by federal, state, provincial, local and foreign governmental
      organizations may lead to laws or regulations concerning various aspects of
      wireless communications and GPS technology. Additionally, it is uncertain how
      existing laws governing issues such as taxation, intellectual property, libel,
      user privacy and property ownership, will be applied to our services. The
      adoption of new laws or the application of existing laws may expose us to
      significant liabilities and additional operational requirements, which could
      decrease the demand for our services and increase our cost of doing business.




**We
      depend on intellectual property rights and development of new products and
      the
      inability to obtain patents or develop new products may have an adverse effect
      on our ability to be profitable.**




Our
      success is partly dependent upon our intellectual property rights. Effective
      protection may not be available for these rights. There can be no assurance
      that
      a patent will provide adequate protection for the underlying technology. While
      we have patents covering our technology, there is no assurance that such patents
      will be able to prevent other companies from developing substantially similar
      products. In addition, litigation may be necessary in the future to enforce
      the
      intellectual property rights. Such litigation, whether successful or
      unsuccessful, could result in substantial costs and diversions of resources,
      either of which could negatively affect our business.




25




**Our
      future success is dependent upon our ability to attract and retain key
      management including a permanent Chief Executive Officer.**




GPSI
      currently has no permanent Chief Executive Officer and is operating under the
      management of its three member Board of Directors with consulting assistance
      provided by a third party management consulting group, Carl Marks Advisory
      Group, pursuant to a consulting agreement entered into on November 16,
      2007.




**Conflicts
      of Interest.**




We
      have
      engaged in transactions with our management in the past, and we can be expected
      to engage in such transactions in the future. In each case, the transactions
      are
      approved by our Board of Directors and are considered to be fair to and in
      the
      best interests of the company.




**Board
      Independence**




The
      current Board of Directors, Audit and Compensation Committee are all considered
      to be non-independent directors as a result of the investment in the Series
      B
      Preferred Shares in November 2006 and again in April 2007. The holders of our
      outstanding Series B Shares have the right to approve or disapprove certain
      corporate action, which could materially affect the holders of our common stock.
      Currently, the rights of the Series B Shares are controlled by Leisurecorp
      LLC.




**Competition.**




We
      face
      competition in all aspects of our business. We compete for customers with other
      electronics and recreation companies, many of which have substantially greater
      assets and resources. Our primary competitor is Prolink Holdings Corp. Our
      ability to compete successfully in the future will depend on several factors,
      including:




·
            the
                cost effectiveness, quality, price, service and market acceptance
                of our
                products;




·
            response
                to the entry of new competitors or the introduction of new products
                by
                competitors;




·
            ability
                to keep pace with changing technology and customer requirements;




·
            timely
                development or acquisition of new or enhanced products; and




·
            timing
                of new product introductions by the Company or our competitors.




**Acquisitions
      of companies may disrupt our business and distract management due to
      difficulties in assimilating personnel and operations.**




In
      October 2007, we purchased Direct Golf Services, Inc. and Golf Academies Limited
      and in January 2008 we purchased all of the operations and assets of UpLink
      Corporation. Although, the purchases of complimentary businesses are expected
      to
      improve our overall operations in the future and to improve our market presence
      in the worldwide golf industry, the cost of purchasing these, and other
      businesses, will negatively impact our financial condition in the near term.




Provided
      that we have sufficient financing, we may consider purchasing other businesses
      that could complement or supplement our current product offerings. If we acquire
      any other company, we could face difficulties in assimilating that company's
      personnel and operations. Acquisitions also involve the need for integration
      into existing administration, services marketing, and support efforts. These
      acquisitions and investments could disrupt our ongoing business, distract
      management and employees and increase our expenses. In addition, key personnel
      of the acquired company may decide not to work for us.




26




**We
      have not been able to implement Section 404 of the Sarbanes-Oxley Act on a
      timely basis.**




We
      are
      required to restate the 1st, 2nd and 3rd quarters of 2007. Management has
      evaluated the Company’s internal controls over financial reporting in light of
      the restatements and has identified 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 December 31, 2007 and March
      31,
      2008. See Item 8A in the Company's Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 2007, as filed with the Securities and Exchange
      Commission and Part I, Item 4 in this quarterly report on Form 10Q for
      Management’s discussion of these material weaknesses.




Although,
      GPSI has made progress towards Section 404 compliance, we are not able to
      conclude that our internal controls are effective nor have we completed our
      Section 404 implementation. We have in the past discovered, and may in the
      future discover, areas of our internal controls that need improvement. However,
      we can not assure you that we will be successful. Any failure to implement
      required new or improved controls, or difficulties encountered in their
      implementation, could negatively affect our operating results or cause us to
      fail to meet our reporting obligations. The costs incurred necessary to achieve
      compliance may be significant.




**RISKS
      RELATED TO OUR COMMON STOCK**




**Our
      common stock is traded on the OTC Bulletin Board, and a shareholder may be
      unable to sell at or near ask prices or at all if the shareholder needs to
      sell
      his shares to raise money or otherwise desire to liquidate his shares.**




Our
      common stock is currently listed for trading on the OTC Bulletin Board. Shares
      listed for trading on the OTC Bulletin Board often are thinly traded, meaning
      the number of persons interested in purchasing the shares at or near ask prices
      at any given time may be relatively small or non-existent. This situation may
      apply to our shares and is attributable to a number of factors, including the
      fact that we are a small public company which is relatively unknown to stock
      analysts, stock brokers, institutional investors and others in the investment
      community that generate or influence sales volume. In addition, even if we
      came
      to the attention of such persons, they tend to be risk-averse and would be
      reluctant to follow a company of our size and expanding into a relatively new
      line of business as we are in, or purchase or recommend the purchase of our
      shares until such time as we became more seasoned and proven. As a consequence,
      there may be periods of several days or more when trading activity in our shares
      is minimal or non-existent, as compared to a seasoned issuer which has a large
      and steady volume of trading activity that will generally support continuous
      sales without an adverse effect on share price. We cannot give you any assurance
      that a broader or more active public trading market for our common stock will
      develop or be sustained, or that current trading levels will be sustained.
      Due
      to these conditions, we can give you no assurance that you will be able to
      sell
      your shares at or near ask prices or at all if you need money or otherwise
      desire to liquidate your shares.




**The
      holders of our outstanding Series B Shares have the right to approve or
      disapprove certain corporate action, which could materially affect the holders
      of our common stock. Currently, the rights of the Series B Shares are controlled
      by Leisurecorp LLC.**




In
      January 2008, May 2007 and December 2006 we issued the Series B Shares to four
      investors. Under the terms of the Series B Shares, we may not, without first
      obtaining the prior approval of the holders of a majority of the then
      outstanding Series B Shares, voting separately as a class, take any of the
      following actions: (i) amend our Articles of Incorporation or Bylaws if such
      action would adversely affect the rights, preferences, privileges, or
      restrictions of the Series B Shares; (ii) authorize or issue any class or series
      of our capital stock or any rights, options, warrants or other securities that
      are convertible into or exchangeable for any of our capital stock, having any
      right, preference or privilege superior to or on parity with the Series B Shares
      in any respect whether by reclassification or otherwise; (iii) pay any dividends
      or distributions on any shares of our capital stock; (iv) amend any of the
      provisions of the Certificate of Designation of the Series B Shares; (v) redeem
      or declare a dividend with respect to any security; (vi) increase or decrease
      the authorized number of shares of Series B Shares; (vii) effect a merger,
      consolidation, or business combination or other acquisition involving GPSI
      (other than solely for the purposes of reincorporation); or (viii) increase
      or
      decrease the authorized number of directors on our Board of Directors. The
      foregoing voting provisions shall remain in effect so long as one holder of
      our
      Series B Shares, Leisurecorp LLC, is the owner of record of 25% or more of
      the
      number of Series B Shares that it purchased in December 2006 and May 2007.
      As a
      result of its investment in the Series B Shares and the voting agreements
      contained in a shareholders agreement Leisurecorp has entered into with the
      other holders of the Series B Shares, Leisurecorp LLC owns or controls the
      vote
      of approximately 87% of the currently issued and outstanding Series B
      Shares.




27




**The
      holders of the Series B Shares have the ability to elect a majority of our
      Board
      of Directors, and we are prohibited from taking certain corporate actions
      without the approval of the directors elected by Series B Share
      holders.**




The
      holders of a majority of the outstanding Series B Shares have the right, voting
      as a separate class, to elect three of our five members of our board of
      directors, of which two shall be designated by the holders of a majority of
      the
      outstanding Series B Shares as the "Reviewing Preferred Directors." Our Board
      of
      Directors may not take certain actions, and none of such actions shall be valid
      and constitute an action of the Board of Directors unless such action is
      approved by a majority of the Board of Directors, which majority shall include
      at least one of the Reviewing Preferred Directors. The actions that must be
      approved by at least one Reviewing Preferred Director are as follows: (i)
      reorganize GPSI or voluntarily liquidate, dissolve or wind up GPSI, (ii) incur
      any new indebtedness or refinance any existing indebtedness for borrowed money
      other than trade payables and accrued expenses incurred in the ordinary course
      of business and indebtedness not to exceed at any time $500,000 in the
      aggregate, (iii) approve, adopt or amend our annual budget, (iv) incur any
      capital or operating expenditures (other than purchases of inventory purchased
      solely for, and specifically to fill signed purchase orders) in excess of
      $50,000 in one or a series of related expenditures, or in excess of $250,000
      in
      the aggregate unless included in our annual budget approved by the Board of
      Directors (including one of the Reviewing Preferred Directors), (v) hire or
      fire
      our Chief Executive Officer, the Chief Financial Officer, or any of our other
      officer or employee who, at the time, earns or is expected to earn a salary
      (excluding bonuses) of $100,000 or more per year, (vi) acquire any assets or
      equity securities of any other business or entity, or sell any of our assets
      (other than in the ordinary course of business), in each case if the transaction
      value of such acquisition or disposition is greater than $2,000,000, (vii)
      issue
      options or securities except under our stock compensation, bonus or other
      compensation plan, (viii) amend our stock compensation, bonus or other
      compensation plan, or (ix) enter into a transaction with a stockholder or an
      affiliate of ours or of a stockholder of ours. The foregoing restrictions will
      remain in effect until the earlier of (a) the date on which Leisurecorp is
      the
      owner of record of less than 25% of the number of Series B Shares that it
      purchased in December 2006 and May 2007 pursuant to the Securities Purchase
      Agreement, or (b) we meet or exceed the approved annual budget for two
      consecutive fiscal years. Under a shareholder agreement entered into by, among
      others, the holders of approximately 87% of our currently outstanding Series
      B
      Shares, Leisurecorp LLC has the right to designate both Reviewing Preferred
      Directors.




**Our
      Board of Directors has the right to issue additional series of preferred stock,
      the terms of which could adversely affect the value of our common
      stock.**




Under
      our
      articles of incorporation, our board of directors has the power, without further
      action by the holders of our common stock, to designate the relative rights
      and
      preferences of the preferred stock, and to issue the preferred stock in one
      or
      more series as designated by our board of directors. The designation of rights
      and preferences could include preferences as to liquidation, redemption and
      conversion rights, voting rights, dividends or other preferences, any of which
      may be dilutive of the interest of the holders of our common stock or the
      preferred stock of any other series. The issuance of preferred stock may have
      the effect of delaying or preventing a change in control of our company without
      further stockholder action and may adversely affect the rights and powers,
      including voting rights, of the holders of our common stock.




**If
      securities or industry analysts do not publish research reports about our
      business, our stock price and trading volume could decline.**




Small,
      relatively unknown public companies can achieve visibility in the trading market
      through research and reports that industry or securities analysts publish.
      However, to our knowledge, no analysts cover our company. The lack of published
      reports by independent securities analysts could limit the interest in our
      stock
      and negatively affect our stock price. We do not have any control over research
      and reports these analysts publish or whether they will be published at all.
      If
      any analyst who does cover us downgrades our stock, our stock price would likely
      decline. If any analyst initiates and then ceases coverage of our company or
      fails to regularly publish reports on us, we could lose visibility in the
      financial markets or never achieve such visibility, which in turn could cause
      our stock price or trading volume to stagnate or decline.




28




**You
      may have difficulty selling our shares because they are deemed “penny stocks.”**




Since
      our
      common stock is not listed on the Nasdaq Stock Market or any national securities
      exchange, if the trading price of our common stock is below $5.00 per share,
      trading in our common stock will be subject to the requirements of certain
      rules
      promulgated under the Securities Exchange Act of 1934, as amended (the Exchange
      Act). These rules require additional disclosures by broker-dealers in connection
      with any trades involving a stock defined as a penny stock. Such rules require
      the delivery, prior to any penny stock transaction, of a disclosure schedule
      explaining the penny stock market and the risks associated therewith and impose
      various sales practice requirements on broker-dealers who sell penny stocks
      to
      persons other than established customers and accredited investors (generally
      defined as an investor with a net worth in excess of $1,000,000 or annual income
      exceeding $200,000 individually or $300,000 together with a spouse). For these
      types of transactions, the broker-dealer must make a special suitability
      determination for the purchaser and have received the purchaser’s written
      consent to the transaction prior to the sale. The broker-dealer also must
      disclose the commissions payable to the broker-dealer, current bid and offer
      quotations for the penny stock and, if the broker-dealer is the sole market
      maker, the broker-dealer must disclose this fact and the broker-dealer’s
      presumed control over the market. Such information must be provided to the
      customer orally or in writing before or with the written confirmation of trade
      sent to the customer. Monthly statements must be sent disclosing recent price
      information for the penny stock held in the account and information on the
      limited market in penny stocks. The additional burdens imposed upon
      broker-dealers by such requirements could discourage broker-dealers from
      effecting transactions in our common stock, which could severely limit the
      market liquidity of the common stock and the ability of holders of the common
      stock to sell their shares.




**The
      market price of our** **common
      stock may be adversely affected by market volatility.**




The
      market price of our common stock is likely to be volatile and could fluctuate
      widely in response to many factors, including:




·
            announcements
                of the results of our operations or the operations of our competitors,




·
            developments
                with respect to intellectual property rights,




·
            announcements
                of technological innovations by us or our competitors,




·
            announcements
                of new services, products or new contracts by us or our competitors,




·
            actual
                or anticipated variations in our operating results due to the level
                of
                development expenses and other factors,




·
            changes
                in financial estimates by securities analysts, if any, and whether
                our
                earnings meet or exceed such estimates,




·
            new
                accounting standards,




·
            general
                economic, political and market conditions and other factors, and




·
            the
                occurrence of any of the risks described in this registration statement.




29




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




During
      the three month period ended March 31, 2008, the Company completed the following
      transactions:




Preferred
      Stock and Warrants :
      On
      January 18, 2008, the Company issued a total of 120 thousand shares of Series
      B
      Preferred Shares with a par value of $1.200 million and warrants to purchase
      up
      to 4.918 million shares of our common stock valued at $219 thousand. These
      Series B shares and warrants were issued as part of the consideration for the
      UpLink asset acquisition.




Common
      Stock :




The
      Company issued the following shares of common stock in the quarter ended March
      31, 2008:




·
            On
                January 10, 2008, the Company issued 142.083 million shares valued
                at
                $7.814 million in relation to the UpLink asset acquisition;
                and




·
            On
                February 29, 2008, the Company issued 400 thousand shares valued
                at $18
                thousand for services rendered.




All
      such
      securities were issued pursuant to an exemption from the registration
      requirements of the Securities Act of 1933, as amended, under Section 4 (2)
      and
      Regulation D.




**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**




$1.500
      million of the obligations of the Company under the Loan Agreement entered
      into
      on February 29, 2008 between the Company and Silicon Valley Bank (SVB) are
      guaranteed by Douglas Wood, the Company’s interim Chief Executive Officer,
      member of the board of directors and a shareholder. On March 30, 2008, Douglas
      Wood passed away. On his passing, the Company triggered an event of default
      in
      the Loan Agreement whereby the bank could demand repayment of $1.500 million
      secured by Mr. Wood. SVB is currently forbearing such demand as it negotiates
      with the estate of Mr. Wood.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




No
      Matters were submitted to a vote of our security holders during the three month
      period ended March 31, 2008.




**ITEM
      5. OTHER INFORMATION**




None.




30




**ITEM
      6. EXHIBITS**




**Exhibit Number**
            
            **Description**31.1
            
            Certification
                of the Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act31.2
            
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act32.1
            
            Certification
                of the Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act32.1
            
            Certification
                of the Chief Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act




31




**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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.Date:
                May 20, 2008
            By:
            /s/
                MARC POTTERMarc
              Potter,Executive
              Vice President(Principal Executive Officer)Date:
                May 20, 2008
            By:
            /s/
                JOSEPH MILLERJoseph
              Miller,Chief
              Financial Officer




32