UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  FORM
10-K
 
 x
              ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
fiscal year ended December 31, 2008
 
 o
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
transition period from ______ to ______
  Commission
file number: 000-30104
 
 GPS
INDUSTRIES, INC.
 (Name of
small business issuer in its charter)
 
 Nevada
                88-0350120(State
      or other jurisdiction of
                (I.R.S.
      EmployerIncorporation
      or organization)
                Identification
      Number)1358
      Fruitville Road, Suite 210Sarasota,
      Florida
                34236(Address
      of principal executive offices)
                (Zip
      Code)
 
 Issuer's
telephone number: (941) 364-8180
 
 Securities
registered under Section 12(b) of the Act: None.
 
 Securities
registered under Section 12(g) of the Act: Common Stock, $0.001 par value per
share.
 
 Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. o
 
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No o
 
 Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
 
 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
 
 Indicate
by check mark whether the registrant is a large accelerated filer, and
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” I Rule 12b-2 of the Exchange
Act.
 
 Large
      accelerated filer  o
              Accelerated
      filer  oNon-accelerated
      filer (Do not check if a smaller reporting company)  o
              Smaller
      reporting company  x
   Aggregate
market value of the common stock held by non-affiliates of the Issuer as of June
30, 2008 was approximately $16,820,000.
 
 There
were 563,499,653 shares of the Company's common stock outstanding on March 31,
2009.
  
 1
  TABLE OF
CONTENTS
 
 PART
      IITEM 1.
                      Business
                      
                      4ITEM 2.
                      Properties
                      
                      9ITEM 3.
                      Legal Proceedings
                      
                      9ITEM 4.
                      Submission of Matters to a Vote of Security
      Holders
                      
                      10PART
      IIITEM 5.
                      Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
                      
                      11ITEM 6.
                      Selected Financial Data
                      
                      12ITEM 7.
                      Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                      
                      12ITEM 8.
                      Financial Statements and Supplementary Data
                      
                      14ITEM 9.
                      Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
                      
                      15ITEM 9A.
                      Controls and Procedures
                      
                      15ITEM 9B.
                      Other Information
                      
                      16PART
      IIIITEM 10.
                      Directors, Executive Officers, Promoters and Corporate
      Governance
                      
                      17ITEM 11.
                      Executive Compensation
                      
                      19ITEM 12.
                      Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                      
                      22ITEM 13.
                      Certain Relationships and Related Transactions, and Director
      Independence
                      
                      26ITEM 14.
                      Principal Accounting Fees and Services
                      
                      27ITEM 15.
                      Exhibits, Financial Statements Schedules
                      
                      29
      2
 Table of Contents
  "SAFE
HARBOR" STATEMENT
 
 From time
to time, we make oral and written statements that may constitute
"forward-looking statements" (rather than historical facts) as defined in the
Private Securities Litigation Reform Act of 1995 or by the Securities and
Exchange Commission, or SEC, in its rules, regulations and releases, including
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We desire to take advantage of the
"safe harbor" provisions in the Private Securities Litigation Reform Act of 1995
for forward-looking statements made from time to time, including the
forward-looking statements made in this Annual Report, as well as those made in
our other filings with the SEC.
 
 All
statements in this Annual Report, including under the captions "Business," "Risk
Factors," and "Management's Discussion and Analysis or Plan of Operation," other
than statements of historical fact are forward-looking statements for purposes
of these provisions, including statements of our current views with respect to
our business strategy, business plan and research and development activities,
our future financial results, and other future events. These statements include
forward-looking statements both with respect to us, specifically, and the golf
industry, in general. In some cases, forward-looking statements can be
identified by the use of terminology such as "may," "will," "expects," "plans,"
"anticipates," "estimates," "potential" or "could" or the negative thereof or
other comparable terminology. Although we believe that the expectations
reflected in the forward-looking statements contained herein are reasonable,
there can be no assurance that such expectations or any of the forward-looking
statements will prove to be correct, and actual results could differ materially
from those projected or assumed in the forward-looking statements.
 
 All
forward-looking statements involve inherent risks and uncertainties, and there
are or will be important factors that could cause actual results to differ
materially from those indicated in these statements. We believe that these
factors include, but are not limited to, those factors set forth in this Annual
Report under the captions "Business," "Risk Factors," and "Management's
Discussion and Analysis or Plan of Operation," all of which you should review
carefully. If one or more of these or other risks or uncertainties materialize,
or if our underlying assumptions prove to be incorrect, actual results may vary
materially from what we anticipate. Please consider our forward-looking
statements in light of those risks as you read this Annual Report. We undertake
no obligation to publicly update or review any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
    3
 Table of Contents
  PART
I
 
 ITEM
1. BUSINESS
 
 Overview
 
 For
purposes of the discussion contained in this section, the use of “we”, “our” or
“us” is meant to include GPS Industries, Inc. (GPSI or Company) and its
subsidiaries Optimal Golf Solutions Inc. (OGSI), Direct Golf Services Inc., Golf
Academies Ltd. (collectively GPSI Europe) and GPS IT, LLC (GPS IT) which was
formed to acquire Uplink Corporation (Uplink).
 
 Company
History
 
 GPSI has
incurred losses since its inception.  Although it has recently
implemented a restructuring plan, GPSI’s ability to implement its plan and the
continued commercialization of its technology is dependent on its ability to
successfully finance its working capital requirements through a combination of
debt and equity financing, sales of its GPS systems and payments from
distributors and potential strategic partners.  There can be no
assurances it will be able to do so.  The Company may not be able to
continue as a going concern.  See, “Risk Factors.”
 
 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."
 
 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 jointly as GPSI Europe;
GPSI also owns 17.5% of GPSI Asia, our Asian distributor.
 
 On
January 18, 2008, GPSI’s wholly owned subsidiary, GPS IT, LLC, acquired the
assets and assumed certain liabilities of Uplink.
  Business
 
 GPS
Industries, Inc. 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, residential community developments and other
recreational and industrial applications. With the development of its latest
generation product, 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.
 
 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, which are no longer significant, have
been collapsed into our core Inforemer business.
 
 GPSI has
offices in the United States, Canada and United Kingdom with exclusive
distributor arrangements covering Asia, South Africa, Australia and New
Zealand.  The North American market is our primary
market.
 
 In mid
2008, the Company commenced consolidating its operations previously divided
between our Vancouver, Canada and Austin, Texas locations, into our new
Sarasota, Florida headquarters.  Software development, research
development, and repair/maintenance will be located in the Austin office.
Finance, sales and customer service will be located in Sarasota.
  4
 Table of Contents
 
 Products
and Systems
 
 InforemerTMGPS
Management System utilizes a wireless network (WiFi) backbone. The WiFi network
turns the entire property into a WiFi “Hotspot” facilitating robust, high-speed
information delivery and two-way communications between the facility operator
and the golfer. The operator can also leverage the WiFi network for other
applications such as wireless security cameras, if desired. The golfer
interfaces with the system through the H2 handheld, the only handheld device
with full management capability, or the HDX, a cart-mounted colored displays
that delivers GPS yardage information, rich course graphics, and streaming data
such as CBS Sportsline. This information is delivered in real time over the WiFi
network, which is also capable of delivering multimedia enriching the experience
for the golfer. The course operator has a full suite of management functions
controlled through a central computer, such as tournament management, cart
location information, pin placement, food and beverage ordering, and pace of
play. This functionality gives the operator far greater control of the operation
which can ultimately impact the facility’s profitability.
 
 The
architecture of the InforemerTM system allows the operator to custom design a
system around their specific needs. Much like purchasing an automobile where you
start with a base model then add options and functionality as desired, the
Inforemer begins with a handheld configuration or basic HDX Lite system and
different capabilities are selected by the operator depending upon their needs
and budget. This flexibility gives the Inforemer the ability to appeal to a
wider variety of markets.
 
 GPSI also
offers (i) an Inforemer Lite System that requires less infrastructure at a lower
price point but still includes distance measurement and (ii) the Inova model GPS
system that was acquired with the Uplink asset acquisition.
 
 The
Market
 
 The
market for the Inforemer System is most broadly defined as golf facilities
worldwide or approximately 33,000 golf courses. Approximately 20,000 of these
golf courses are currently located in North America (16,700 in the United States
and 3,200 in Canada). Almost 50% (5,900) of the remaining golf courses are
located in Europe, with 3,100 concentrated in Great Britain and Ireland. Other
territories containing more than 250 courses include Japan, Australia and South
Africa. The fastest growing golf territories, reporting double-digit growth,
include China, Spain, Mexico and the rest of Latin America.
 
 The
primary market for the full featured InforemerTM system
includes resort courses, high-end daily fee facilities, and residential golf
communities. These facilities constitute approximately 37% of the total golf
course market and include large-scale golf-centric resorts and developments. A
secondary market includes the private courses, mid-range facilities, lower-end
daily-fee facilities and municipal courses that represent approximately 40% of
the global market. This market is more receptive to a product at a lower price
point, which is currently addressed by the sale of a refurbished product or the
Inova golf course system product.
 
 Because
our products are marketed to our primary and secondary target markets, our
market effectively includes 75% of all golf courses worldwide. The balance,
approximately 25%, consists of smaller executive facilities, par 3 courses and
pitch-and-putt facilities for which current product offerings are not
appropriate.
 
 Current
market penetration of GPS Management systems is estimated at less than 5% of the
global market.  The majority of which are the Company and its main
competitor’s customers.
 
 Service
and Support
 
 GPSI
typically offers one year of limited manufacturer’s warranty with service and
maintenance fees payable thereafter. GPSI has approximately 22,000 mobile
display units in operation worldwide in combination with the acquired
Uplink customer base. As a result of the Uplink acquisition, GPSI now manages
its North American installation base through a geographically dispersed customer
service network consisting of Regional Service Managers (RSM’s) supported by our
Austin, Texas-based management team and repair center.
 
 GPSI
Europe and GPSI Asia, a distributor in which GPSI has a 17.5% interest, are
responsible for their own service and maintenance to customers outside of North
America.
 
 Financing
 
 GPSI
customers often require financing in order to acquire the Inforemer System.
While GPSI typically does not provide, “in-house” financing, we do help our
customers source, customize and obtain financing acceptable to them through a
number of well established lenders in the golf and leisure
industry.
  5
 Table of Contents
 
 Sales
and Marketing
 
 With
offices, distribution and sales channels worldwide, GPSI has the opportunity to
market and sell our products globally. In North America, we sell our systems
through our network of direct sales representatives, distributors and multi-line
agents. We also sell our systems through both GPSI Europe and GPSI Asia, and
recently announced the signing of a distributor agreement with On-Pin for
Australia and New Zealand. GPSI generally sells our systems outright for cash or
through a fixed payment lease arrangement with a third party lessor whereby GPSI
sells the system to the lessor for a portion of the net present value (NPV) of
the stream of payments made by the golf course to the lessor.
 
 Advertising
 
 The
InforemerTM system has industry-leading capabilities to deliver advertising
content to the golfer while they are in the golf environment. The InforemerTM can
deliver advertising messages that can be location-based, language specific and
dynamic in nature. This ability gives the Inforemer a far more flexible offering
than a static ad that is just displayed “by the hole.”  GPSI partners
with the course operator and sells advertising in the various markets through
agents or third parties in the advertising industry. The revenue generated is
then shared with the course operator.
 
 Intellectual
Property
  On July
2, 2004, we purchased the patents to differential GPS in Australia, Japan and
eleven European nations from Pinranger (Australia) Pty Ltd. On November 19,
2004, we acquired the patents to GPS for golf in the United States and in Canada
(Optimal Patents) in the stock purchase of Optimal Golf Solutions, Inc. (OGSI).
In addition to providing us with broad patent protection for a number of our
products in the GPS market, these patents also generate recurring revenue
through licensing fees paid to us by competitors in the golf industry. The
Optimal Patents have been licensed to six companies. We intend to license these
patents on a non-exclusive basis to other GPS-based golf system providers and
believe we are in a strong position to enforce the Optimal Patents against
infringers. In November 2006 we entered into a $1,2000,000 settlement in a
patent-infringement lawsuit we initiated in London County Court, UK. In 2006, we
received a $212,500 as part of this settlement as the first license payment; we
are scheduled to receive additional license payments under that
settlement/license agreement of $210,000 per year, paid quarterly, until 2011,
with the last payment due in August 2011.
 We funded
the purchase of the Optimal Patents through loans that we obtained from Great
White Shark Enterprises, Inc. (GWSE). As compensation for the loans that enabled
the acquisition of these patents, GWSE now receives 20% of all Optimal Patent
license payments we receive through December 31, 2008, after which time their
share of these fees will be increased to 40% for the remaining life of the
patents.
 
 On
January 18, 2008 GPSI also acquired significant patents as part of the Uplink
Asset Purchase - specifically: U.S. Patent 7,239,965 issued July 3, 2007 for the
method and system for golf cart control and U.S. Patents 5,685,786 - Passive
Golf Information System and Method and 5,772,534 - Satellite Enhanced Golf
Information System issued November 11, 1997 and June 30, 1998, respectively.
These related to automatic zone detection and determination of distance to
course landmarks. The ‘786 patent also provides coverage for displaying
advertising information and tournament standings information received from a
transmitting station on the display units.
  In
addition to those referenced above, we have filed for and/or obtained certain
other patents and registered various trademarks associated with our core
business in the United States and locations around the world.
 
 Competition
 
 Competition
in the GPS golf market can be segmented into two main categories; low-priced
consumer products and high-value GPS-based management business
solutions.
  While
there are an increasing number of GPS golf products on the market, many of these
are consumer oriented, utilizing devices such as laser finders, binoculars or
personal digital assistants (PDA's). These commodity products are basic in
functionality, and do not provide the same level of accuracy or reliability as
our products and business solutions.
 
 Our
direct competition in the GPS golf management market consists primarily of
ProLink Holding Corp (ProLink). ProLink’s website indicates that they have over
700 course installations worldwide and is a competitor in most markets GPSI
operates in. Management believes that the ProLink offering however lacks in the
sophistication, technological advantages and functionality of the Inforemer
product offering. ProLink had a non-exclusive license from GPSI for use of the
`Optimal' GPS patents in the United States; however, that non-exclusive license
was terminated based on ProLink’s default of their payment obligations
thereunder and their subsequent failure to cure the default.  ProLink
has a non-exclusive license from GPSI for use of the “PinRanger” patents in the
UK. ProLink is also a competitor for on-course advertising. However, with GPSI’s
recent acquisition of Uplink’s business and assets, GPSI now owns the patents
and exclusive use for location based on-course advertising.
  6
 Table of Contents
 
 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
are not intended to be an all-inclusive list of the potential risks relating to
an investment in our securities. If any of the following or other risks actually
occur, our business, financial condition or operating results and the trading
price or value of our securities could be materially adversely
affected.
 
 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.
 
 Risks
Related to Additional Capital Requirements
 
 We
need a substantial amount of new funding to meet our cash requirements,
including the repayment of debt, for the next 12 months and to fully implement
our business plan during the next 12 months.  We currently are
evaluating alternate sources and types of financing.  However, at this
time, we do not have any firm commitments or identified sources of additional
capital.  Although our officers and directors or their affiliates have
facilitated capital for us, or provide us with capital, in the past, they are
not legally bound to do so.  There can be no assurance that additional
capital will be available to us, or that, if available, it will be on terms
satisfactory to us.  Any additional financing may involve dilution to
our shareholders.  If we are unable to raise additional financing on
terms satisfactory to us, or at all, we would not be able to fully implement our
business plan which would have a materially adverse effect our business and
financial position and could cause us to delay, curtail, scale back or forgo
some or all of our operations or we could cease to exist.
 
 Risks
Related to Technology
 
 We depend on GPS technology owned
and controlled by others.  Our services rely on signals from GPS
satellites built and maintained by the U.S. Department of Defense and others.
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.   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, by affecting the availability
and pricing of GPS technology, our business could suffer.
 
 Our GPS
technology depends on the use of radio frequency spectrum controlled by others.
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 in-band may
materially and adversely affect the utility and reliability of our products,
which could result in a material adverse effect on our operating
results.
 
 In
addition, 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.  With the adoption of new
laws, 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.
 
 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.
 
 7
 Table of Contents
 
 GPSI’s
performance and ability to complete are dependent to a significant degree on its
proprietary technology.  GPSI holds 31 patents and has 8 additional
patents pending covering several areas.  There can be no assurance
that pending patent applications will be allowed or that any of GPSI’s patents
will provide absolute protection for its products.  GPSI expects to
file additional patent applications to protect it proprietary
designs.  Despite GPSI’s efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of GPSI’s products or to obtain
and use information that GPSI regards as proprietary.  There can be no
assurance that the measures taken by GPSI to protect its proprietary technology
and such protections may not preclude competitors from developing products
similar to GPSI’s products.  In addition, effective patent, copyright,
trademark, and trade secret protection may be unavailable or limited in certain
foreign countries.  In addition, in the future GPSI may also need to
file lawsuits to enforce GPSI’s intellectual property rights.  Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversion of resources, which could have a material adverse effect on
GPSI.  The failure of GPSI to protect its proprietary information
would have a material adverse effect on GPSI’s business, financial condition,
and results of operations.
 
 While
GPSI believes that its products and trademarks do not infringe upon the
proprietary rights of third parties, there can be no assurance that GPSI will
not receive future communications from third parties asserting that without
merit, could result in costly, time-consuming litigation and diversion of
technical and management resources.  In the event any third party were
to make a valid claim and a license were not made available on commercially
reasonable terms, or if GPSI were unable to develop non-infringing alternative
technology, GPSI’s business, financial condition, and results of operations
would be materially and adversely affected.
 
 Risks
Related to 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. 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 GPSI or our
  competitors.
  Risks
Related to Internal Controls
 
 We have engaged in transactions with
our management, directors, shareholders and major investors and the organization
and employers of directors 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 interest of the Company.
 
 The current Board of Directors 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 have the right to
approve or disapprove certain corporate action, which could materially affect
the holders of our Common stock.  Currently, Leisurecorp, LLC
(Leisurecorp), controls the rights of the Series B shares.
 
 The Company’s management 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, 2008.  See Item 8A in this report for Management’s
discussion of these material weaknesses.
 
 We have not been able to implement
Section 404 of the Sarbanes-Oxley Act on a timely basis and accordingly 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 or
difficulties encountered in their implementation, which could negatively affect
our operating results or cause us to fail to meet our reporting
obligations.  The costs necessary to achieve compliance may be
significant.
 
 Risk
Related to our Capital 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
shares to raise money or otherwise desire to liquidate his shares.  In
addition, the market price of our Common stock may be adversely affected by
market volatility.  Furthermore, you may have difficulty selling our
shares because they are deemed “penny stocks” and our trading volume is very
light.
  8
 Table of Contents
 
 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, Leisurecorp controls the rights of the Series B
shares.
 
 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
shareholders.
 
 In the
event GPSI liquidates, either voluntarily or involuntarily, the holders of its
Series B preferred shares will receive funds from the liquidation before any
funds can be paid to the holders of common shares.  The series C
preferred stock has a liquidation preference of $10.00 per share and will
participate on a parity basis with the holders of the series B preferred stock
with respect to liquidation.  Accordingly, in liquidation, it is
unlikely that common stockholders will be entitled to receive any assets or
distributions from the Company.
 
 The
holders of shares of the series B preferred shares may require GPSI to redeem
their shares for cash at a price per share.  Should the holder
exercise this right, the funds used to redeem the shares will necessarily reduce
the amount available for working capital and may result in the Company’s
inability to continue as a going concern.
 
 Our Board
of Directors has the right to issue additional Series of Preferred stock, the
term of which could adversely affect the value of the Common stock.
 
 Risk
Related to Reporting Requirements
 
 Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board.  If we fail to remain current on
our reporting requirements, we could be removed from the OTC Bulletin
Board.  As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market.
 
 
 Risk
Related to our Currency Exchange
 
 We are
subject to the risk of currency fluctuation.  Most of our revenues are
collected in U.S. dollar.  However, many of our expenses are paid in
foreign currency, the majority of which are paid in Canadian
dollar.
 
 ITEM 2. 
PROPERTIES
 
 Our
principle executive offices are located in Sarasota, Florida in a 3,600 square
foot facility under two leases, one of which is subleased from the Company’s
Chief Executive Officer on a month to month basis at a rate of $2,500 per
month.  The other lease expires in September 2011 and calls for an
annual rental of $60,000.  We also have an 8,500 square foot facility
in Vancouver, which has an annual cost of $85,000, which expires in September
2010.  During 2008, the Company has gradually reduced operations in
Vancouver as the result of outsourcing manufacturing and the relocation to the
Company’s new Sarasota facility.
 
 As a
result of the acquisition of the Uplink operation, the Company had acquired an
approximately 13,000 square foot leased facility in Austin; however the lease
was terminated in January 2009 as the result of the outsourcing of manufacturing
and the relocation to Sarasota.  In January 2009, the Company leased a
4,600 square foot facility in Austin to house the development engineers and
repair operations.  This lease expires in January 2011 and costs
$4,183 per month.
  ITEM 3. 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 the Company breached a consulting agreement by failing to pay monthly
consulting fees, and claims $101,000 in damages. On April 25, 2008, the Company
and CCG agreed to settle the matter for $25,000 and the lawsuit was dismissed
with prejudice.
 
 On
October 29, 2007, Optimal I.P. Holdings, L.P. (Optimal) initiated arbitration
proceedings in Austin, Texas against the Company alleging breach of a Patent
Enforcement Cooperation Agreement between the two companies.  On
November 16, 2007 the Company responded to the arbitration demand by objecting
to the jurisdiction of the American Arbitration Association (AAA) over the
dispute and further denying all material allegations of the
demand.  On May 25, 2008 the arbitrator ruled that the AAA did not
have jurisdiction over the arbitration proceedings and dismissed the
proceeding.
  On July 7, 2008, Charles
Huston and Daryl Cornish filed a lawsuit in State Court in Texas alleging, among
other things, breach of the Stock Purchase Agreement, as amended, relating to
the purchase by the Company of the capital stock of OGSI (which is the owner of
U.S. Patent No. 5,364,093).
  On July
9, 2008, Optimal initiated arbitration proceedings in Chicago, Illinois against
the Company alleging breach of a Patent License Agreement between the two
companies.
  9
 Table of Contents
  In
January 2009, the Company settled all of the above-referenced actions with
Optimal, Huston and Cornish. The terms of the settlement reached with Optimal
provide that:
 
 ·
              The
      Stock Purchase Agreement was amended by adding provisions (a) issuing a
      promissory note convertible into shares of the Company’s Common stock at a
      fixed conversion price of $0.031 per share; (b) GPSI agreeing to remove
      the restrictive legend from 30,392,082 GPSI shares of Common stock
      previously issued to Optimal; and (c) GPSI agreeing to issue 12 million
      restricted shares of Common stock as payment against accrued interest. The
      Stock Purchase Agreement was also amended to specify lock up and leak out
      provisions governing Optimal’s disposition of GPSI shares of Common
      Stock.
 
 ·
              The
      parties also entered into a Replacement License Agreement which supersedes
      the previous license agreement and specifically describes the parties
      agreement regarding handheld devices.  Under the new license
      agreement, the parties have agreed that each party may distribute handheld
      devices through each Company’s own distribution channels (in the case of
      GPSI, not until July 2009) and that each Company may sublicense one
      company that is not in either company’s distribution channel to exploit
      the “software only” field; i.e., software downloaded to a portable device
      to determine distances on a golf
course.
  On November 1, 2007,
ProLink  filed a patent infringement lawsuit against the Company and
Uplink. The compliant alleges that the Company, Uplink and one of each of the
Company’s and Uplink’s 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 seeks a
declaratory judgment that ProLink has not infringed U.S. Patent No. 5,685,786
and that this patent is invalid; however, the federal judge presiding summarily
dismissed all ProLink requests for declaratory judgment regarding U.S. Patent
No. 5,685,786.  By virtue of the Asset Purchase Agreement between the
Company and Uplink, as amended effective January 18, 2008, the Company has
assumed any 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 its customer and Uplink’s customer in connection with the litigation. The
Company intends to vigorously defend this lawsuit.
  On July 16, 2008, the
Company, filed suit for patent infringement in the United States District Court
for the Northern District of Illinois against ProLink , ProLink Solutions, LLC,
ABC National Television Sales, Inc., and LinksCorp, Inc. The suit alleges
infringement of U.S. Patent No. 5,685,786, which relates to on-screen display of
centrally transmitted advertising and tournament standings information. The
Company has also asserted U.S. Patent No. 5,438,518, which relates to the
Company’s position-based hole advance and screen scrolling technology. The
Complaint also alleges that the ProLink and its related companies have made
false representations in the marketplace and in connection with financing
activities that they own rights in the U.S. Patent No. 5,438,518, when in fact
they hold no interest in the patent and are not authorized to utilize the
technology it covers.  ABC has since been dismissed from the lawsuit based
on a agreement between the parties.  Further, this litigation has been
stayed pending a reexamination of the patents in question by the U.S. Patent and
Trademark Office.
 We may
occasionally become subject to legal proceedings and claims that arise in the
ordinary course of our business. It is impossible for us to predict with any
certainty the outcome of any disputes that may arise, and we cannot predict
whether any liability arising from claims and litigation will be material in
relation to our consolidated financial position or results of
operations.
 
 ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
 
 No
matters were submitted to a vote of our security holders during
2008.
  10
 Table of Contents
 
 PART
II
 
 ITEM 5. MARKET FOR
REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 
 Our
common stock is listed for trading on the OTC Bulletin Board under the symbol
"GPSN". The following table sets forth the high and low closing prices per share
of our common stock. The prices represent prices between dealers, exclusive of
retail markup, markdown or commission and do not necessarily represent actual
transactions. There is no trading market for our outstanding preferred
stock.
 
 Year
      ended December 31, 2008High
                    LowFirst
      Quarter
                    $  0.060
                    $
      0.033Second
      Quarter
                    $  0.042
                    $
      0.021Third
      Quarter
                    $  0.040
                    $
      0.021Fourth
      Quarter
                    $  0.024
                    $
      0.010
 
 
 Year
      ended December 31, 2007High
                    LowFirst
      Quarter
                    $  .013
                    $0.07Second
      Quarter
                    $  0.16
                    $0.10Third
      Quarter
                    $  0.11
                    $0.08Fourth
      Quarter
                    $.
      0.09
                    $0.05
 
 
 As of
December 31, 2008, there were 542,499,653 Common shares outstanding and
approximately 340 shareholders of record, not including holders who hold their
stock in "street name".
 
 Dividends
 
 We have
never paid any cash dividends on our Common stock.
 
 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, pay any dividends or distributions on any shares
of our capital stock.
 
 Recent
Sales of Unregistered Securities
 
 During
the past three years we issued the following unregistered
securities:
 
 Issued in
2008:
 
 ·
              On
      January 10, 2008, the Company issued 142,083,334 shares valued at
      $7,814,000 in relation to the Uplink asset acquisition;
  and
 
 ·
              On
      February 29, 2008, the Company issued 400,000 shares valued at $18,000 for
      services rendered.
 
 ·
              On
      August 14, 2008, the Company issued 191,000 shares valued at $6,000 for
      settlement of trade payables.
 
 ·
              On
      August 20, 2008, the Company issued 622,000 shares valued at $18,000 for
      settlement of trade payables.
  
 All of
the foregoing shares were sold pursuant to an exemption available under Section
4 (2) of the Securities Act of 1933 (Securities Act) because the issuances did
not involve any public offering.
 
 Equity
Compensation Plan Information
 
 The
information on the number of securities to be issued upon the exercise of the
outstanding stock options,  the weighted-average exercise price of the
outstanding Stock options; and the number of stock options remaining available
for future issuance under our equity compensation plans is detailed in Footnote
13 of our Consolidated Financial Statements that appear elsewhere in the Annual
report.
  11
 Table of Contents
 
 ITEM 6.  SELECTED
FINANCIAL DATA
 
 Not applicable.
 
 ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 You
should read the information in this Item 7 together with our consolidated
financial statements and notes thereto that appear elsewhere in this Annual
Report. This Annual Report contains forward-looking statements that involve
risks, uncertainties, and assumptions. Actual results may differ materially from
those anticipated in these forward-looking statements as a result of various
factors, including, but not limited to, those presented under "Risk Factors"
included in ITEM 1 and elsewhere in this Annual Report.
 
 Management’s
Discussion and Analysis of Results of Operations
 
 Twelve-months
ended December 31, 2008 compared to December 31, 2007
 
 For the
year ended December 31, 2008, we recorded total revenue of $13,490,000 compared
to $7,266,000 during the year ended December 31, 2007. This $6,224,000 increase
was due to an increase in 18-hole equivalent sales at higher average selling
price per 18-hole equivalents and additional leasing/rental programs, service
and maintenance contract revenues.  These increases were in part
generated by the acquisition of GPSI Europe in October, 2007 and Uplink
operations in January, 2008.
  Cost of
goods sold, as a percentage of revenue, was similar at 87% in both 2007 and
2008.
  Selling,
general and administrative expenses increased by $2,742,000 in 2008 to
$10,490,000 from $7,748,000 in 2007.  The increase was due to the
inclusion of GPSI Europe and Uplink operations in 2008 which caused the
resultant personnel related costs, rent and utilities and office operations to
increase due to the higher staffing levels and two additional offices. In
addition, the Company was charged $1,041,000 in professional fees for third
party interim management services paid for by a related party and costs incurred
by two related parties.  Legal expenses increased from $360,000 in
2007 to $1,293,000 in 2008 due primarily to the legal costs incurred in the
ProLink litigation.
  Engineering
and research and development expenses for the year ended December 31, 2008
decreased by $1,883,000 or 48% from$ 3,868,000 to $1,985,000.  During
early 2007, the Company incurred significant product development costs for the
development of the next generation of the Informer 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 of its
strategic development partners during the 2008 period.
 
 Depreciation
and amortization expense is primarily due to the amortization of the Company’s
acquired patents, and also includes the depreciation of the Company’s property
and equipment. Depreciation and amortization increased from $527,000 to
$2,567,000. Most of the expense during 2008 is attributable to patent
amortization. The increase is a result of the amortization of the estimated 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.
 
 In
December 2007, the Company’s senior management committed to a restructuring plan
involving the downsizing of the Company.  This plan included a process
to terminate employees under a plan of termination and to rescind the Company’s
acquisition of certain assets of Golf IT.  This restructure plan was
executed in January 2008 and resulted in one-time termination expense of
$427,000 and recognition of $664,000 in costs incurred to implement the Golf IT
acquisition.  These costs have been included in restructuring costs in
the consolidated statement of operations for the year ended December 31,
2007.  The Company incurred additional charges to income of $181,000
during the first quarter of 2008 to complete its restructuring
plan.
 
 In
mid-2008, the Company began developing a plan to consolidate the majority of its
remaining operation in Sarasota, Florida.  This plan was initiated in
the fourth quarter of 2008 and is expected to continue into the first half of
2009.  The company estimates that the one time expenses remaining to
be incurred in 2009 will be approximately $1,476,000.  These costs
have been included in restructuring costs in the consolidated statement of
operations for the year ended December 31, 2008.
  The
Company’s loss before other income (expense) increased by $3,185,000 from
$12,306,000 in 2007 to $15,491,000 in 2008. The increase in loss from operations
for 2008 was due to increased operating expenses of the Uplink and GPSI Europe
operations. Higher operating expenses during this period were due to $1,553,000
increase in depreciation and amortization of intellectual property, and a
$2,742,000 increase in selling, general and administrative expenses offset by a
$1,883,000 million decrease in operations, engineering, research and development
expenses. The year-to-year gross profit increased $790,000 due to more
sales.
  12
 Table of Contents
  Interest
and financing expenses increased from $636,000 in 2007 to $1,581,000 in
2008.  These costs increased primarily due to the $3,500,000 increase
in its previous line of credit, and the $5,500,000 borrowing under a Convertible
Promissory Note.
  During
the year ended December 31, 2008 the company incurred a foreign currency
exchange gain of $401,000 compared to a loss of $618,000 in 2007. During 2008,
the value of the U.S. dollar fluctuated against the Canadian dollar and the
British Pound, and during the second half of 2008, gained strength, thereby
causing us to record a substantial gain on our currency exchange whereas during
2007 the value of the U.S. dollar had decreased compared to the Canadian
dollar.
  The
Company recorded a gain on extinguishment of debt of $49,000 for the year ended
December 31, 2008 versus a gain of $1,968,000 in the same period in
2007.  In 2007, the gain was primarily due to the write-off of debt
guarantees of discontinued operations reported in earlier periods.
  At
December 31, 2008 the Company recorded an impairment charge of approximately
$14,324,000 primarily associated with the intangible assets that were purchased
from Uplink in January 2008.  We initially recorded $7,455,000 of
intangible assets in connection with the Uplink acquisition, primarily related
to patents and technology that we acquired from Uplink.  Subsequently,
management elected to focus on sales of its InforemerTM GPS Management System and
to decrease its focus on other products and technologies, including the Uplink
products.  As a result, the Company elected to take the forgoing
impairment charge, since the future utilization of the Uplink assets is in
doubt.
  Net loss
was $30,881,000 for the year ended December 31, 2008 compared to $11,593,000 for
the year ended December 31, 2007. The Company’s 2007 net loss applicable to
common shareholders included a deemed preferred stock dividend of $12,500,000,
whereas the Company’s 2008 net loss included an intangible impairment charge of
$14,324,000.  No similar impairment was recorded during the 2007
period.
 
 Liquidity
And Capital Resources
 
 We have incurred losses since our
inception and expect to continue to incur losses in the near
future.  Our auditors have issued a going concern opinion as a result
of an inability to generate sufficient cash from operations to meet our current
obligations.  GPSI has undertaken a restructuring of our operations to
increase sales and reduce expenses, with the goal of reducing and eventually
eliminating our operating losses.  However, there can be no assurance
that we will be successful in these efforts.
 
 We need a substantial amount of new
funding to meet out cash requirements, including the repayment of debt, for the
next 12 months and to fully implement our business plan during the next 12
months.  We currently are evaluating alternate sources and types of
financing.
 
 At December 31, 2008 the Company had
cash and cash equivalents of $1,823,000 as compared to $1,488,000 as of December
31, 2007.
 
 Net cash
used by operating activities for the year ended December 31, 2008 was
$9,037,000, as compared to $11,656, 000 during the twelve months ended December
31, 2007.  Net cash used in investing activities was $2,313,000 in
2008 as compared to $3,694,000 in 2007.  Net cash provided by
financing activities was $11,685,000 for the 2008 fiscal period, as compared to
$14,641,000 for fiscal 2007.  Financing activities in 2008 consisted
primarily of  two debt financings totaling $12,000,000.
  As of
December 31, 2008 the Company had a working capital deficiency of $18,403,000
compared to $5,172,000 as of December 31, 2007.
 
 Our
ability to repay our accounts payable and other outstanding indebtedness, and
our ability to maintain sufficient liquidity to continue our operations, is
significantly dependent upon our ability to generate sufficient cash from sales
in 2009 and beyond, supplemented by the Company’s ability to attract additional
investment.  The Company is continuing to work with its existing
investors to obtain further debt or equity funding that will provide longer-term
liquidity although no assurance can be given that such funds will be available
or, if available what the terms might be.
  13
 Table of Contents
 
 ITEM 8. FINANCIAL
STATEMENTS
 
 Our
consolidated financial statements and notes thereto and the related
reports  are attached to this Annual Report beginning at page F-1 and
are incorporated herein by reference.
 
 Filed
herewith are the following financial statements:
 
 GPS
INDUSTRIES, INC.
 FINANCIAL
STATEMENTS
 
 INDEX
 
 Page
      NumberREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM
                            
                            
                            F-1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM
                            
                            
                            F-2CONSOLIDATED
      FINANCIAL STATEMENTS:Balance Sheets
                            
                            
                            F-3Statements of Operations
                            
                            
                            F-4Statements of Stockholders' Deficit
                            
                            
                            F-5Statements of Cash Flows
                            
                            
                            F-6Notes to Financial Statements
                            
                            
                            F-7
      to F-24
  
 
 14
 Table of Contents
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 The Board
of Directors and Stockholders
 GPS
Industries Inc. and Subsidiaries
 
 We have
audited the accompanying consolidated balance sheet of GPS Industries Inc. as of
December 31, 2008 and the related consolidated statements of operations,
stockholders' deficit and cash flows for the year ended December 31, 2008. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
has determined that it is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of GPS Industries Inc. at
December 31, 2008 and the results of its operations and its cash flows for the
year ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred
significant losses and has a working capital deficiency as more fully described
in Note 1.   These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
    /s/
      Moore Stephens Lovelace, P.A.Independent
      Registered Public Accountants
                    Orlando,
      FloridaApril
      14, 2009
  
 F-1
 Table of Contents
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 The Board
of Directors and Stockholders
 GPS
Industries Inc. and Subsidiaries
 
 We have audited the accompanying
consolidated balance sheets of GPS Industries Inc. as of December 31, 2007 and
2006, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the years ended December 31, 2007 and 2006. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
 We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. The Company has determined that it is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
 In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of GPS Industries Inc. at December 31, 2007 and 2006 and
the results of its operations and its cash flows for the years ended December
31, 2007 and 2006 in conformity with accounting principles generally accepted in
the United States.
 
 The accompanying consolidated
financial statements have been prepared assuming that the Company will continue
as a going concern. The Company has incurred significant losses and has a
working capital deficiency as more fully described in Note 1. The Company
anticipates that additional funding will be necessary to sustain the Company's
operations through the fiscal year ending December 31, 2008. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
 
 
 /s/ Sherb & Co., LLPCertified
      Public Accountants
  April
14, 2008
 New
York, NY
    F-2
 Table of Contents
 
 GPSINDUSTRIES
      INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSDecember
      31,2008
                                
                                
                                2007ASSETS
                                
                                (In
      thousands, expect per share amounts)Current
      Assets:Cash
                                
                                $
                                1,823
                                
                                
                                $
                                1,488Accounts
      receivable, net
                                
                                
                                692
                                
                                
                                
                                1,494Inventories,
      net
                                
                                
                                4,311
                                
                                
                                
                                3,011Prepaid
      expenses and other current assets
                                
                                
                                312
                                
                                
                                
                                459Total
      current assets
                                
                                
                                7,138
                                
                                
                                
                                6,452Property
      and equipment, net
                                
                                
                                978
                                
                                
                                
                                829Third
      party leases with recourse, net
                                
                                
                                492
                                
                                
                                
                                617Intangible
      assets, net
                                
                                
                                2,831
                                
                                
                                
                                2,723Other
      assets, including deposits of $862 in 2008 and an advance of $946 in
      2007
                                
                                
                                1,131
                                
                                
                                
                                1,369Total
      assets
                                
                                $
                                12,570
                                
                                
                                $
                                11,990LIABILITIES
      AND SHAREHOLDERS’ DEFICITCurrent
      Liabilities:Notes
      payable
                                
                                $
                                1,352
                                
                                
                                $
                                3,342Current
      maturities of long-term debt
                                
                                
                                6,818
                                
                                
                                
                                37Customer
      deposits
                                
                                
                                3,534
                                
                                
                                
                                372Accounts
      payable
                                
                                
                                5,522
                                
                                
                                
                                4,478Accrued
      liabilities
                                
                                
                                8,315
                                
                                
                                
                                3,395Total
      current liabilities
                                
                                
                                25,541
                                
                                
                                
                                11,624Long-term
      debt, net of current maturities
                                
                                
                                7,405
                                
                                
                                
                                -Other
      accrued liabilities, net of current maturities
                                
                                
                                1,830
                                
                                
                                
                                880Total
      liabilities
                                
                                
                                34,776
                                
                                
                                
                                12,504SHAREHOLDERS’
      DEFICITSeries
      B convertible preferred stock, $10 par value, 4,000,000 authorized,
      3,244,089 and
                                  3,124,089
      issued and outstanding respectively
                                
                                
                                32,441
                                
                                
                                
                                31,241Class
      A common stock, $.001 par value, 1,600,000,000 authorized 542,499,653
      and
                                  399,203,369
      issued and outstanding respectively
                                
                                
                                543
                                
                                
                                
                                399Accumulated
      other comprehensive income
                                
                                
                                722
                                
                                
                                
                                722Additional
      paid-in capital
                                
                                
                                77,896
                                
                                
                                
                                70,052Accumulated
      deficit
                                
                                
                                (133,808
                                )
                                
                                
                                (102,928
                                )Total
      shareholders deficit
                                
                                
                                (22,206
                                )
                                
                                
                                (514
                                )$
                                12,570
                                
                                
                                $
                                11,990See
      accompanying notes to these consolidated financial
    statements
 
 F-3
 Table of Contents
 
 GPS INDUSTRIES INC.
      AND SUBSIDIARIES
                CONSOLIDATED
      STATEMENTS OF OPERATIONS
 
 For
      the Twelve Months Ended
                                            December
      312008
                                          
                                          
                                          2007(In
      thousands, expect per share amounts)Revenue
                                          
                                          $
                                          13,490
                                          
                                          
                                          $
                                          7,266Cost
      of goods sold
                                          
                                          
                                          11,773
                                          
                                          
                                          
                                          6,339Gross
      profit
                                          
                                          
                                          1,717
                                          
                                          
                                          
                                          927Selling,
      general and administrative expenses
                                          
                                          
                                          10,490
                                          
                                          
                                          
                                          7,748Engineering
      and research and development
                                          
                                          
                                          1,985
                                          
                                          
                                          
                                          3,868Depreciation
      and amortization
                                          
                                          
                                          2,080
                                          
                                          
                                          
                                          526Restructuring
      costs
                                          
                                          
                                          1,476
                                          
                                          
                                          
                                          1,091Inventory
      impairment
                                          
                                          
                                          1,177
                                          
                                          
                                          
                                          -17,208
                                          
                                          
                                          
                                          13,233(15,491
                                          )
                                          
                                          
                                          (12,306
                                          )Other
      Income (Expense):Interest
      expense and finance costs
                                          
                                          
                                          (1,581
                                          )
                                          
                                          
                                          (636
                                          )Goodwill
      and other intangibles impairment
                                          
                                          
                                          (14,324
                                          )
                                          
                                          
                                          -Gain(loss)
      on foreign exchange
                                          
                                          
                                          401
                                          
                                          
                                          
                                          (618
                                          )Gain
      on extinguishment of debt
                                          
                                          
                                          49
                                          
                                          
                                          
                                          1,968Other
      Income
                                          
                                          
                                          65
                                          
                                          
                                          
                                          -(15,390
                                          )
                                          
                                          
                                          714Net
      loss
                                          
                                          
                                          (30,881
                                          )
                                          
                                          
                                          (11,593
                                          )Deemed
      preferred stock dividend
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (12,500
                                          )Net
      loss applicable to common shareholders
                                          
                                          $
                                          (30,881
                                          )
                                          
                                          $
                                          (24,092
                                          )Loss
      per common share-
      Basic and diluted
                                          
                                          $
                                          (0.06
                                          )
                                          
                                          $
                                          (0.06
                                          )Weighted
      average number of common shares outstanding-
      Basic and diluted
                                          
                                          
                                          538,037,619
                                          
                                          
                                          
                                          385,484,908
 
 See
accompanying notes to these consolidated financial statements
  F-4
 Table of Contents
  GPS INDUSTRIES INC. AND
      SUBSIDIARIES
                                                                                                                              CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' DEFICIT(in
      thousands, expect per share amounts)Series
      A
                                                                                                                            
                                                                                                                            
                                                                                                                            Series
      B
                                                                                                                            
                                                                                                                            
                                                                                                                            Class
      APreferred
      Stock
                                                                                                                            
                                                                                                                            
                                                                                                                            Preferred
      Stock
                                                                                                                            
                                                                                                                            
                                                                                                                            Common
      StockNumber
                                                                                                                              of
                                                                                                                              Shares
                                                                                                                            
                                                                                                                            
                                                                                                                            Amount
                                                                                                                            
                                                                                                                            
                                                                                                                            Number
                                                                                                                              of
                                                                                                                              Shares
                                                                                                                            
                                                                                                                            
                                                                                                                            Amount
                                                                                                                            
                                                                                                                            
                                                                                                                            Number
                                                                                                                              of
                                                                                                                              Shares
                                                                                                                            
                                                                                                                            
                                                                                                                            Amount
                                                                                                                            
                                                                                                                            
                                                                                                                            Additional
                                                                                                                              Paid-In
                                                                                                                              Capital
                                                                                                                            
                                                                                                                            
                                                                                                                            Other
                                                                                                                              Comprehensive
                                                                                                                              Income
                                                                                                                            
                                                                                                                            
                                                                                                                            Accumulated
                                                                                                                              Deficit
                                                                                                                            
                                                                                                                            
                                                                                                                            Total
                                                                                                                              Stockholders'
                                                                                                                              DeficitBalance
      December 31, 2006
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,874,089
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            18,741
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            343,441,885
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            343
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            53,457
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            722
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (78,834
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            (5,571
                                                                                                                            )Preferred
      shares issued for cash
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,150,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            11,500
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            11,500Preferred
      shares issued for debt
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            100,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,000Common
      stock issued for settlement of debt
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            40,808,955
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            41
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            2,706
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            2,747Common
      stock issued for acquisition in subsidiary
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            11,000,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            11
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            994
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,005Common
      stock issued for interest
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            2,907,529
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            3
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            302
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            305Common
      stock issued for compensation expense
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,045,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            127
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            128Other,
      Net
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (34
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (34
                                                                                                                            )Net
      loss for  the year
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (11,593
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            (11,593
                                                                                                                            )Deemed
      stock dividend
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            12,500
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (12,500
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            -Balance
      December 31, 2007
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            3,124,089
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            31,241
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            399,203,369
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            399
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            70,052
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            722
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            (102,927
                                                                                                                            )
                                                                                                                            
                                                                                                                            $
                                                                                                                            (513
                                                                                                                            )Preferred
      shares issued for acquisition of Uplink operations
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            120,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,200
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,200Common
      stock issued for acquisition of Uplink operations
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            142,083,334
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            142
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            7,672
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            7,814Common
      stock issued for settlement of debt
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            812,950
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            23
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            24Common
      stock issued for compensation expense
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            400,000
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            17
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            18Debt
      discount
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,009
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            1,009Common
      stock issued for acquisition in subsidiary
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (1307
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (1307
                                                                                                                            )Warrants
      issued for acquisition of Uplink operations
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            219
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            219Stock
      options issued
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            211
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            211Net
      loss for  the year
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            (30,881
                                                                                                                            )
                                                                                                                            
                                                                                                                            
                                                                                                                            (30,881
                                                                                                                            )Balance
      December 31, 2008
                                                                                                                            
                                                                                                                            
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            -
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            3,244,089
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            32,441
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            542,499,653
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            543
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            77,896
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            722
                                                                                                                            
                                                                                                                            
                                                                                                                            $
                                                                                                                            (133,808
                                                                                                                            )
                                                                                                                            
                                                                                                                            $
                                                                                                                            (22,206
                                                                                                                            )
 
 See
accompanying notes to these consolidated financial statements
  F-5
 Table of Contents
  GPS INDUSTRIES INC. AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 For
      the Twelve Months EndedDecember
      31,2008
                                                                                                                      
                                                                                                                      
                                                                                                                      2007(In
      thousands, expect per share amounts)Cash
      Flow From Operating ActivitiesNet
      Loss
                                                                                                                      
                                                                                                                      $
                                                                                                                      (30,881
                                                                                                                      )
                                                                                                                      
                                                                                                                      $
                                                                                                                      (11,592
                                                                                                                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                                                                                                                      
                                                                                                                      
                                                                                                                      1,165
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      270Provision
      for doubtful accounts
                                                                                                                      
                                                                                                                      
                                                                                                                      912
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Amortization
      of convertible debt discount
                                                                                                                      
                                                                                                                      
                                                                                                                      177
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Amortization
      of intangibles
                                                                                                                      
                                                                                                                      
                                                                                                                      1,402
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      257Amortization
      of third party lessor recourse guarantees, net
                                                                                                                      
                                                                                                                      
                                                                                                                      (543
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      -Impairment
      of intangibles
                                                                                                                      
                                                                                                                      
                                                                                                                      14,324
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Stock
      option based compensation
                                                                                                                      
                                                                                                                      
                                                                                                                      211
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Gain
      on extinguishment of debt
                                                                                                                      
                                                                                                                      
                                                                                                                      (49
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,969
                                                                                                                      )Other
      non-cash expenses
                                                                                                                      
                                                                                                                      
                                                                                                                      42
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      238Inventory
      impairment provision
                                                                                                                      
                                                                                                                      
                                                                                                                      1,177
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Other
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      727Changes
      in operating assets and liabilities:Accounts
      receivable
                                                                                                                      
                                                                                                                      
                                                                                                                      (110
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (186
                                                                                                                      )Inventories
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,688
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,576
                                                                                                                      )Prepaid
      expenses and current other assets
                                                                                                                      
                                                                                                                      
                                                                                                                      376
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (71
                                                                                                                      )Customer
      deposits
                                                                                                                      
                                                                                                                      
                                                                                                                      3,162
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      224Accounts
      payable and accrued liabilities
                                                                                                                      
                                                                                                                      
                                                                                                                      1,953
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      678Other
      accrued liabilities
                                                                                                                      
                                                                                                                      
                                                                                                                      (667
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      1,344Net
      Cash Used in Operating Activities
                                                                                                                      
                                                                                                                      
                                                                                                                      (9,037
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (11,656
                                                                                                                      )Cash
      Flow From Investing ActivitiesDeferred
      product development costs
                                                                                                                      
                                                                                                                      
                                                                                                                      310
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (413
                                                                                                                      )Investment
      in patents
                                                                                                                      
                                                                                                                      
                                                                                                                      (427
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (45
                                                                                                                      )Purchase
      of property and equipment
                                                                                                                      
                                                                                                                      
                                                                                                                      (488
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,096
                                                                                                                      )Cost
      of acquisition of subsidiaries, net of cash acquired
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,708
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (1,333
                                                                                                                      )Investment
      in Optimal Golf Solutions Inc.
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (807
                                                                                                                      )Net
      Cash Flow Used  In Investing Activities
                                                                                                                      
                                                                                                                      
                                                                                                                      (2,313
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (3,694
                                                                                                                      )Cash
      Flow From Financing ActivitiesProceeds
      of SVB revolving line of credit
                                                                                                                      
                                                                                                                      
                                                                                                                      6,500
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Proceeds
      of convertible debenture issuance
                                                                                                                      
                                                                                                                      
                                                                                                                      5,500
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      -Proceeds
      of other loans
                                                                                                                      
                                                                                                                      
                                                                                                                      1,860
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      1,520Repayments
      on loans and bank indebtedness
                                                                                                                      
                                                                                                                      
                                                                                                                      (2,175
                                                                                                                      )
                                                                                                                      
                                                                                                                      
                                                                                                                      (4,047
                                                                                                                      )Preferred
      stock issued for cash (net of costs)
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      16,168Preferred
      stock issued for debt
                                                                                                                      
                                                                                                                      
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      1,000Net
      Cash Flow Provided By Financing Activities
                                                                                                                      
                                                                                                                      
                                                                                                                      11,685
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      14,641Net
      (Decrease)/Increase In Cash
                                                                                                                      
                                                                                                                      
                                                                                                                      335
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      (709
                                                                                                                      )Cash,
      Beginning of Year
                                                                                                                      
                                                                                                                      
                                                                                                                      1,488
                                                                                                                      
                                                                                                                      
                                                                                                                      
                                                                                                                      2,196Cash,
      End of Year
                                                                                                                      
                                                                                                                      $
                                                                                                                      1,823
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      1,488Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                                                                                                                      
                                                                                                                      $
                                                                                                                      649
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      499Cash
      paid for taxes
                                                                                                                      
                                                                                                                      $
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      22Non-Cash
      Investing And Financing Activities:Common
      stock issued to settle liabilities
                                                                                                                      
                                                                                                                      $
                                                                                                                      42
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      1,354Common
      stock issued for investments
                                                                                                                      
                                                                                                                      $
                                                                                                                      7,814
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      2,658Deemed
      dividends on issuance of preferred stock
                                                                                                                      
                                                                                                                      $
                                                                                                                      -
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      12,500Note
      payable issued for accrued interest
                                                                                                                      
                                                                                                                      $
                                                                                                                      870
                                                                                                                      
                                                                                                                      
                                                                                                                      $
                                                                                                                      -
 
 See
accompanying notes to these consolidated financial statements
  F-6
 Table of Contents
  GPS industries Inc. and
Subsidiaries
 Notes to
Consolidated Financial Statements
 For the
years ended December 31, 2008 and 2007
 1.
Business and Basis of Presentation
  Basis
of Presentation
 
 The
consolidated financial statements include the operations of GPS Industries, Inc.
(GPSI or the Company) and its wholly-owned subsidiaries (collectively, the
Company). All significant intercompany transactions and balances have been
eliminated in consolidation.
  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 December 31, 2008 and 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.
 
 Business
  The
Company is a global technology solutions provider with customizable,
patent-protected applications in global positioning satellite (GPS) and Wi-Fi
software and hardware for use with golf course operations and residential
community developments.  GPSI’s primary business is the development
and sale of the Inforemer HDX mobile display units along with the related
infrastructure.  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. Business activities are
divided between its Vancouver, Canada, Austin, Texas and Sarasota,
Florida offices. The
Company also owns 17.5% of GPSI Asia, its Asian distributor, which is accounted
for at cost.
  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 and is currently
trading on the OTC Bulletin Board under the symbol "GPSN."
 
 In 2004
the Company acquired 100% of the common shares of Optimal Golf Solutions, Inc.
(OGSI) for a total of $5,250,000 note plus interest of 4.75% on the principal
balance outstanding, payable by a combination of cash and stock.
 
 In
January 2007 the Company paid $807,000 cash and issued 30,392,082 shares to
satisfy the remaining liability for the purchase of OGSI. Full satisfaction of
this liability will depend on the OGSI shareholders receiving sufficient funds
from the sale of the issued shares 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 December 31, 2008, the remaining liability would not be satisfied in
full from the sale of the shares issued.  Therefore, during the year
ended December 31, 2008, the Company recorded an additional $1,307,000 in
liability offset by a decrease in paid-in capital associated with the OGSI
acquisition due to the decrease in the stock price below $0.054 to $0.011on
December 31, 2008.  In February, 2009 the Company issued 12,000,000
additional common shares to partially satisfy the liability.  The
Company could be required to issue further shares or pay the shortfall in cash
for the second stock payment.
 
 OGSI is
engaged solely in the business of holding patents relating to GPS technology for
the golf industry. A related party, Great White Shark Enterprises (GWSE) is
entitled to 20% of all patent license payments received through December 31,
2008, after which their share of these fees increase to 40% for the remaining
life of the patents. The Company has accrued this liability to December 31,
2008.
 
 Effective
October 18, 2007, the Company purchased 100% of the outstanding shares of
capital stock of Direct Golf Services Limited (DGS) and Golf Academies Limited
(GAL). DGS and GAL are registered companies in England and Wales, collectively
GPSI Europe, whose principal activity is the sales and rental of golf equipment
specifically golf distance-measuring devices using GPS technology throughout
Europe.
  On
January 18, 2008, GPSI’s wholly owned subsidiary, GPS IT, LLC, acquired the
operations, assets and assumed certain liabilities of Uplink Corporation
(Uplink), which produced and sold 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 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.
  F-7
 Table of Contents
 
 Total
consideration for the acquisition of Uplink was $21,240,000.  This
consideration included, in part, the assumption of $9,403,000 in liabilities,
the issuance of a note payable of $1,521,000 along with cash expenditures of
$1,083,000, consisting primarily of $946,000 in advances to Uplink during the
second half of 2007.  The remainder of the consideration resulted from
the issuance of 142,100,000 Common shares valued at $7,814,000, 120,000 Series B
Preferred shares with a par value of $1,200,000 and 4,918,000 Common stock
warrants at an exercise price of $0.122 per share valued at $219,000. 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.
 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 in
2008. The business combination was accounted for under the Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) No.
141, “Business Combinations.” The application of purchase accounting under SFAS
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 completed its assessment and finalized the fair values of the assets
acquired and the following table summarizes the Company’s best estimate of the
purchase accounting, which, among other things, resulted in a restatement of
certain assets and certain contingent liabilities on the balance sheet, and
reclassified the related amortization from gross margin to selling, general and
administrative expenses.
  The
following table summarizes the company’s original estimate of the purchase
accounting at the date of acquisition:
 
 Amount($000's)(unaudited)Assets
      AcquiredInventory
                            
                            $
                            789Other
      current assets
                            
                            
                            76Fixed
      assets
                            
                            
                            254Third
      party leases with recourse, net
                            
                            
                            3,096Other
      assets
                            
                            
                            861Intangible
      assets
                            
                            
                            16,164Total
      assets acquired
                            
                            $
                            21,240Liabilities
      assumedAccounts
      payable
                            
                            $
                            1,881Accrued
      liabilities
                            
                            
                            1,521Deferred
      revenue
                            
                            
                            5,523Long-term
      debt
                            
                            
                            478Total
      liabilities assumed
                            
                            $
                            9,403Net
      assets acquired
                            
                            $
                            11,837
 Upon
closing, the Common shares issued were held in escrow as security of
representations and warranties until March, 2009 when they were
released.
  The
following unaudited pro forma condensed combined Statements of Income and notes
thereto for the year ended December 31, 2008 and 2007, assume the acquisition
occurred at January 1, 2007 except for the application of SFAS No. 141,
the
application of which is reflected in the adjustments
column.
  F-8
 Table of Contents
 
 The pro
forma financial information is presented for illustrative purposes only and is
not necessarily indicative of the results of operations that would have occurred
had the acquisition taken place on January 1, 2007 or, the future operations of
the combined business.
  For the twelve month period ended December
      31, 2007GPSI
                            
                            
                            Uplink
                            
                            
                            Adjustments
                            
                            
                            Proforma
                              Combined(000's except per share data and number of shares) (unaudited)Revenue
                            
                            $
                            7,266
                            
                            
                            $
                            10,848
                            
                            
                            $
                            (286
                            )a
                            
                            $
                            17,828Cost
      of goods sold
                            
                            
                            6,339
                            
                            
                            
                            7,256
                            
                            
                            
                            (170
                            )a
                            
                            
                            13,425Operating
      ExpenseSelling,
      general and administrative
                            
                            
                            8,839
                            
                            
                            
                            4,452
                            
                            
                            
                            -
                            
                            
                            
                            13,291Research
      and development
                            
                            
                            3,868
                            
                            
                            
                            1,171
                            
                            
                            
                            -
                            
                            
                            
                            5,039Amortization
      of intellectual property
                            
                            
                            526
                            
                            
                            
                            737
                            
                            
                            
                            1,632
                            b
                            
                            
                            2,895$
                            13,233
                            
                            
                            $
                            6,360
                            
                            
                            $
                            1,632
                            
                            
                            $
                            21,225Loss
      Before Other Income (Expense)
                            
                            
                            (12,306
                            )
                            
                            
                            (2,768
                            )
                            
                            
                            (1,748
                            )
                            
                            
                            (16,822
                            )Other
      Income (Expense)
                            
                            
                            714
                            
                            
                            
                            (459
                            )
                            
                            
                            74
                            a
                            
                            
                            329Net
      Loss Before Deemed Preferred Stock Dividend
                            
                            $
                            (11,592
                            )
                            
                            $
                            (3,227
                            )
                            
                            $
                            (1,674
                            )
                            
                            $
                            (16,493
                            )Deemed
      preferred stock dividend
                            
                            
                            12,500
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            12,500Net
      Loss
                            
                            $
                            (24,092
                            )
                            
                            $
                            (3,227
                            )
                            
                            $
                            (1,674
                            )
                            
                            $
                            (28,993
                            )Net
      loss per common share, basic and diluted
                            
                            $
                            (0.06
                            )
                            
                            
                            
                            
                            
                            $
                            (0.01
                            )
                            
                            $
                            (0.05
                            )Weighted
      average common shares outstanding, basic and diluted
                            
                            
                            385,484,908
                            
                            
                            
                            
                            
                            
                            
                            142,083,334
                            c
                            
                            
                            527,568,242
 a
                Elimination
      of inter-company revenues and expenses related to the settlement and
      acquisition of patent licenses by Uplink from
  GPSI
  b
                Amortization
      of the estimated amount of value ascribed to intangible assets and
      patents. For this purpose, it was assumed that approximately $8,150,000
      would be allocated under SFAS No. 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 $1,224,000 for the twelve month period
      ended December 31, 2008.  As of December 31, 2008 the Company
      determined a portion of the intangible assets and patents were impaired
      and the unamortized portions were written
off.
  c
                Adjustment
      to reflect shares issued on acquisition for the period presented as if
      acquisition happened at the beginning of
period.
 
 F-9
 Table of Contents
 The
finalized allocation of the UpLink purchase price resulted, among other things,
in a reclassification that netted certain assets with certain contingent
liabilities on the balance sheet, and reclassed the related amortization from
gross margin to selling, general and administrative expenses.  The
unaudited impact of these adjustments for each of the three quarters ended
September 30, 2008 is as follows:
 Three
      months ending (unaudited)March
      31, 2008
                                                                                                                        
                                                                                                                        
                                                                                                                        June
      30, 2008
                                                                                                                        
                                                                                                                        
                                                                                                                        September
      30, 2008As
                                                                                                                          Reported
                                                                                                                        
                                                                                                                        
                                                                                                                        Reclass-
                                                                                                                          ification
                                                                                                                        
                                                                                                                        
                                                                                                                        As
                                                                                                                          Restated
                                                                                                                        
                                                                                                                        
                                                                                                                        As
                                                                                                                          Reported
                                                                                                                        
                                                                                                                        
                                                                                                                        Reclass-
                                                                                                                          ification
                                                                                                                        
                                                                                                                        
                                                                                                                        As
                                                                                                                          Restated
                                                                                                                        
                                                                                                                        
                                                                                                                        As
                                                                                                                          Reported
                                                                                                                        
                                                                                                                        
                                                                                                                        Reclass-
                                                                                                                          ification
                                                                                                                        
                                                                                                                        
                                                                                                                        As
                                                                                                                          RestatedRevenue
                                                                                                                        
                                                                                                                        $
                                                                                                                        2,666
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        399
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        2,267
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        4,564
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        566
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        3,998
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        4,793
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        536
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        4,275Cost
      of Goods Sold
                                                                                                                        
                                                                                                                        
                                                                                                                        2,270
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        245
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        2,025
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        3,296
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        321
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        2,975
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        5,069
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        295
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        4,774Gross
      profit (loss)
                                                                                                                        
                                                                                                                        
                                                                                                                        398
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        154
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        242
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        1,268
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        245
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        1,023
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (276
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        241
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (517
                                                                                                                        )Operating
      expenses
                                                                                                                        
                                                                                                                        
                                                                                                                        3,339
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (154
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        3,185
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        4,827
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (245
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        4,582
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        3,762
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (241
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        3,521Net
      Loss
                                                                                                                        
                                                                                                                        $
                                                                                                                        (2,943
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        (2,943
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        (3,559
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        (3,559
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        (4,038
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        (4,038
                                                                                                                        )
  
 2.
Summary of Significant Accounting Policies
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
 
 Revenue
Recognition
 
 The
Company recognizes revenue only when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or determinable, and
collectability is probable. When other significant obligations remain after
products are delivered, associated revenue is recognized only after such
obligations are fulfilled.
 
 System
sales are derived from the sales of the Company’s product lines directly to
end-user customers and third-party equipment lessors. Recurring revenues consist
of (i) transactions which are recognized ratably over the end-user contract term
from equipment sales to third parties that have a recourse component to the
Company , (ii) revenues realized from the rental of Company owned equipment
through either fixed rental payments or actual usage (iii) advertising revenues
and (iv) service revenues. The Company recognizes revenue on certain contracts
based on completion of major project milestones.  These project
contracts are with a related party.
 
 Rental
income arises from the leasing of the Company’s golf equipment to customers.
Lease terms are generally 60 months and are operating leases. Depreciation
expense for assets subject to these operating leases is provided primarily on
the straight-line method over the term of the lease in amounts necessary to
reduce the carrying amount to its estimated residual value.
  For
certain long-term equipment lease contracts, the Company utilizes third-party
financing entities to which the Company sells the equipment for a purchase
price. The Company evaluates the rights of the financing entity in these
transactions to determine the proper revenue recognition
treatment.  For instances where the Company has guaranteed the lease
rental payments in the event of customer default, revenue and product cost is
deferred and is recognized ratably over the contract term.
 
 Reclassifications
 
 Certain
reclassifications of items in the prior period's financial statements have been
made to conform to the current year's presentation.
 
 Cash
and cash equivalents
 
 Cash and
cash equivalents include all highly liquid investments with maturities of three
months or less when purchased.
  F-10
 Table of Contents
 
 Concentration
of Credit Risks
 
 The
Company is subject to concentrations of credit risk primarily from cash and cash
equivalents, accounts receivable, and deposits.   The Company's cash and
cash equivalents accounts are held at financial institutions and are insured by
the Federal Deposit Insurance Corporation (FDIC) up to $250,000. During the
period ended December 31, 2008, the Company has reached bank balances exceeding
the FDIC insurance limit. To reduce its risk associated with the failure of such
financial institutions, the Company’s accounts are held at financial
institutions with the highest credit ratings.
 
 Accounts
Receivable.
 
 The
Company maintains an allowance for doubtful accounts based upon our estimates of
amounts that will be realized from customers. The Company develops the allowance
based upon our experience with specific customers and our judgment as to the
likelihood of ultimate payment. Management considers the collection experience
of the entire portfolio of our receivables and makes estimates regarding
collectability based on trends in aging.
 
 Inventories
 
 The Company values inventories at the
lower of cost (first-in, first-out basis) or market. Inventories are primarily
comprised of finished electronic hardware, service parts and repair components.
 
 The
Company maintains inventory reserves based on periodic reviews of inventory
during the year to identify inventory that was determined to be obsolete or
unusable due to damage or due to incompatibility with the Company’s current and
future product offerings. Additionally, we establish reserves for GPS units that
were returned to inventory as a result of being swapped out or returned from
golf courses and overstocked items.
 
 Warranties
 
 The
Company establishes warranty reserves for each 18-hole equivalent sold.
Management reviews each facility under service based on our experience with
equipment and region. The Company charges cost of sales with the expenses of
such service and amortize the previously established course reserves ratably
over the following 12 months.
 
 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.
 
 Impairment
of Long-lived Assets
 
 Management
assesses the recoverability of long-lived assets when events or circumstances
indicate that the carrying amount of an asset may not be fully recoverable. If
undiscounted expected cash flows to be generated by a long-lived asset or asset
group are less than its carrying amount, we record an impairment to write down
the long-lived asset or asset group to its estimated fair value. Fair value is
estimated based on discounted expected future cash flows.
  Advertising
Costs
 
 Advertising costs are charged to
operations when incurred.  Advertising expense was approximately
$20,000 and $353,000 for the years ended December 31, 2008 and 2007,
respectively.
  Research
and Development Costs
 
 Research and development costs are
charged to operations when incurred.  Such costs were approximately
$225,000 and $598,000 for the years ended December 31, 2008 and 2007,
respectively.
 
 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 in
non-capital raising transactions for services and for financing
costs.
  F-11
 Table of Contents
 The
Company expenses stock options and warrants under the provisions of SFAS No.
123(R), "Share-Based Payment". 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. (See Note
15)
 
 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.
 
 Recent
Accounting Pronouncements
  In April
2008, the FASB issued FASB Staff Position (FSP) 142-3, “Determination of the
Useful Life of Intangible Assets” (FSP 142-3), which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS
No. 142, Goodwill and Other Intangible Assets.  The intent of
this FSP is to improve the consistency between the useful life of a recognized
intangible asset under SFAS 142 and the period of expected cash flows used to
measure the fair value of the asset under SFAS No. 141 and other U.S.
generally accepted accounting principles . FSP 142-3 is effective for
fiscal years beginning after December 15, 2008. The adoption of FSP 142-3
is not expected to have a material impact on the Company’s Consolidated
Financial Statements
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” The new standard is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles for
non-governmental entities. SFAS 162 is effective November 15,
2008.  The Company is currently evaluating the effects, if any, that
SFAS No. 162 may have on its financial reporting.
  In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,” which
addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need to be included in
the earnings allocation in computing earnings per share (EPS) under the
two-class method described in paragraphs 60 and 61 of SFAS No. 128, Earnings per Share. FSP EITF
03-6-1 is effective for fiscal years beginning after December 15, 2008, and
interim periods within those years. The adoption of FSP EITF 03-6-1 is not
expected to have a material impact on the Company’s Consolidated Financial
Statements.
 
 NOTE
3 – NET INCOME (LOSS) PER SHARE
 
 Basic net
loss per share is computed by dividing net loss, adjusted for preferred stock
dividends, by the weighted average number of issued common shares outstanding
during the applicable period.  Diluted net loss per share is computed
by dividing net loss, adjusted for preferred stock dividends, by the weighted
average number of issued common shares and potential common
shares.  Potential common shares consist of convertible preferred
stock, and warrants computed using the if converted method, and stock options
(vested and unvested) using the treasury stock method.
  F-12
 Table of Contents
 
 The
following table sets forth the computation of basic and diluted net income
(loss) per share:
  2008
                                                          
                                                          
                                                          2007($000
      omitted, except for share data)BasicNet
      loss
                                                          
                                                          $
                                                          (30,881
                                                          )
                                                          
                                                          $
                                                          (11,592
                                                          )Preferred
      dividends
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (12,500
                                                          )Net
      loss applicable to common shareholders
                                                          
                                                          $
                                                          (30,881
                                                          )
                                                          
                                                          $
                                                          (24,092
                                                          )Weighted
      average shares outstanding
                                                          
                                                          
                                                          538,037,619
                                                          
                                                          
                                                          
                                                          385,484,908Net
      loss per share
                                                          
                                                          $
                                                          (0.06)
                                                          
                                                          
                                                          $
                                                          (0.06
                                                          )DilutedNet
      loss
                                                          
                                                          $
                                                          (30,881
                                                          )
                                                          
                                                          $
                                                          (11,592
                                                          )Preferred
      dividends
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (12,500
                                                          )Net
      loss allocated to common shareholders
                                                          
                                                          $
                                                          (30,881
                                                          )
                                                          
                                                          $
                                                          (24,092
                                                          )Weighted
      average shares outstanding
                                                          
                                                          
                                                          538,037,619
                                                          
                                                          
                                                          
                                                          385,484,908Effect
      of dilutive securities:
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Employee
      stock options
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Convertible
      preferred stock
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Warrants
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Dilutive
      potential common shares
                                                          
                                                          
                                                          538,037,619
                                                          
                                                          
                                                          
                                                          385,484,908Net
      loss per share
                                                          
                                                          $
                                                          (0.06
                                                          )
                                                          
                                                          $
                                                          (0.06
                                                          )For
      the years ended December 31, 2008 and 2007, options to purchase 43,500,000
      and 42,360,000 shares of Common stock, respectively, were not included in
      the computation of diluted net loss per share because the effect would be
      anti-dilutive.
                                                            
                                                            For
      the years ended December 31, 2008 and 2007, the preferred series stock
      were not included in the computation of dilutive net loss per share
      because the effect would be anti-dilutive.
                                                            
                                                            For
      the years ended December 31, 2008 and 2007 warrants to purchase
      142,068,214 and 150,546,910 shares of common stock were not included in
      the computation of diluted net loss per share because the effect would be
      anti-dilutive.
   NOTE
4 - ACCOUNTS RECEIVABLE, NET
 
 Accounts
receivable consist of the following at December 31, 2008 and 2007:
 
 2008
                        
                        
                        2007($000
      omitted)Accounts
      receivable
                        
                        $
                        1,938
                        
                        
                        $
                        1,591Allowance
      for doubtful accounts
                        
                        
                        (1,246
                        )
                        
                        
                        (97
                        )$
                        692
                        
                        
                        $
                        1,494
  As of
December 31, 2008 and 2007, accounts receivable included amounts due from
related parties of $73,000 and $356,000, respectively.  At December
31, 2008 and 2007, substantially all of the Company's accounts receivable were
pledged as collateral for a line of credit or notes payable.
  F-13
 Table of Contents
 
 NOTE
5 - INVENTORY, NET
 
 Inventory
consists of the following at December 31, 2008 and 2007:
 
 2008
                                  
                                  
                                  2007($000
      omitted)Inventory
      Components
                                  
                                  $
                                  3,993
                                  
                                  
                                  $
                                  2,792Completed
      Units
                                  
                                  
                                  1,111
                                  
                                  
                                  
                                  -Deferred
      Installation Costs
                                  
                                  
                                  1,551
                                  
                                  
                                  
                                  407$
                                  6,655
                                  
                                  
                                  $
                                  3,199Less:
      Inventory Reserve
                                  
                                  
                                  (2,344
                                  )
                                  
                                  
                                  (188
                                  )$
                                  4,311
                                  
                                  
                                  $
                                  3,011
 Inventory
components consist of the purchased parts necessary to assemble the Company’s
systems.  Completed units consist of assembled and tested systems
available to be installed.  Deferred installation costs consist of
completed units in the process of installation and the costs associated with the
installation. At December 31, 2008 and 2007, substantially all of the Company's
inventory was pledged as collateral for a line of credit or notes
payable.
 
 NOTE
6 - PROPERTY AND EQUIPMENT:
 
 Property
and equipment consists of the following at December 31, 2008 and
2007:
 
 2008
                      
                      
                      2007($000
      omitted)Office
      Furniture/Equipment
                      
                      $
                      1,935
                      
                      
                      $
                      1,082Course
      Assets
                      
                      
                      425
                      
                      
                      
                      142Software
                      
                      
                      239
                      
                      
                      
                      156Leaseholds
                      
                      
                      275
                      
                      
                      
                      1802,874
                      
                      
                      
                      1,560Accumulated
      depreciation and amortization
                      
                      
                      (1,896
                      )
                      
                      
                      (731
                      )Net
      Property and Equipment
                      
                      $
                      978
                      
                      
                      $
                      829
 
 Depreciation
and amortization expense for the years ended December 31, 2008 and 2007 was $
593,000 and $270,000, respectively.
 
 NOTE
7 - THIRD-PARTY LEASES WITH RECOURSE
 
 During
2007, the Company entered into certain system sales agreements whereby the
Company guaranteed the end user lease rental payment to a third-party financing
company.  The Company deferred those costs; consisting principally of
manufacture and installation costs, commissions and fees, and also the related
revenues associated with the contracts and are recognizing them pro-ratably as
the end user makes its lease payments.
 
 Third-party
leases with recourse consists of the following at December 31, 2008 and
2007:
 
 2008
                      
                      
                      2007($000
      omitted)Third-party
      leases with recourse
                      
                      $
                      692
                      
                      
                      $
                      692Accumulated
      amortization
                      
                      
                      (199
                      )
                      
                      
                      (74
                      )Net
      third-party leases with recourse
                      
                      $
                      492
                      
                      
                      $
                      617
 
 Amortization
related to third-party leases for the years ended December 31, 2008 and 2007 was
$125,000 and $74,000, respectively.
  F-14
 Table of Contents
 
 NOTE
8 - INTANGIBLE ASSETS:
 
 Intangible
assets consist of the following at December 31, 2008 and 2007:
 
 2008
                              
                              
                              2007($000
      omitted)Patents
                              
                              $
                              4,041
                              
                              
                              $
                              1,857Goodwill
                              
                              
                              -
                              
                              
                              
                              1,359Other
                              
                              
                              351
                              
                              
                              
                              3104,392
                              
                              
                              
                              3,526Less
      accumulated amortization
                              
                              
                              (1,561
                              )
                              
                              
                              (803
                              )$
                              2,831
                              
                              
                              $
                              2,723
  Approximately
$16,164,000 of intangibles were recorded in connection with the Uplink purchase
in January 2008.  However, due to the continuing operating losses and
the extensive restructuring of the Company by the new management team in the
last half of 2008 it was determined that a substantial portion of the Company’s
intangibles were impaired at December 31, 2008.  As a result the
Company recorded a charge of $12,965,000 at December 31, 2008 to recognize the
diminution of value of these assets.
 
 In
addition, the Company recorded a charge of $1,359,000 at December 31, 2008 to
recognize the diminution of value of goodwill associated with GPSI
Europe.
 
 NOTE
9 - ACCRUED LIABILITIES
 
 Accrued
liabilities consist of the following at December 31, 2008 and 2007:
 
 2008
                      
                      
                      2007($000
      omitted)Accrued
      restructuring costs
                      
                      $
                      1,450
                      
                      
                      $
                      427Accrued
      liability - Optimal acquisition
                      
                      
                      1,307
                      
                      
                      
                      -Accrued
      interest
                      
                      
                      887
                      
                      
                      
                      1,123Accrued
      professional fees
                      
                      
                      669
                      
                      
                      
                      340Deferred
      revenue
                      
                      
                      1,597
                      
                      
                      
                      847Inventory
      in transit
                      
                      
                      661
                      
                      
                      
                      -Accrued
      payroll related
                      
                      
                      521
                      
                      
                      
                      425Accrued
      warranty costs
                      
                      
                      430
                      
                      
                      
                      80Accrued
      other
                      
                      
                      797
                      
                      
                      
                      153Total
      accrued liabilities
                      
                      $
                      8,315
                      
                      
                      $
                      3,395
 
 Included
in deferred revenue is the current portion, amounting to $1,200,000 and $847,000
at December 31, 2008 and 2007, respectively, of the long term deferred revenue
(see Note 11).
 
 NOTE
10 - NOTES PAYABLE AND LONG-TERM DEBT
 
 Notes Payable –Notes payable
consists of the following at December 31, 2008 and 2007:
 2008
                    
                    
                    2007($000
      omitted)12.0%
      to 18.0% Term notes, payable on demand, including $1,572,000 in 2007,
      payable to a director and shareholder
                    
                    $
                    1,244
                    
                    
                    $
                    3,092Bank
      overdraft credit facility, due on demand, interest only payments at 3.75%
      over the bank’s base rate (7% at December 31, 2008), collateralized by a
      debenture comprising fixed and floating charges over all the assets and
      undertakings of GPSI Europe
                    
                    
                    108
                    
                    
                    
                    67Revolving
      credit facility, retired March 2008
                    
                    
                    -
                    
                    
                    
                    183$
                    1,352
                    
                    
                    $
                    3,342
 
 The bank
overdraft facility is comprised of a Sterling Overdraft, a Euro Overdraft and a
USD Overdraft with a combined limit of £35,000 (an amount equivalent to $51,000
USD at December 31, 2008).
  F-15
 Table of Contents
 
 Long – Term Debt –Long term
debt consists of the following at December 31, 2008 and 2007:
 
 2008
                              
                              2007($000
      omitted)6%
      Revolving Line of Credit, retired in April 2009
                              
                              $
                              6,500
                              
                              
                              $
                              -7%
      Non-negotiable Convertible Promissory Note, convertible to Series C
      Preferred stock, principal and interest due in June 2011, net of
      unamortized discount of $832,000
                              
                              
                              4,668
                              
                              
                              
                              -7%
      Promissory Note to related party, principal and interest due in June
      2011
                              
                              
                              2,337
                              
                              
                              
                              -7%
      Other Secured Promissory Note, due November 2011, convertible to Series C
      Preferred Stock
                              
                              
                              400
                              
                              
                              
                              -7%
      Note Payable to related party, payable in four equal quarterly
      installments through September 30, 2009
                              
                              
                              100
                              
                              
                              
                              -Other
      notes payable maturing through September 2009 with monthly principal and
      interest payments of $1,287
                              
                              
                              11
                              
                              
                              
                              -8%
      Fleet Rental Notes maturing through September 2011, with monthly principal
      payment ranging from $1,367 to $6,872 over the period
                              
                              
                              207
                              
                              
                              
                              -Term
      note payable, retired in June 2008
                              
                              
                              -
                              
                              
                              
                              37Total
      Long-term debt
                              
                              
                              14,223
                              
                              
                              
                              37Less:
      Current portion
                              
                              
                              6,818
                              
                              
                              
                              37Long-term
      debt, net of current maturities
                              
                              $
                              7,405
                              
                              
                              $
                              -
  In
February 2008, the Company and Silicon Valley Bank (SVB) entered into a Loan and
Security Agreement (SVB Agreement) pursuant to which the SVB agreed to make
available to the Company advances under a revolving line of credit up to
$3,000,000. The obligations of the Company under the SVB Agreement were
collateralized in part by, a certificate of deposit in the principal amount of
$1,500,000 provided by Hansen, Inc. and $1,500,000 personal guarantee by Douglas
Wood, the Company’s interim Chief Executive Officer, member of the board of
directors and a stockholder at the time. On March 30, 2008, Douglas Wood passed
away.
 
 In
May 2008, the Company and SVB entered into an amendment to the SVB Agreement
pursuant to which SVB increased the revolving line of credit up to $6,500,000.
The obligations of the Company under the amended SVB Agreement were
collateralized in part by certificates of deposit in the principal amount of
$3,5000,000 provided by GWSE and $1,500,000 provided by Hansen,
Inc.
 
 In
January 2009, the Company issued a $3,500,000, 7%, convertible note payable to
GWSE and a warrant to purchase up to 14,344,262 shares of the Company’s Common
stock at $0.22 per share in exchange for GWSE liquidating the certificate of
deposit and applying the proceeds against the SVB loan.
  In April
2009, the Company issued a $1,500,000 note payable to Hansen, Inc. in exchange
for it liquidating its certificate of deposit and applying the proceeds against
the SVB loan.  Simultaneously, the Company issued a $750,000 note
payable to the Estate of Douglas Wood in exchange for cash and the Company paid
off the remaining $1,500,000 of the SVB loan.  Both of the notes,
aggregating $2,250,000, bear interest at 4.5% payable monthly and mature in June
2011.
  F-16
 Table of Contents
 In June
2008, the Company entered into an agreement with Tulip Group Investments Limited
(Tulip Group) pursuant to which the Tulip Group loaned to the Company $5.5
million pursuant to a Non-negotiable 7% Convertible Promissory Note. The Note
bears interest on a non-compounded basis at the rate of 7%. The principal amount
and accrued simple interest is payable on June 12, 2011.  At any time
prior to maturity, the Tulip Group has the right to convert all or a portion of
the Note into shares of a yet to be created Series C Preferred Stock at a
conversion price of $10.00 per share and shares of Common Stock at a conversion
rate of $0.031 per share, subject to certain adjustments. The Series C Preferred
Stock will have a liquidation preference of $10.00 per share and will
participate on a parity basis with the holders of the Series B Preferred Stock
with respect to liquidation. Upon conversion, the holders of the Series C
Preferred Stock will have limited and specified voting rights and a conditional
right to elect one director. Upon conversion of the Note, the Company will issue
to the Tulip Group a warrant granting the Tulip Group the right to purchase up
to 22,540,983 shares of Common Stock at a price of $0.122 per share. As part of
the transaction, the Tulip Group entered into a Purchase Option Agreement with
Leisurecorp and GWSE, whom together have appointed three members of the
Company's Board of Directors, pursuant to which the Tulip Group was granted the
exclusive right and option to purchase shares of the Company’s Common Series B
Preferred Stock and warrants to purchase shares of Common Stock from Leisurecorp
and GWSE.Stock.
 In
November 2008, the Company and Green Tulip Enterprises, Ltd (GTE) entered into a
loan agreement, which provides GTE will advance the Company up to $3,600,000 in
monthly installments of $100,000.  GTE is not obligated to advance any
funds. However, those funds that are advanced are convertible into shares, at
$10.00 per share, of the Company’s yet to be designated Series C Preferred stock
and into shares, at $0.031 per share, of the Company’s Common
stock.
 
 In
November 2008, the Company issued a 3 year promissory note in the amount of
$2,337,000 to Estate of Doug Wood for the settlement of current amounts due to
the Estate. The Note bears interest on a non-compounded basis at the rate of 7%.
The principal amount and accrued unpaid interest is payable on June 12,
2011.
 
 Substantially
all of the Company’s assets are pledged as collateral under the various loan
agreements.
 
 The
future maturities of long-term debt (000, omitted) at December 31, 2008 are as
follows:
 
 Total2009
                                
                                $
                                6,8192010
                                
                                
                                -2011
                                
                                
                                8,23615,055Less:  unamortized
      Discount
                                
                                
                                (832
                                )Total
                                
                                $
                                14,223
 NOTE
11 – OTHER ACCRUED LIABILITIES
 
 Other
accrued liabilities consist of the following at December 31, 2008 and
2007:
 
 2008
                      
                      
                      2007($000
      omitted)Estimated
      recourse liability
                      
                      $
                      1,428
                      
                      
                      $
                      -Third-party
      lease rental agreements
                      
                      
                      747
                      
                      
                      
                      1,082Other
      deferred revenue
                      
                      
                      855
                      
                      
                      
                      645Total
      Other Accrued Liabilities
                      
                      
                      3,030
                      
                      
                      
                      1,727Less:  Current
      portion
                      
                      
                      1,200
                      
                      
                      
                      847Total
      Long-term Other Accrued Liabilities
                      
                      $
                      1,830
                      
                      
                      $
                      880
  F-17
 Table of Contents
 
 Other
accrued liabilities at December 31, 2008 are scheduled to mature as
follows:
 
 Year
      Ended December 31,
                      
                      Total2009
                      
                      $
                      1,2002010
                      
                      
                      9282011
                      
                      
                      5222012
                      
                      
                      3132013
      and thereafter
                      
                      
                      67$
                      3,030
 
 During 2007, the Company entered into
certain system sales agreements whereby the Company guaranteed the end users
lease rental payments to a third-party financing company.  The Company
recognizes revenue ratably over the term of the contracts for the end user under
their payments.
 
 The
Company has recorded an estimated recourse liability for the third-party lessor
recourse and residuals that it assumed as part of the Uplink
acquisition.  This liability, exclusive of the residual portion, is
amortized over the remaining lease term as an offset to selling, general and
administrative expense.  The Company also assumed $848,000 of
holdbacks by the third-party lessor which are included in deposits at December
31, 2008.  These holdbacks will be available to the Company once all
of the leases with the third party are concluded.
 
 NOTE
12 - SHAREHOLDERS' DEFICIT
 
 Preferred
stock
 
 In
connection with the December 2006 purchase of Series B shares by GWSE and
Leisurecorp, LLC (Leisurecorp) the Company agreed to grant them each a right,
exercisable until the end of April 2007, to increase their investment, or make
an additional investment in the Series B shares and warrants on the same terms
as the securities sold to them on December 29, 2006. GWSE and Leisurecorp
exercised the foregoing option in April 2007 to purchase 1,250,000 Series B
shares and warrants to purchase up to 51,229,508 shares of Common stock for a
total purchase price of $12,500,000. Leisurecorp purchased its Series B Shares
and warrants by delivering a $10,000,000 interest-free promissory note that was
paid in full with three installments during 2007.   GWSE
purchased its Series B shares and warrants in exchange for $1,500,000 in cash
and the cancellation of $1,000,000 of outstanding indebtedness the Company owed
to GWSE.
 
 In
January 2008, the Company issued 120,000 shares of the Series B Preferred Shares
with a par value of $1,200,000 and warrants to purchase up to 4,918,033 shares
of Common stock in relation to the Uplink acquisition.
 
 As part of the Tulip Group
financing in June 2008, the Company issued a Non-Negotiable Convertible
Promissory Note that granted the Tulip Group the right to convert all or a
portion of the note into shares of a yet to be created Series C Preferred Stock
at a conversion price of $10.00 per share and shares of Common Stock at a
conversion rate of $0.031 per share, subject to certain adjustments. The Series
C Preferred Stock will have  a liquidation preference of $10.00 per
share and will participate on a parity basis with the holders of the Series B
Preferred Stock with respect to liquidation. Upon conversion, the holders of the
Series C Preferred Stock will have limited and specified voting rights and a
conditional right to elect one director. Upon conversion of the note, the
Company will issue to the Tulip Group a warrant granting the Tulip Group the
right to purchase up to 22,540,983 shares of Common Stock at a price of $0.122
per share. As part of the transaction, the Tulip Group entered into a Purchase
Option Agreement with Leisurecorp and GWSE, both major shareholders who
collectively have the direct right to appoint the three outside directors
pursuant to which the Tulip Group was granted the exclusive right and option to
purchase shares of the Company’s Common Stock, Series B Preferred Stock and
warrants to purchase shares of Common Stock from Leisurecorp and GWSE. As a
result of the Tulip Group financing, the Company recorded a beneficial
conversion feature related to the effective conversion price that is lower than
the price of the common stock on the transaction date. The beneficial conversion
feature was recorded at initial value of $1,009,000 as debt discount on the
Tulip Note and is being amortized into interest expense throughout the term of
the Note. Interest expense recorded as a result of amortization of this
convertible debt discount during the year ended December 31, 2008 was $177,000
and the unamortized balance of debt discount at December 31, 2008 was
$832,000.
 The
Certificate of Designation of the Company's Series B Convertible Preferred Stock
contains provisions lowering the applicable conversion price thereof (on a
weighted average basis) in the case of certain issuances of derivative
securities where the conversion price of such securities is lower than the
conversion price of the Series B Preferred Stock. The Non-Negotiable Convertible
Promissory Note issued to the Tulip Group permits the holder to convert all or
any portion of the note into, among other things, shares of the Company's Common
Stock at a conversion price lower than the Series B conversion price.
Accordingly, the Company may be required to adjust the conversion price of the
Series B Preferred Stock.
 
 During
the year ended December 31, 2007 the Company recorded a deemed preferred stock
dividend of $12,500,000.  The deemed dividend does not represent an
actual cash dividend paid on shares but is the result of the issuance of the
Preferred Series B shares and warrants for the cash equity and debt conversion
investment that occurred during 2007 which are convertible at a favorable rate
as compared to the market price of the stock on the date of issuance. A portion
of the cash received and debt converted has been assigned to the fair market
valuation of the warrants issued with the Series B shares. The remaining portion
is compared to the fair market value of the Series B shares issued. The
difference arising from this comparison, together with the fair market value of
the warrants, has been treated as a deemed dividend issued on the Series B
shares.
  F-18
 Table of Contents
  The
Series B shares provide the holders thereof with significant rights, including
the right to elect three of GPSI's Board of Directors and the right to approve
various corporate and business actions of GPSI.
 
 The
Company also has a registration rights agreement and a shareholder agreement
with GWSE, Leisurecorp, and two of our former Chief Executive
Officers.
 
 Common
Stock Purchase Warrants
 
 During
the year ended December 31, 2008, the Company issued 4,918,000 warrants at
$0.122 associated with the acquisition of the Uplink operations.  The
valuation was based upon a Black-Scholes calculation, assuming a 5 year life, a
risk free rate of return of 1.22% and a volatility of 134.00%
 
 During
the year ended December 31, 2007, the Company issued 51,229,509 warrants at
$0.122 associated with the sale of 1,250,000 Series B Preferred shares and
various debt conversions.  The valuation was based upon a
Black-Scholes calculation, assuming a five-year life, a risk free rate of return
of 5.00% and a volatility of 159.00%.
 
 The
Company issued a Non-Negotiable Convertible note during 2008 with warrants
contingently issuable; such warrants are not effective until the note is
converted.
 
 A
reconciliation of warrant activity is as follows:
 
 Number
      of
                                Shares
                                Issuable
                              
                              
                              Weighted
                                Average
                                Exercise
      PriceBalance
      at January 1, 2007
                              
                              
                              104,454,945
                              
                              
                              $
                              0.139Granted
                              
                              
                              51,229,509
                              
                              
                              
                              0.122Exercised
                              
                              
                              -
                              
                              
                              
                              -Expired
                              
                              
                              (5,137,544
                              )
                              
                              
                              6.684Balance
      at December 31, 2007
                              
                              
                              150,546,910
                              
                              
                              $
                              0.133Granted
                              
                              
                              4,918,000
                              
                              
                              
                              0.122Exercised
                              
                              
                              -
                              
                              
                              
                              -Expired
                              
                              
                              (13,396,696
                              )
                              
                              
                              0.186Balance
      at December 31, 2008
                              
                              
                              142,068,214
                              
                              
                              $
                              0.127
 
 The
following table summarized warrants outstanding and exercisable as of December
31, 2008:
 
 Exercise
      Price
                          
                          
                          Number
      of
                            shares
                            underlying
                            Warrants
                          
                          Weighted-average
                            remaining
                            contractual
                            life
                            (in
      Years)
                          
                          Number
      of
                            shares
                            Exercisable$0.25
      - $0.15
                          
                          
                          
                          6,666,667
                          
                          0.15
                          
                          
                          6,666,667$0.124
      - $0.055
                          
                          
                          
                          135,401,547
                          
                          2.87
                          
                          
                          135,401,547142,068,214
                          
                          3.02
                          
                          
                          142,068,214
  Common
Stock Options
  In 2000,
the Company adopted the 2000 Stock Option Plan (2000 Option Plan). Under the
2000 Option Plan the Company is authorized to issue a total of 10,000,000 shares
as either incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or nonqualified stock options to our
officers, directors, employees, consultants and others performing services for
us. The 2000 Option Plan is administered by the Company’s Board of
Directors.
 
 As of
December 31, 2008, there were outstanding options under the 2000 Option Plan to
purchase approximately 8,350,000 shares of the Company’s Common stock at a
weighted-average exercise price of approximately $0.0496 per share. No options
were exercised during the year ended December 31, 2008 and 3,010,000 options
were cancelled in the year upon termination of various employees.
  F-19
 Table of Contents
  Stock
option activity, under the plan, is summarized as follows:
  Weighted
                      number
      of
                      shares
                      Issuable
                    
                    
                    Weighted
                      average
                      Exercise
                      priceBalance
      January 1, 2007
                    
                    
                    9,690,000
                    
                    
                    $
                    0.0694Granted
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Expired
                    
                    
                    (2,330,000
                    )
                    
                    
                    0.0648Balance
      December 31, 2007
                    
                    
                    7,360,000
                    
                    
                    $
                    0.06045Granted
                    
                    
                    4,000,000
                    
                    
                    
                    0.0385Exercised
                    
                    
                    -
                    
                    
                    
                    -Expired
                    
                    
                    (3,010,000
                    )
                    
                    
                    0.0612Balance
      December 31, 2008
                    
                    
                    8,350,000
                    
                    
                    $
                    0.0496
  At
December 31, 2008 the market value of our common stock was $0.011; accordingly
there was no intrinsic value to these options.
 
 The
following table summarizes the outstanding and exercisable options under the
plan as at December 31, 2008:
  Exercise
                          Prices
                        
                        
                        Number
                          shares
                          issuable
                          under
                          outstanding
                          option
                        
                        Weighted-average
                          Remaining
                          Contractual
      Life
                        
                        Number
                          Exercisable$0.031
      – 0.061
                        
                        
                        
                        4,000,000
                        
                        2.13
                        
                        
                        4,000,000$0.05
      - 0.08
                        
                        
                        
                        3,350,000
                        
                        .95
                        
                        
                        3,350,000$0.06
                        
                        
                        
                        1,000,000
                        
                        2.41
                        
                        
                        1,000,0008,350,000
                        
                        
                        
                        
                        8,350,000
  In late
2007 the Board of Directors approved an additional 40,000,000 options for
issuance under a new stock option plan. As of December 31, 2008, the new plan
has not been developed and, accordingly, no options have been issued under the
proposed plan.
  In 2006,
outside of its 2000 Option Plan, the Company granted to its former Chief
Executive Officer five year options to purchase up to 15,000,000 shares of the
Company’s Common stock.  These options were issued at an exercise
price of $0.074 and vested immediately. In 2007, outside of its 2000 Option
Plan, the Company granted to the former Chief Executive Officer a four-year
option to purchase on a cashless exercise basis up to 20,000,000 shares of the
Company’s Common stock. These options were issued at an exercise price of $0.06
and vested as part of his severance agreement finalized in November,
2008.  These options resulted in an administrative cost of $139,000
for the year ended December 31, 2008 and such costs were charged against a
previously established reserve.   Fair value was determined with
the use of a Black-Scholes valuation model with 3 year life, 1.66% risk free
rate, and volatility of 117.48%.
  In 2008,
the Company granted to its new Chief Executive Officer 30 and 36 month options
to purchase up to 4,000,000 shares of the Company’s Common
stock.  These options were issued at an exercise price of $0.031 and
$0.061 and were all vested at December 31, 2008.  These options
resulted in an administrative cost of $72,000 for the year ended December 31,
2008.  Fair value was determined with the use of a Black-Scholes
valuation model with 2.5 to 3.0 year life, 5.00% risk free rate, and volatility
of 107.14%.  In addition, this executive has an aggregate of
56,000,000 additional options that might be available to him based on various
terms of his employment contract.
  F-20
 Table of Contents
 
 NOTE
13 - RESTRUCTURING COSTS
 
 During
2008 the Company recorded $1,476,000 in restructuring charges which consisted
principally of severance benefits resulting from the plan to downsize and
realign the ongoing operations adopted by the new management team in
2008.
 
 In 2007, restructuring costs included
$427,000 for accrued severance benefits resulting from the downsizing of current
operations, and $664,000 related to an acquisition the Company rescinded in
2007.
 
 NOTE
14 - GAIN ON EXTINGUISHMENT OF DEBT
 
 During
the year ended December 31, 2008 the company settled various trade debts through
the issuance of common stock.  These transactions resulted in a net
gain on extinguishment of debt amounting to $49,000.
 
 During
the year ended December 31, 2007 the Company extinguished $2,309,000 of debt of
a subsidiary which had arisen from discontinued operations prior to 2007 under
Chapter 7 relief of the Federal bankruptcy laws.  The Company also
settled various other trade debts and loans payable in 2007 by issuance of
common stock. These transactions resulted in a net loss on extinguishment of
debt amounting to $341,000.
 
 NOTE
15 - INCOME TAXES
 
 The
Company is subject to United States Federal income taxes at an approximate rate
of 35%.  However, for the years ended December 31, 2008 and 2007, the
Company incurred net operating losses and, accordingly, no provision for income
taxes has been recorded.  In addition, no benefit for income taxes has
been recorded due to the uncertainty of the realization of any tax
assets.
 
 The
reconciliation of the provision (recovery) for income taxes, at the United
States federal statutory rate compared to the Company's income tax expense as
reported is as follows:
 
 2008
                              
                              
                              2007($000
      omitted)Expected
      (Benefit) at U.S. Statutory Rates
                              
                              $
                              (10,808
                              )
                              
                              $
                              (4,057
                              )Other
                              
                              
                              7,880
                              
                              
                              
                              104Change
      in Valuation Allowance
                              
                              
                              2,928
                              
                              
                              
                              3,953Income
      Tax Provision (Benefit)
                              
                              $
                              -
                              
                              
                              $
                              -
 
 Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The Company has recognized a valuation
allowance for those deferred tax assets for which it is more likely than not,
that realization will not occur. Significant components of the Company's
deferred tax assets as of December 31, 2008 and 2007 are as
follows:
 
 2008
                          
                          
                          2007($000
      omitted)Net
      Operating Loss Carryforwards
                          
                          $
                          23,432
                          
                          
                          $
                          19,452Other
                          
                          
                          1,528
                          
                          
                          
                          2,580Valuation
      Allowance
                          
                          
                          (24,960
                          )
                          
                          
                          (22,032
                          )$
                          -
                          
                          
                          $
                          -
 
 The
Company has net operating losses for United States income tax purposes of
approximately $67,000,000, which will expire through the year 2028. The use of
the United States loss carry-forwards may be limited in any given year as a
result of previous changes in ownership.
 
 NOTE
16 – OTHER RELATED PARTY TRANSACTIONS
 
 During
2007, the Company entered into a contract (2007 Contract) with Leisurecorp to
design, supply, deliver and install a Wi-Fi network and GPS management system
for a golf estates project in Dubai. In June 2008, the Company and Leisurecorp
expanded this contract whereby it has agreed to deliver four separate and
distinct solutions to the customer, a utilities management application, an asset
tracking solution, an amenities management system and an Community Management
system at an aggregate value of approximately $7,000,000. The total
consideration for this transaction was established and agreed to by the related
parties; however, management believes it is substantially similar in pricing to
that which would have been agreed to by independent parties. For the period
ending December 31, 2007, the Company has recognized $383,681 in revenue for
completion and delivery of the first milestone in the
contract.  During 2008, the Company received deposits from Leisurecorp
aggregating $2,144,000 and recognized revenue of $305,000 associated with the
completion of a significant milestone under this contract.   At
December 31, 2008 $1,839,000 is included in the customer deposits.
  F-21
 Table of Contents
 
 As of
March 2009, the Company received $1,580,000 of additional advances under the
2007 Contract.  In March 2009, the Company and Leisurecorp entered
into an agreement which terminated in 2007 Contract and released both parties
from all obligations.  In addition, the Company agreed to provide two
eighty cart GPS system to Leisurecorp in July 2009.  Leisurecorp paid
$575,000 in consideration for the transaction, mutual release and the two GPS
systems.
 
 In 2008,
the Company was charged $820,000, primarily for the cost of the interim
management company paid by Leisurecorp on behalf of the Company.  At
December 31, 2008 the $820,000 owed to Leisurecorp, along with $1,200,000 which
is payable to GWSE, is included in accounts payable.
 
 In the
twelve months ended December 31, 2008, the Company entered into several
transactions with GPSI Asia, Ltd., a company which GPS Industries owns a 17.5%
interest. The total consideration for these transactions were established and
agreed to by the related parties; however, management believes that they are
substantially similar in pricing to that which would have been agreed to by
independent third parties. The Company paid GPSI Asia $140,000 for consulting
services performed during the period. These expenses have been recorded in
operating expenses. The Company has recorded GPS system sales revenue in the
amount of $300,000 for GPS systems sold and delivered to GPSI Asia during 2008.
These GPS system sales were done under terms of a Master Supply Agreement
between the Company and GPSI Asia, Ltd. In addition, the Company recorded
$47,000 in commission expense and $46,000 in installation expense for work
performed by GPSI Asia. The Company also prepaid, to GPSI Asia, $78,000 for
installation services performed in China, which is recorded in prepaid expenses
and other current assets in the Company’s balance sheet at December 31, 2008.
Included in accounts payable at December 31, 2008 is $59,000 due to GPSI
Asia.
 
 In
November 2008, the Company entered into Master Purchase Agreement (Purchase
Agreement) with Green Tulip, Inc. (GTI) and Green Tulip Enterprises Ltd. (GTE)
pursuant to which the Company has the right to request that GTI and/or GTE
purchase equipment of the Company relating to GPS devices for use on golf
courses. Any purchase will be pursuant to a purchase supplement, which will
cover the terms and conditions of any purchase. GTI and/or GTE will lease the
purchased equipment to golf courses. The Purchase Agreement provides for a
maintenance agreement between the Company and the prospective lessee. Pursuant
to the Purchase Agreement, the Company, until the earlier of the third
anniversary of the Purchase Agreement or the execution of at least 100 purchase
supplements, has granted to GTI and GTE the first right to provide lease
financing services with respect to the Company’s equipment.
 
 The
Company has an employment agreement with its CEO which, among other things,
provides that the CEO may retain his direct and indirect interest in certain GPS
golf course equipment.  This includes approximately 2,000 video
displays in North America and 700 outside of North America.  The CEO
has agreed to assign his rights in all of the advertising revenues derived from
his equipment.   In addition, the CEO agreed to negotiate and
split the service and support revenue received on this equipment and, in
exchange, the Company will provide the service and support at the courses where
the CEO’s equipment is located.  At December the Company had paid a
third party consultant $51,000 to service these units and had received no
revenue associated with the equipment.
  In
January 2009, the Company issued a perpetual, non-terminal, royalty-free limited
license in one of the Company’s patents to Golfview Investors, LLC (Golfview) in
exchange for a fifty percent interest in Golfview.  The remainder of
the Golfview’s investors consists of entities owned or controlled by the
Company’s Chief Executive Officer and the principals of Tulip
Group.
 
 The
Company also leases a portion of its executive offices in Sarasota from a
company related to the Company’s CEO.
  F-22
 Table of Contents
 
 NOTE
17 - COMMITMENTS AND CONTINGENCIES
 
 Lease
Commitments
 
 The
Company leases office premises and certain of its office equipment under
operating leases with various expiration dates to 2011. Rent expense for the
years ended December 31, 2008 and December 31, 2007 was $487,000 and $186,000,
respectively. The future minimum lease commitments under the leases ($000,
omitted) at December 31, 2008 are as follows:
 
 Total2009
                          
                          $
                          1102010
                          
                          
                          1102011
                          
                          
                          44Total
                          
                          $
                          264
 Guarantees
 
 In 2007,
the Company entered into sales agreements with two golf courses in which the
Company guaranteed that the golf courses would achieve minimum annual cash flows
from rental of advertising space on their product. If these minimum levels are
not achieved during the period, the Company is required to compensate the golf
courses for any shortfall. During the years ended December 31, 2008 and 2007 the
advertising revenue failed to reach the minimum guarantee cash flow. As a
result, the Company charged $45,000 and $75,000, respectively, to operations in
recognition of this guarantee short-fall.  At December 31, 2008 and
2007 the Company has recorded an outstanding liability in other accrued
liabilities of $120,000 and $75,000, respectively associated with these
guarantees.
 
 The
future maximum liabilities, associated with these guarantees ($000 omitted) at
December 31, 2008 are as follows:
 
 Total2009
                        
                        $
                        452010
                        
                        
                        452011
                        
                        
                        452012
                        
                        
                        452013
                        
                        
                        45Total
                        
                        $
                        225
 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 the
Company breached a consulting agreement by failing to pay monthly consulting
fees, and claims $101,000 in damages. On April 25, 2008, the Company and CCG
agreed to settle the matter for $25,000, and the
lawsuit was dismissed with prejudice.
  On
October 29, 2007, Optimal I.P. Holdings, L.P. (Optimal) initiated arbitration
proceedings in Austin, Texas against the Company alleging breach of a Patent
Enforcement Cooperation Agreement between the two Companies.  On
November 16, 2007 the Company responded to the arbitration demand by objecting
to the jurisdiction of the American Arbitration Association (AAA) over the
dispute and further denying all material allegations of the
demand.  On May 25, 2008 the arbitrator ruled that the AAA did not
have jurisdiction over the arbitration proceedings and dismissed the
proceeding.
  On July 7, 2008, Charles
Huston and Daryl Cornish filed a lawsuit in State Court in Texas alleging, among
other things, breach of the Stock Purchase Agreement, as amended, relating to
the purchase by the Company of the capital stock of OGSI.
  On July 9, 2008, Optimal initiated
arbitration proceedings in Chicago, Illinois against the Company alleging breach
of a Patent License Agreement between the two Companies.
  F-23
 Table of Contents
 
 In
January 2009, the Company settled all of the above-referenced actions with
Optimal, Huston and Cornish. The terms of the settlement reached with Optimal
provide that:
 
 ·
              The
      Stock Purchase Agreement was amended by adding provisions (a) issuing a
      promissory note convertible into shares of the Company’s Common stock at a
      fixed conversion price of $0.031 per share; (b) GPSI agreeing to remove
      the restrictive legend from 30,392,082 GPSI shares of Common stock
      previously issued to Optimal; and (c) GPSI agreeing to issue 12 million
      restricted shares of Common stock as payment against accrued interest. The
      Stock Purchase Agreement was also amended to specify lock up and leak out
      provisions governing Optimal’s disposition of GPSI shares of Common
      Stock.
 
 ·
              The
      parties also entered into a Replacement License Agreement which supercedes
      the previous license agreement and specifically describes the parties
      agreement regarding handheld devices.  Under the new license
      agreement, the parties have agreed that each party may distribute handheld
      devices through each Company’s own distribution channels (in the case of
      GPSI, not until July 2009) and that each Company may sublicense one
      company that is not in either company’s distribution channel to exploit
      the “software only” field; i.e., software downloaded to a portable device
      to determine distances on a golf
course.
  On November 1, 2007,
ProLink  filed a patent infringement lawsuit against the Company and
Uplink. The compliant alleges that the Company, Uplink and one of each of the
Company’s and Uplink’s 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 seeks a
declaratory judgment that ProLink has not infringed U.S. Patent No. 5,685,786
and that this patent is invalid; however, the federal judge presiding summarily
dismissed all ProLink requests for declaratory judgment regarding U.S. Patent
No. 5,685,786.  By virtue of the Asset Purchase Agreement between the
Company and Uplink, as amended effective January 18, 2008, the Company has
assumed any 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 its customer and Uplink’s customer in connection with the litigation. The
Company intends to vigorously defend this lawsuit.
  On July 16, 2008, the
Company, filed suit for patent infringement in the United States District Court
for the Northern District of Illinois against ProLink , ProLink Solutions, LLC,
ABC National Television Sales, Inc., and LinksCorp, Inc. The suit alleges
infringement of U.S. Patent No. 5,685,786, which relates to on-screen display of
centrally transmitted advertising and tournament standings information. The
Company has also asserted U.S. Patent No. 5,438,518, which relates to the
Company’s position-based hole advance and screen scrolling technology. The
Complaint also alleges that the ProLink and its related companies have made
false representations in the marketplace and in connection with financing
activities that they own rights in the U.S. Patent No. 5,438,518, when in fact
they hold no interest in the patent and are not authorized to utilize the
technology it covers.  ABC has since been dismissed from the lawsuit based
on a agreement between the parties.  Further, this litigation has been
stayed pending a reexamination of the patents in question by the U.S. Patent and
Trademark Office.
 The
Company may occasionally become subject to legal proceedings and claims that
arise in the ordinary course of business. It is impossible for
Management  to predict with any certainty the outcome of any disputes
that may arise, and Management cannot predict whether any liability arising from
claims and litigation will be material in relation to the Company’s consolidated
financial position or results of operations.
  NOTE
18 – OTHER SUBSEQUENT EVENTS
 
 As
of March 2009, the Company received an additional $2,155,000 in deposits on the
long-term contract with Leisurecorp.
 
 In February 2009 the Company issued
12,000,000 shares of its Common stock in the settlement of accrued interest to
the former OGSI shareholders and 9,000,000 shares to satisfy certain trade debt,
consulting fees and revenue costs.
  F-24
 Table of Contents
  ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  On
December 5, 2008 the Company’s then Principal Accountant, Sherb & Co. was
terminated. On December 8, 2008 the Company engaged Moore Stephens Lovelace to
serve as its Principal Accountants.  The decision to change
accountants was approved by the Board of Directors.   Sherb &
Co., opinion for December 31, 2007 and 2006 contained a going concern
question.  There was no disagreement with Sherb & Co. with respect
to accounting principles or practices, financial statement disclosure, auditing
scope or procedures.
  ITEM 9A. 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.
 
 Management’s
Report on Internal Control Over Financial Reporting
  The
Company’s management's is responsible for establishing and maintaining adequate
internal control over financial reporting for the registrant. The Company’s
management, including the Principal Executive Officer and the Chief Financial
Officer, carried out an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures pursuant to
Exchange Act Rule 13a - 15(b). Based upon the evaluation, the Principal
Executive Officer and the Chief Financial Officer concluded that the
Company’s internal controls are not effective and contain significant
deficiencies, in part as a result of the material weakness discussed
below.
  The
report entitled Internal Control - Integrated Framework, issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) defines a material
weakness as a control deficiency, or combination of control deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or
detected.
  This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.
 
 Management’s
Discussion of Material Weakness
 
 Management
has identified the following groups of control deficiencies, each of which, in
the aggregate, represents a material weakness in the Company’s internal control
over financial reporting as of December 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 interest that could
      conflict with the priorities of the
Company.
 ·
              The
      Company has not widely circulated a code of ethics beyond the Company’s
      directors and officers, including the Company’s whistle blower
      policy.
 ·
              The
      Company did not design and implement controls to communicate and monitor
      corporate strategy and objectives or compliance with policies and
      procedures, including expenditure policies at its operation in the United
      Kingdom.
 ·
              The
      Company has no independent directors on the Board of
      Directors.
 ·
              There
      has been a temporary degradation of controls, which may or may not have
      reached the level of a material weakness, resulting from the departure of
      certain key personnel arising from the integration of the Uplink
      acquisition into GPS Industries.
 
 15
 Table of Contents
  Management
of the Company takes very seriously the strength and reliability of the of the
internal control environment for the Company. During 2008 and continuing in
2009, the Company has undertaken steps necessary to improve the control
environment that include:
 
 ·
              The
      Company implemented a new accounting system to more effectively manage
      expenditures and analyze results against budgets and
  plans.
 ·
              Engaged
      Deloitte Touche, LLP to assist in the assessment, development and
      implementation of internal controls and business process
      documentation.  The Company has started to develop a top-down,
      risk-based approach to SOX compliance that focuses on key controls and
      high-risk areas.  This effort was suspended during the third
      quarter as the Company focused on the integration of Uplink into the GPS
      Industries organization.
 ·
              The
      Company has hired a permanent Chief Executive
  Officer.
 ·
              The
      Company reconstituted and enhanced the Board of Directors with the
      appointment of Tony Sole, CFO of Leisurecorp, Declan Hogan, Senior IT
      Manager, Leisurecorp, and David Chessler, CEO of GPS
      Industries.
 
 Management
acknowledges its responsibility for internal controls over financial reporting
and seeks to continually improve these controls. In order to achieve compliance
with Section 404 of the Sarbanes Oxley Act, we are performing system and process
documentation and evaluation needed to comply with Section 404, which is both
costly and challenging. We believe our process for documenting, evaluating and
monitoring our internal control over financial reporting is consistent with the
objectives of Section 404 of the Act.
 
 Changes
in Internal Controls
 
 The
Company has continued to take remediation steps to enhance its internal control
over financial reporting and reduce control deficiencies. During the six months
of 2008, the remediation efforts were slowed as a result of trying to integrate
the operations of the Uplink acquisition and to streamline the resulting
organization.  We will continue to work on the elimination of control
weaknesses and deficiencies noted.
 
 ITEM 9B. OTHER
INFORMATION
 
 Item
2.05 Costs Associated with Exit or Disposal Activities.
  In
December 2007, the Company’s senior management committed to a restructuring plan
(2007 Plan) involving the downsizing of the Company. This plan included a
process to terminate employees under a plan of termination and the rescinding of
the Golf IT Asset Purchase Agreement. This restructure plan was executed in
January 2008 and resulted in one-time termination expense of $427,000 and
recognition of $664,000 in costs incurred to affect the Golf IT acquisition.
These costs have been included in restructuring costs in the consolidated
statement of operations for the year ended December 31, 2007.  The
Company incurred additional charges to income of $181,000 during the first
quarter of 2008 to complete its 2007 Plan.
 
 In
mid-2008, the Company decided to consolidate its operations and committed to a
plan (2008 Plan) to outsource its manufacturing operations and consolidate the
majority of its remaining operation in Sarasota,
Florida.    This plan was initiated in the fourth quarter of
2008 and is expected to continue into the first half of
2009.   The Company estimates that the 2008 Plan expenses
remaining to be incurred in 2009 will be approximately
$1,476,000.  These costs have been included in Restructuring Costs in
the Consolidated Statement of Operations for the year ended December 31,
2008.
  16
 Table of Contents
  PART
III
  ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
  Executive
Officers and Directors
 
 The
following table sets forth the names and position held by each of our executive
officers and directors. Directors are elected for a period of one year and
thereafter serve until the next annual meeting at which their successors are
duly elected by the stockholders.
  Name
                      
                      PositionTony
      Sole
                      
                      Chairman
      of the Board of DirectorsBart
      Collins
                      
                      DirectorDeclan
      Hogan
                      
                      DirectorDavid
      Chessler
                      
                      Chief
      Executive OfficerBenjamin
      E Porter
                      
                      Chief
      Operating OfficerRussell
      R Lee III
                      
                      Chief
      Financial OfficerAlex
      Doaga
                      
                      Vice
      President, Chief Technical Officer
 
 Tony
Sole, Chairman of Board of Directors.  Mr. Sole was appointed to the
Board of Directors and elected as Chairman in June 2008 pursuant to the
Securities Purchase Agreement dated as of November 13, 2006 (the “Purchase
Agreement”), between the Company, GWSE and Leisurecorp.  Mr. Sole has
not had any relationship with, or engaged in any transaction with the Company
during the past two years.  From June 2000 to February 2008, Mr. Sole
was the Chief Financial Officer of Dubai Aluminum Company Limited, and since
February 2008, Mr. Sole has been Chief Financial Officer of
Leisurecorp.
 
 Bart
Collins, Director. Bart Collins has served as a Director of GPSI since January
26, 2005. Mr. Collins is President of GWSE, a multi-national corporation founded
by Greg Norman in 1993. GWSE is involved in the areas of golf course design,
residential development, turf grass development, golf events, golf equipment,
merchandising and licensing. Having worked in some capacity with Greg Norman
since 1987, Mr. Collins was retained on a full time basis by GWSE in 1995 as an
International Vice President based in Sydney, Australia, overseeing GWSE's
interests in the Asia-Pacific region. In 1997 Mr. Collins moved into his current
position in Jupiter, Florida. Prior to joining GWSE, he spent 12 years with the
sports conglomerate International Management Group (IMG) that he joined in 1983
and became a Vice President. At the age of 31 he established and managed IMG's
operation in Southeast Asia from their offices in Singapore. Mr. Collins
graduated from Wittenberg University in 1983.
 
 Declan
Hogan, Director.  Mr. Hogan was appointed as a Director of GPSI in
June 2008 pursuant to the Securities Purchase Agreement dated as of November 13,
2006 (Purchase Agreement), between the Company, GWSE and
Leisurecorp.  Mr. Hogan has been Senior IT Manager of Leisurecorp
since February 2007.  Prior thereto, from 1999 to December 2007, Mr.
Hogan was a senior solution designer and project manager for Optus
Telecommunications of Sydney Australia.  Mr. Hogan has not had any
relationship with or engaged in any transactions with the Company during the
past two years.  Mr. Hogan holds a B.A. in Anthropology and Post Grad
diploma in Communications from the National University of Ireland, Maynooth, Co.
Kildare, Ireland.
 
 David
Chessler, Chief Executive Officer. Mr. Chessler began his career as an
entrepreneur, taking several companies from start-up to sale between 1991 and
2002.  Mr. Chessler has been the managing member of DC Leasing, LLC
since January 2003.  DC Leasing and their subsidiaries hold and manage
many different assets from RFID asset tracking tags developed to track valuable
assets as they were moved throughout global locations, to asset based debt
lending, GPS golf course leasing, reverse mergers, land banking and a diverse
variety of strategic lending.  From March 1993 to October 2002 Mr.
Chessler was the CEO and Founder of ParView, Inc., which manufactured GPS golf
system mounted in the roof of the golf cart.  Mr. Chessler oversaw
day-to-day operations, capital raising and strategic
relationships.  In January 2003, Mr. Chessler formed Global Asset
Tracking, LLC, a technology company funded by Yamaha to develop an asset
tracking tag to manage inventory control for their product lines.  Mr.
Chessler continued to expand his investment portfolio and formed multiple
investment companies that held a variety of assets from real estate ventures to
individual company loans.
  17
 Table of Contents
 
 Benjamin
E. Porter, Chief Operating Officer. Mr. Porter was appointed in February
2009.  Mr. Porter founded Golf Academies Ltd in the UK in 1997 and,
since its inception through the present, has directed the operations and sales
of that company as the Managing Director.  That company markets and
distributes technology products for golf including simulators, digital video
arrangements, analyzers and global positioning satellite
systems.  Golf Academies became the exclusive European and Middle East
distributor for GPS Industries in 2004 and was acquired by the Company in 2007;
since the acquisition, Mr. Porter has continued in the role he occupied prior to
the acquisition.  Prior to founding Golf Academies, Mr. Porter was a
member of the British PGA, an eight-year touring pro (Europe, Africa, US) and
golf course owner.
 
 Russell
R. Lee III, Chief Financial Officer.  Mr. Lee was hired as the
Company’s Chief Financial Officer in October 2008.  Mr. Lee, who holds
a Bachelor Degree of Business Administration in Accounting from the University
of Toledo, is a Certified Public Accountant licensed in Florida and Ohio, and
has more than thirty (30) years experience in business and
finance.  Prior to joining GPS Industries, Inc., Mr. Lee was with
Teltronics, Inc., a publicly traded manufacturer of telecommunications
equipment.  Mr. Lee joined Teltronics in 2004 and served most recently
as its Vice President of Finance and Chief Financial Officer.  Prior
to joining Teltronics, Mr. Lee served as Chief Financial Officer of SinoFresh
HealthCare, Inc., a publicly traded developer and marketer of antiseptic
solutions for respiratory problems and as Executive Vice President of Finance
for Esprix Technologies, LLP, a privately held international fine and specialty
chemical company supplier.  From 1990 to 1998, Mr. Lee served as
Corporate Controller and then Treasurer/Chief Financial Officer of Gencor
Industries, Inc., a publicly held, international manufacturer of processing
equipment.  Mr. Lee subsequently served on the Board of Directors of
Gencor from 2004 through 2008.  Prior to his private industry
experience, Mr. Lee was a Senior Audit Manager in the Ernst & Young
organization in both Ohio and Florida.
 
 Alex
Doaga, Senior Vice President, Chief Technical Officer. Mr. Doaga joined the
Company in 1999 and has served as Vice President since 2003. From 2001-2002, Mr.
Doaga was Vice President, Engineering for Synapse Global Development, a GPS
wireless asset management company. From 1996-1999, Mr. Doaga was President and
Chief Executive Officer of Westgate Digital Corporation, a telecommunication
voice, video and data services company. From 1991 to 1996, Mr. Doaga was
President and Chief Executive Officer of the Net Group of Companies, a cable TV
and data communication systems group in Romania. Mr. Doaga received his MSc.
Degree in Automotive Engineering from the Bucharest Polytechnic University in
Romania.
 
 Audit
Committee
 
 Since the
reorganization of the Board of Directors in June 2008 there have been no
committees established.  The outside directors have assumed the
responsibilities that were assigned to the Audit Committee by the Board in
January 2005.  These responsibilities include meeting periodically
with our management and independent accountants to, among other things, review
the results of the annual audit and quarterly reviews and discuss the financial
statements, select the independent accountants to be retained, and receive and
consider the accountants' comments as to controls, adequacy of staff and
management performance and procedures in connection with audit and financial
controls and the review of related  party transactions for potential
conflicts of interest.
 
 The Board
of Directors does not currently have a member designated as the "financial
expert," as defined under Item 401(h)(2) of Regulation S-K of the Securities Act
of 1933, of the Audit Committee. In addition, none of the directors are
“independent” as defined under Item 407(a)(1) of Regulation S-K of the
Securities Act of 1933.
 
 Special
Management Provisions
 
 The
holders of our Series B convertible Preferred shares have the right to appoint
three persons to serve as “Preferred Directors” under the Series B Shares
Certificate of Designation.  At December 31, 2008, all of the outside
directors serve as the Preferred Directors.
 
 Code
of Ethics
 
 Our Board
of Directors has adopted a business code of ethics for directors and officers
and has also adopted an Insider Trading Policy. A copy of our code of ethics
will be furnished without charge to any person upon written request. Requests
should be sent to: Secretary, 1358 Fruitville Road, Suite 210, Sarasota, FL
34236.
 
 There are
no family relationships between any of our officers and directors.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than 10% of the outstanding shares of our common stock
(collectively, "Reporting Persons") to file reports of ownership and changes in
ownership with the SEC. Reporting Persons are required by SEC regulations to
furnish us with copies of all Section 16(a) forms that they file.
  18
 Table of Contents
 
 In part
as a result of the changes in management and the corporate restructuring
undertaken in 2008, it is our understanding that several Reporting Persons
failed to timely file all applicable Section 16 filing requirements, but all
have subsequently filed the required filings.
 
 ITEM 11. EXECUTIVE
COMPENSATION
 
 Compensation
of Executive Officers
 
 The
following table summarizes compensation paid or earned by our Chief Executive
Officer, Chief Financial Officer and the other most highly compensated executive
officer (the "Named Executive Officer") whose annual compensation exceeded
$100,000 as of December 31, 2008.
 Name
      and Principal Position
                                      
                                      Year
                                      
                                      Salary
                                        ($)8
                                      
                                      Option
                                        Awards
                                        ($)
      6
                                      
                                      All
      Other
                                        Compensation
                                        ($)
      7,
      8
                                      
                                      Total
                                        ($)David
      Chessler, Chief Executive Officer1
                                      
                                      
                                      2008
                                      
                                      65,000
                                      
                                      
                                      72,345
                                      
                                      9,849
                                      
                                      
                                      147,194Douglas
      J. Wood, Interim Chief Executive Officer 2
                                      
                                      
                                      2007Robert
      C. Silzer, Sr., Former Chief Executive Officer and President 3,
      8
                                      
                                      
                                      2008
                                      
                                      187,357
                                      
                                      
                                      138,517
                                      
                                      3,612
                                      
                                      
                                      329,4862007
                                      
                                      291,568
                                      
                                      
                                      -
                                      
                                      3,190
                                      
                                      
                                      294,7582006
                                      
                                      208,419
                                      
                                      
                                      929,796
                                      
                                      15,841
                                      
                                      
                                      1,154,056Joe
      Miller, Former Chief Financial Officer4,
      8
                                      
                                      
                                      2008
                                      
                                      85,322
                                      
                                      
                                      -
                                      
                                      10,922
                                      
                                      
                                      96,2442007
                                      
                                      70,174
                                      
                                      
                                      -
                                      
                                      8,283
                                      
                                      
                                      78,457Russell
      R. Lee III, Chief Financial Officer5
                                      
                                      
                                      2008
                                      
                                      43,039
                                      
                                      
                                      -
                                      
                                      1,220
                                      
                                      
                                      44,259Alex
      Doaga, Senior Vice President & CTO8
                                      
                                      
                                      2008
                                      
                                      130,583
                                      
                                      
                                      -
                                      
                                      3,577
                                      
                                      
                                      134,1602007
                                      
                                      150,334
                                      
                                      
                                      -
                                      
                                      3,190
                                      
                                      
                                      153,524
  1
                  On
      June 16, 2008, David Chessler was appointed by the Company’s Board of
      Directors as Chief Executive
Officer.
 
 2
                  On
      November 29, 2007, Douglas J. Wood was appointed by the Company’s Board of
      Directors as Interim Chief Executive Officer and Chairman of the Board.
      Mr. Wood was not compensated by the Company for this role.  On
      March 27, 2008 Mr. Wood passed
away.
 
 3
                  On
      November 29, 2007, Robert Silzer, Sr. resigned as a director, Chairman of
      the Board and Chief Executive
Officer
 
 4
                  Effective
      August 31, 2008, Joe Miller resigned as Chief Financial
      Officer.
 
 5
                  On
      September 30, 2008,Russell R.Lee III was appointed by the Company’s Board
      of Directors as Chief Financial
Officer.
 
 6
                  This
      column represents the dollar amount recognized for financial statement
      reporting purposes of the fair value of stock options granted to the named
      executive, in 2008 as well as prior fiscal years, in accordance with SFAS
      123R.  Pursuant to SEC rules, the amounts shown exclude the
      impact of estimated forfeitures related to service-based vesting
      conditions. For additional information on the valuation assumption with
      respect to the grants, refer to our Note 12of our financial statements in
      this Annual Report.  These amounts reflect our accounting
      expense for these awards, and do not correspond to the actual value that
      will be recognized by the named executive from these
    awards.
 
 7
                  Amounts
      primarily represent medical insurance premiums and payments for automobile
      and electronic communication device
expenses.
 
 8
                  Certain
      executive officers were paid in Canadian dollars as these officers live in
      British Columbia, Canada, amounts are converted to US Dollars based on the
      conversion rates in effect on December 31st of the respective year
      shown.
  19
 Table of Contents
  Stock
Option Grants
 
 The
following table sets forth information as of December 31, 2008 concerning
unexercised options, unvested stock and equity incentive plan awards for the
executive officers named in the Summary Compensation Table.
  OUTSTANDING
      EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2008Option
      AwardsEquity
      Incentive Plan Awards:Name
                                          
                                          Number
      of
                                            Securities
                                            Underlying
                                            Unexercised
                                            Options
                                            (#)
                                            Exercisable
                                          
                                          Number
      of
                                            Securities
                                            Underlying
                                            Unexercised
                                            Options
                                            (#)
                                            Unexercisable
                                          
                                          Number
      of
                                            Securities
                                            Underlying
                                            Unexercised
                                            Unearned
                                            Options
                                            (#)
                                          
                                          Option
                                            Exercise
                                            Price
                                            ($)
                                          
                                          Option
                                            Expiration
                                            DateDavid
      Chessler1,
      Chief Executive Officer
                                          
                                          
                                          3,500,000
                                          1
                                          
                                          0
                                          
                                          
                                          0
                                          
                                          $
                                          0.031
                                          
                                          
                                          12/10/10500,000
                                          1
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          0.31
                                          
                                          
                                          6/30/1156,000,000
                                          
                                          
                                          0.031
      – 0.061
                                          
                                          
                                          6/30/11
      – 12/31/2011Robert
      C. Silzer, Sr., Former Chief Executive Officer
                                          
                                          
                                          15,000,000
                                          2
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          0.074
                                          
                                          
                                          12/18/201120,000,000
                                          3
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          0.060
                                          
                                          
                                          11/29/2011Alex
      Doaga, Senior Executive Vice President & CTO
                                          
                                          
                                          1,250,000
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          0.050
                                          
                                          
                                          12/25/20091,000,000
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          $
                                          0.060
                                          
                                          
                                          5/31/2011
 
 1           Vested
upon grant, June 12, 2008.
 
 2           Vested
upon grant, December 19, 2006.
 
 3           Vested
on November 20, 2008 as part of the mutual release agreement discussed
below.
 
 Compensation
of Directors
 
 During
the fiscal years ended December 31, 2007 and 2008, we did not pay any of our
directors any compensation (neither cash nor stock options) for serving on the
Board of Directors.
  Employment
Agreements and Severance Agreements
  Robert C.
Silzer, Sr.  On December 19, 2006, we entered into an employment
agreement with Robert C. Silzer, Sr.  Mr. Silzer was our Chief
Executive Officer from 1996 until November 29, 2007 when Mr. Silzer resigned as
a director, Chairman of the Board and Chief Executive Officer of the Company.Mr. Silzer agreed to continue to be employed by the Company in the
capacity of Advisor to the Company’s Chief Executive Officer. Pursuant to his
resignation Mr. Silzer signed a new employment agreement, which commenced on
November 29, 2007, and replaces in its entirety Mr. Silzer’s prior employment
agreement with the Company. Term of employment is through December 31, 2009 and
stipulates a minimum salary of US$ 159,250 in 2008 and $75,000 in 2009 subject
to discontinuance pursuant to Special Projects Agreement between Mr. Silzer and
the Company.   The Company also granted Mr. Silzer four year
options to purchase on a cashless exercise basis up to 20,000,000 shares of the
Company’s common Stock at an exercise price of $0.06 per share, such options to
vest if certain performance milestones are achieved as set out in the Special
Projects Agreement.
  On November 20, 2008, the
Company and Mr. Silzer entered into a mutual release agreement whereby each
party released the other from all matters including,  in Mr. Silzer’s
case,  the remainder of his November 29, 2007 employment agreement
except for the four-year option to purchase 20,000,000 shares of the Company’s
Common stock.  As part of the release, Mr. Silzer and the Company
entered into an assignment agreement of a certain business initiative known as
Fire at the Flag (“FAF”), which is an initiative to partner with golf courses to
place hole-in-one contests on golf courses worldwide, with the exception of
three courses in Europe.  The Assignment provides the Company with a
royalty based on FAF revenue.
  20
 Table of Contents
  David Chessler.  On June 16,
2008, the Company entered into an Employment Agreement with David Chessler
pursuant to which the Company employed Mr. Chessler as its Chief Executive
Officer for a term commencing June 16, 2008 and expiring on December 31,
2011.  Under the Employment Agreement, Mr. Chessler is entitled to a
base salary of $120,000 through 2009, $126,000 for 2010 and $132,000 for
2011.  For each annual period, beginning January 1, 2009, Mr. Chessler
is entitled to a bonus equal to 50% of his base salary if at least half of the
performance criteria set forth in the Employment Agreement for that particular
year had been achieved.  Mr. Chessler is also granted options to
purchase an aggregate of 60,000,000 shares of the Company’s common stock,
divided into 39 tranches.  Tranches 1-15 have a term of 30 months and
Tranches 16-39 have a term of 24 months from the date of
vesting.  With the exception of Tranches 1 and 2 (both of which vested
on June 18, 2008), the options do not vest until the satisfaction of certain
performance criteria have been achieved.
 
 The Company may terminate Mr.
Chessler’s employment at any time with or without cause.  If the
Company terminates Mr. Chessler’s employment without cause, or Mr. Chessler
terminates his employment under circumstances constituting “good reason,” Mr.
Chessler will be entitled to the less of either a continuation of base salary
for the remaining period or the term of twelve months base salary in each case
at the rate in effect as of the termination date. “Good reason” includes, among
other things, a change of control of the Company’s assets, any diminution of the
performance criteria used to determine Mr. Chessler’s bonus opportunity, or any
reduction of Mr. Chessler’s base salary without his consent.
 
 Alex
Doaga. We entered into an employment agreement with Alex Doaga, our current
Senior Vice President, on September 1, 2002 for a five-year term, which was
renegotiated after December 31, 2003. The agreement called for an annual salary
of $80,000. This agreement was subsequently renegotiated and in 2004 Mr. Doaga
earned a base salary of Cdn$140,000 per year. In January, 2005 a commitment was
made to Doaga to increase this base salary to Cdn$151,000 per year effective
January 1, 2005, plus to provide an annual bonus of up to 25% of his base
salary, and stock options. In December 2005 Mr. Doaga was granted options to
purchase 1,250,000 shares of common stock at a price of $0.05 per share. On
January 1, 2006 Mr. Doaga's salary was increased to Cdn$160,000. In June, 2006
Mr. Doaga was granted options to purchase 1,000,000 shares of common stock at a
price of $0.06 per share.
 
 Stock
Option Plan
 
 We have
adopted the 2000 Stock Option Plan (2000 Option Plan). Under the 2000 Stock
Option Plan we are authorized to issue a total of 10,000,000 shares as either
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or nonqualified stock options to our officers,
directors, employees, consultants and others performing services for us. The
2000 Option Plan is administered by our Board of Directors (or by our
Compensation Committee, if the Board elects to delegate these responsibilities).
The Compensation Committee/Board of Directors designates the optionees, number
of options, exercise prices, dates of grant, exercise period and other terms and
conditions.
 
 The
purchase price to be paid upon exercise of each incentive stock option granted
pursuant to the 2000 Option Plan shall be no less than the fair market value of
the Common Stock on the date the option is granted, or 110% of such fair market
value in the case of any optionee holding in excess of 10% of the combined
voting power of all classes of our capital stock as of the date of grant.
Provided that our Common Stock is publicly traded on an exchange or on an over
the counter market, the fair market value will equal to the closing price of our
Common Stock on such exchange or market on the date of grant (or on the last
date preceding such date on which a sale was reported). The purchase price and
method of exercise of each nonqualified option granted to officers and other key
employees shall be determined by the Compensation Committee/Board of Directors.
The purchase price is payable in full by cash, check, and if approved by the
Compensation Committee/Board of Directors, by the surrender of shares of our
Common Stock having a market value equal to the option price of the shares to be
purchased, or by any other manner of cashless exercises permitted by
law.
  Options
granted under the 2000 Option Plan become exercisable and shall expire on such
dates as determined by the Compensation Committee/Board of Directors, provided,
however, that no term may exceed ten years from the date of grant, or five years
from the date of grant in the case of any optionee holding more than 10 percent
of the combined voting power of all classes of our capital stock as of the date
of grant. After options become exercisable they may be exercised at any time or
from time to time as to any part thereof. The Compensation Committee/Board of
Directors may, at any time after grant of the option and from time to time
increase the number of shares purchasable in any installment, subject to certain
limitations.
 
 Options
granted under the 2000 Option Plan expire on such date as the Compensation
Committee/Board of Directors has determined. Options are not transferable except
by will or by the laws of descent and distribution; during the life of the
person to whom the option is granted, that person alone may exercise them. All
rights to exercise options terminate 90 days from the date a grantee ceases to
be an employee for any reason other than termination for cause, death or
disability.
  21
 Table of Contents
 
 If an
option grantee is terminated for cause, the option terminates on the date of
such termination of employment. If a grantee dies while in our employ, his or
her option may be exercised at any time within one year following the grantee's
death by his or her estate or by the person or persons to whom the grantee's
rights under the option passed by will or operation of law, but only to the
extent such option was exercisable by the grantee at the time of his or her
death. Except for certain stated provisions covering termination, disability or
death, no option may be exercised after the expiration of its original
term.
 
 To date,
since we had not established a Compensation Committee, the 2000 Option Plan has
been administered by the entire Board. As of December 31, 2008, there were
outstanding options under the Option Plan to purchase approximately 8,350,000
shares of our common stock at a weighted- average exercise price of
approximately $0.059 per share.
 
 Indemnification
of Directors and Officers
 
 Our
bylaws authorize the corporation to indemnify its directors, officers, employees
and agents of the Registrant to the fullest extent permitted by the laws of the
State of Nevada. Section 78.7502 of the Nevada General Corporation Law permits a
corporation to indemnify any of its directors, officers, employees or agents
against expenses actually and reasonably incurred by such person in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (except for an action by or in
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, provided that it is
determined that such person acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 78.751 of the
Nevada General Corporation Law requires that the determination that
indemnification is proper in a specific case must be made by:
 
 ·
              the
      stockholders,·
              the
      board of directors by majority vote of a quorum consisting of directors
      who were not parties to the action, suit or proceeding
  or·
              independent
      legal counsel in a written opinion if a majority vote of a quorum
      consisting of disinterested directors is not possible or if such an
      opinion is requested by a quorum consisting of disinterested
      directors.
 
 Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
  ITEM 12  SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 The
following table sets forth certain information regarding beneficial ownership of
our common stock as of March 15, 2009 (a) by each person known by us to own
beneficially 5% or more of any class of our common stock, (b) by each of our
executive officers named in the Summary Compensation Table under "Executive
Compensation" and our directors and (c) by all executive officers and directors
of this company as a group. As of March 15, 2009 there were 544,386,703 shares
of our common stock issued and outstanding. Unless otherwise noted, we believe
that all persons named in the table have sole voting and investment power with
respect to all the shares beneficially owned by them. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options, warrants and convertible
securities currently exercisable or convertible, or exercisable or convertible
within 60 days, are deemed outstanding, including for purposes of computing the
percentage ownership of the person holding such option, warrant or convertible
security, but not for purposes of computing the percentage of any other
holder.
 
 As a
result of (i) Shareholder Agreement, dated December 29, 2006, described below
(Shareholder Agreement) entered into certain of the principal stockholders these
stockholders are deemed to beneficially own significantly more shares than they
current own. Accordingly, the parties to these agreements (and their
affiliates)appear to beneficially own more shares of common stock than we are
authorized to issue or that are currently outstanding. For example,
Leisurecorp  Dubai World’s subsidiary, currently owns 2,000,000 Series
B shares (which shares are convertible into 327,868,852 shares of common stock)
and warrants to purchase up to 81,967,213 shares of common stock. However,
because it is a party to the Shareholders Agreement (and therefore is deemed to
beneficially own the shares of the other parties to that agreement
Leisurecorp  is deemed to beneficially own 574,080,104 shares (even
though we currently only have 544,386,703 shares of our common stock issued and
outstanding). Further information on the effect of these agreements is provided
in the footnotes below and is summarized in the "Supplementary Table on 5%
Beneficial Owners"
 
 Unless
otherwise indicated, the address for each shareholder listed in the following
table is c/o GPS Industries, Inc., 1358 Fruitville road, Suite 210, Sarasota, Fl
34236. This table is based upon information supplied by directors, officers and
principal shareholders and reports filed with the Securities and Exchange
Commission.
  22
 Table of Contents
 
 
 Name
      and Address of Beneficial Owner (1)
                                                          
                                                          Shares
                                                            Beneficially
                                                            Owned
                                                          
                                                          
                                                          Percentage
      of
                                                            Total
                                                            Common
                                                            Stock5%
      Beneficial OwnersGregory
      John Norman
                                                          
                                                          
                                                          588,090,417
                                                          
                                                          
                                                          
                                                          51.70
                                                          1501
      North A1A, JupiterFlorida,
      33477Great
      White Shark Enterprises, Inc
                                                          
                                                          
                                                          739,381,432
                                                          
                                                          
                                                          
                                                          64.19
                                                          2501
      North A1A, JupiterFlorida,
      33477Istithmar
      PJSC
                                                          
                                                          
                                                          574,080,104
                                                          
                                                          
                                                          
                                                          50.47
                                                          3P.O.
      Box 17000,Dubai,
      UAEMulligan
      Ventures, Inc.
                                                          
                                                          
                                                          166,673,498
                                                          
                                                          
                                                          
                                                          28.34
                                                          4(FKA
      Uplink Corporation)4908
      Bull Mountain CoveAustin,
      TX 78746Tulip
      Business Developers, Ltd BVI Co
                                                          
                                                          
                                                          270,240,615
                                                          
                                                          
                                                          
                                                          47.96
                                                          5P.O.
      Box 73147Duabi,
      UAED.
      Wood Holdings, LLC
                                                          
                                                          
                                                          73,040,547
                                                          
                                                          
                                                          
                                                          11.67
                                                          6Robert
      C. Silzer, Sr.
                                                          
                                                          
                                                          56,740,158
                                                          
                                                          
                                                          
                                                          9.43
                                                          7Directors
      and OfficersDavid
      Chessler
                                                          
                                                          
                                                          5,200,000
                                                          
                                                          
                                                          
                                                          0.92
                                                          8Benjamin
      E. Porter
                                                          
                                                          
                                                          3,905,000
                                                          
                                                          
                                                          
                                                          0.69
                                                          9Russell
      R. Lee III
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          0.00Alex
      Doaga
                                                          
                                                          
                                                          3,336,000
                                                          
                                                          
                                                          
                                                          0.59
                                                          10Tony
      Sole
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          0.00Bart
      Collins
                                                          
                                                          
                                                          100,000
                                                          
                                                          
                                                          
                                                          0.02
                                                          11Declan
      Hogan
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          0.00Total
      Directors and Officers as a Group (7 persons)
                                                          
                                                          
                                                          12,541,000
                                                          
                                                          
                                                          
                                                          2.22
 
   1
                Consists
      of (i) 13,745,441 shares of Common Stock held in the name of the Greg
      Norman Intangible Trust 12/01/2004, (ii) 254,872 shares of Common Stock
      held in the name of the Greg Norman Intangible Trust
      12/01/2005,  and (iii) 164,244,038 shares beneficially owned by
      GWSE (see, footnote (2) below). Greg Norman is the principal and sole
      beneficiary of the Greg Norman Intangible Trust 12/01/2004, which owns all
      of the issued and outstanding capital stock of GWSE. Mr. Norman also is
      the sole Director and Chief Executive Officer of GWSE. In addition, GWSE
      is a party to a Shareholder Agreement, dated December 29, 2006, with
      Leisurecorp and certain other parties (Shareholder Agreement). Under the
      Shareholder Agreement, GWSE and Leisurecorp have agreed to vote their
      Series B Shares in favor of the election to the GPSI Board of Directors of
      two designees of Leisurecorp and one designee of GWSE. See, "Description
      of Capital Stock—Shareholder Agreement." Accordingly, GWSE is deemed to
      have shared voting power with respect to the 409,836,066 shares of Common
      Stock beneficially owned by
Leisurecorp.
  23
 Table of Contents
  2
                  Consists
      of (i) 824,089 Series B Shares (convertible into 135,096,557 shares of
      Common Stock), and (ii) warrants to purchase up to 43,491,743 shares of
      Common Stock, and (iii) the right, exercisable until May 8, 2012, to
      purchase additional Series B Shares and warrants that collectively are
      convertible/exercisable for an additional 150,957,065 shares of Common
      Stock. In addition, as a result of the voting agreement under the
      Shareholder Agreement, GWSE is deemed to have shared voting power with
      respect to the 409,836,066 shares of Common Stock beneficially owned by
      Leisurecorp.
 
 3
                  Consists
      of the following securities registered in the name of, or otherwise owned
      by Leisurecorp: (i) 2,000,000 Series B Shares (convertible into
      327,868,852 shares of Common Stock), and (ii) warrants to purchase up to
      81,967,213 shares of Common Stock. In addition, as a result of the voting
      agreement under the Shareholder Agreement, Leisurecorp is deemed to have
      shared voting power with respect to the 135,096,557 shares of Common Stock
      issuable to GWSE upon the conversion of the 824,089 Preferred Shares owned
      by GWSE and warrants that are convertible/ for an additional 29,147,481
      shares of Common Stock. Leisurecorp is a direct wholly owned subsidiary of
      Istithmar PJSC. By virtue of its relationship with Leisurecorp, Istithmar
      has the power to cause Leisurecorp to vote, or to dispose of, certain
      securities which Leisurecorp beneficially owns. Accordingly, Istithmar may
      be deemed, under Rule 13d-3 under the Exchange Act, to beneficially own
      574,080,104 shares of Common Stock beneficially owned by
      Leisurecorp.
 
 4
                  Consists
      of (i) 142,083,334 shares of Common Stock (ii) 120,000 Series B Shares
      (convertible into 19,672,131 shares of Common Stock), and (iii) warrants
      to purchase up to 4,918,033 shares of Common
  Stock.
 
 5
                  Consists
      of  the right, exercisable until June 12, 2011, to purchase
      additional Series B Shares and warrants that collectively are
      convertible/exercisable for an additional 150,957,065 shares of Common
      Stock .  Also includes 57,377,050 shares subject Purchase Option
      Agreement, dated June 12, 2008, between the Tulip Group, Leisurecorp, and
      GWSE, where Leisurecorp and GWSE have granted the Tulip Group the Option
      to Purchase, as defined, Series B Preferred Stock and Warrants totaling
      57,377,050 shares.
 
 6
                  Consists
      of 10,898,470 shares of Common Stock, warrants to purchase 12,961,749
      shares and 300,000 series B Shares (convertible into 49,180,328 shares of
      Common Stock).
 
 7
                  Consists
      of 18,666,388 shares of Common Stock, warrants to purchase 3,073,770
      shares and 35,000,000 shares subject to Common Stock purchase
      options.
 
 8
                  Consists
      of  1,200,000 shares of Common Stock and
      4,000,000  shares subject to Common Stock purchase options. Does
      not include 56,000,000 shares potentially subject to Common Stock purchase
      options but not yet vested.
 
 9
                  Consists
      of 529,000 shares of Common Stock and 3,376,000 shares of Common stock
      owned by spouse.
 
 10
                  Consists
      of 1,086,000 shares of Common Stock and 2,250,000 shares subject to Common
      Stock purchase options.
 
 11
                  Consists
      of 100,000 shares of Common Stock and does not include the shares owned by
      GWSE, of which Mr. Collins is the
President.
  24
 Table of Contents
  Supplementary
Table on 5% Beneficial Owners
 
 The table
below shows holdings excluding the impact of the provisions of the Shareholder
Agreement. For the purposes of this table, "Shares Beneficially Owned" therefore
only include (i) shares of common stock currently owned, (ii) shares of common
stock that can be acquired upon the conversion of the Series B Shares, (iii)
shares of common stock that can be acquired upon the exercise of currently
owned, exercisable stock purchase warrants, (iv) shares of common stock that can
be acquired upon exercise of exercisable stock purchase options.
 
 Name
      and Address of Beneficial Owner (1)
                                                        
                                                        Shares
                                                          Beneficially
                                                          Owned
                                                        
                                                        
                                                        Percentage
      of Total
                                                          Common
      Stock5%
      Beneficial OwnersGregory
      John Norman
                                                        
                                                        
                                                        178,254,351
                                                        (1)
                                                        
                                                        24.49
                                                        %501
      North A1A, JupiterFlorida,
      33477Great
      White Shark Enterprises, Inc
                                                        
                                                        
                                                        329,545,366
                                                        
                                                        
                                                        36.90
                                                        %501
      North A1A, JupiterFlorida,
      33477Istithmar
      PJSC
                                                        
                                                        
                                                        409,836,066
                                                        
                                                        
                                                        42.11
                                                        %P.O.
      Box 17000,Dubai,
      UAEMulligan
      Ventures, Inc.
                                                        
                                                        
                                                        166,673,498
                                                        
                                                        
                                                        29.29
                                                        %(FKA
      Uplink Corporation)4908
      Bull Mountain CoveAustin,
      TX 78746212,863,565
                                                        
                                                        
                                                        27.42
                                                        %Tulip
      Business Developers, Ltd BVI CoP.O.
      Box 73147Duabi,
      UAERobert
      C. Silzer, Sr.
                                                        
                                                        
                                                        56,740,158
                                                        
                                                        
                                                        9.43
                                                        %D.
      Wood Holdings, LLC.
                                                        
                                                        
                                                        73,040,547
                                                        
                                                        
                                                        11.67
                                                        %
  (1)These
      shares include shares owned by Mr. Norman and all of the 164,244,038
      shares owned by Great White Shark Enterprises,
  Inc.
  Supplementary
Table on 5% Beneficial Owners
 
 The table
below shows holdings excluding the impact of the provisions of the Shareholder
Agreement. For the purposes of this table, "Shares Beneficially Owned" therefore
only include (i) shares of common stock currently owned, (ii) shares of common
stock that can be acquired upon the conversion of the Series B Shares, (iii)
shares of common stock that can be acquired upon the exercise of currently
owned, exercisable stock purchase warrants, (iv) shares of common stock that can
be acquired upon exercise of exercisable stock purchase options.
  25
 Table of Contents
  ITEM 13 CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
  This
section describes the transactions we have engaged in with persons who were
directors, officers or affiliates at the time of the transaction, and persons
known by us to be the beneficial owners of 5% or more of our common stock since
January 1, 2007.
 
 In
connection with the December 2006 purchase of Series B shares by GWSE and
Leisurecorp the Company agreed to grant them each a right, exercisable until the
end of April 2007, to increase their investment, or make an additional
investment in the Series B shares and warrants on the same terms as the
securities sold to them on December 29, 2006. GWSE and Leisurecorp exercised the
foregoing option in April 2007 to purchase 1,250,000 Series B shares and
warrants to purchase up to 51,229,508 shares of Common stock for a total
purchase price of $12,500,000. Leisurecorp purchased its Series B Shares and
warrants by delivering a $10,000,000 interest-free promissory note that was paid
in full with three installments during 2007.   GWSE purchased its
Series B shares and warrants in exchange for $1,500,000 in cash and the
cancellation of $1,000,000 of outstanding indebtedness the Company owed to
GWSE.
 
 During
2007, the Company entered into a contract with Leisurecorp to design, supply,
deliver and install a Wi-Fi network and GPS management system for a golf estates
project in Dubai. In June 2008, the Company and Leisurecorp expanded this
contract whereby it has agreed to deliver four separate and distinct solutions
to the customer, a utilities management application, an asset tracking solution,
an amenities management system and an eCommunity Management system at an
aggregate value of approximately $7,000,000. The total consideration for this
transaction was established and agreed to by the related parties; however, it is
believed to be substantially similar in pricing to that which would have been
agreed to by independent parties. For the period ending December 31,2007, the
Company has recognized $384,000 in revenue for completion and delivery of the
first milestone in the contract.  During 2008, the Company received
deposits from Leisurecorp aggregating $2,144,000 and recognized revenue of
$305,000 associated with the completion of a significant milestone under this
contract.   At December 31, 2008 $1,839,000 is included in the
current portion of deferred revenue related to these advances.
 
 As of
March 2009, the Company received $1,580,000 of additional advances under the
2007 Contract.  In March 2009, the Company and Leisurecorp entered
into an agreement which terminated in 2007 Contract and released both parties
from all obligations.  In addition, the Company agreed to provide two
eighty cart GPS system to Leisurecorp in July 2009.  Leisurecorp paid
$575,000 in consideration for the transaction, mutual release and the two GPS
systems.
 
 During
the period ended December 31, 2007, the Company completed another project for
Leisurecorp. As a result of the transaction, $301,000 has been recognized as
revenue for the period ended December 31, 2007.
 
 For the
year ended December 31, 2007, the Company recorded $194,000 in interest expense
due to GWSE for purchase order financing provided by GWSE, and for interest on
balances owing to GWSE. Additionally the Company has recorded $500,000 in sales
commissions due to GWSE, which has been charged to Sales and Marketing expense,
pursuant to an endorsement agreement between the two parties dated April 2003.
GWSE is a stockholder of the Company and has appointed a member of the Company's
Board of Director's. Included in accounts payable and accrued liabilities at
December 31, 2008 and 2007 is $1,109,003 due to GWSE.
 
 In
February 2008, the Company and Silicon Valley Bank (SVB) entered into a Loan and
Security Agreement (SVB) Agreement) pursuant to which the SVB agreed to make
available to the Company advances under a revolving line of credit up to
$3,000,000. The obligations of the Company under the SVB Agreement are secured
in part by, a certificate of deposit in the principal amount of $1,500,000
provided by Hansen, Inc. and $1,500,000 personal guarantee by Douglas Wood, the
Company’s interim Chief Executive Officer, member of the board of directors and
a stockholder at the time. On March 30, 2008, Douglas Wood passed
away.
 
 In May
2008, the Company and SVB entered into an amendment to the SVB Agreement
pursuant to which SVB increased the revolving line of credit up to $6,500,000.
The obligations of the Company under the amended SVB Agreement are secured in
part by certificates of deposit in the principal amount of $3,5000,000 provided
by GWSE and $1,500,000 provided by Hansen, Inc.
 
 In
January 2009, the Company issued a $3,500,000, 7%, convertible note payable to
GWSE and a warrant to purchase up to 14,344,262 shares of the Company’s Common
stock at $0.122 per share in exchange for them liquidating the certificate of
deposit and applying the proceeds against the SVB loan.
 
 In April 2009, the Company issued a
$1,500,000 note payable to Hansen, Inc. in exchange for it liquidating its
certificate of deposit and applying the proceeds against the SVB
loan.  Simultaneously, the Company issued a $750,000 note payable to
the Estate of Douglas Wood in exchange for cash and the Company paid off the
remaining $1,500,000 of the SVB loan.  Both of the notes, aggregate
$2,250,000, has interest of 4.5% payable monthly and mature in June
2011.
  26
 Table of Contents
 
 In June
2008, the Company entered into an agreement with Tulip Group Investments Limited
(Tulip Group) pursuant to which the Tulip Group loaned to the Company $5,500,000
pursuant to a Non-negotiable 7% Convertible Promissory Note. The Note bears
interest on a non-compounded basis at the rate of 7%. The principal amount and
accrued simple interest is payable on June 12, 2011.  At any time
prior to maturity, the Tulip Group has the right to convert all or a portion of
the Note into shares of a newly created Series C Preferred Stock at a conversion
price of $10.00 per share and shares of Common Stock at a conversion rate of
$0.031 per share. The Series C Preferred Stock has a liquidation preference of
$10.00 per share and will participate on a parity basis with the holders of the
Series B Preferred Stock with respect to liquidation. Upon conversion, the
holders of the Series C Preferred Stock have limited and specified voting rights
and a conditional right to elect one director. Upon conversion of the Note, the
Company will issue to the Tulip Group a warrant granting the Tulip Group the
right to purchase up to 22,540,983 shares of Common Stock at a price of $0.122
per share. As part of the transaction, the Tulip Group entered into a Purchase
Option Agreement with Leisurecorp LLC and GWSE, together whom have appointed
three members of the Company's Board of Directors, pursuant to which the Tulip
Group was granted the exclusive right and option to purchase shares of the
Company’s Common Series B Preferred Stock and warrants to purchase shares of
Common Stock from Leisurecorp and GWSE.Stock.
 
 In November 2008, the Company and Green
Tulip Enterprises, Ltd (GTE) entered into a loan agreement, which provides GTE
will advance the Company up to $3,600,000 in monthly installments of
$100,000.  GTE is not obligated to advance any funds. However, those
funds that are advanced are convertible into shares, at $10.00 per share, of the
Company’s Series C Preferred stock and into shares, at $0.031 per share, of the
Company’s Common stock. At December 31, 2008 $400,000 had been drawn under their
agreement.
 
 In
November 2008, the Company issued a 3 year promissory note in the amount of
$2,337,000 to Estate of Doug Wood for the settlement of current amounts due to
the Estate that are included in current liabilities in the Company’s balance
sheet at September 30, 2008. The Note bears interest on a non-compounded basis
at the rate of 7%. The principal amount and accrued unpaid interest is payable
on June 12, 2011.
 
 In
November 2008, the Company entered into Master Purchase Agreement (Purchase
Agreement) with Green Tulip, Inc. (GTI) and Green Tulip Enterprises Ltd. (GTE)
pursuant to which the Company has the right to request that GTI and/or GTE
purchase equipment of the Company relating to GPS devices for use on golf
courses. Any purchase will be pursuant to a purchase supplement, which will
cover the terms and conditions of any purchase. GTI and/or GTE will lease the
purchased equipment to golf courses. The Purchase Agreement provides for a
maintenance agreement between the Company and the prospective lessee. Pursuant
to the Purchase Agreement, the Company, until the earlier of the third
anniversary of the Purchase Agreement or the execution of at least 100 purchase
supplements, has granted to GTI and GTE the first right to provide lease
financing services with respect to the Company’s equipment.
 
 In the
twelve months ended December 31, 2008, the Company entered into several
transactions with GPSI Asia, Ltd., a company which GPS Industries owns 17.5%.
The total consideration for these transactions were established and agreed to by
the related parties; however, it is believed that they are substantially similar
in pricing to that which would have been agreed to by independent third parties.
The Company paid GPSI Asia $140,000 for consulting services performed during the
period. These expenses have been recorded in operating expenses. The Company has
recorded GPS system sales revenue in the amount of $300,000 for GPS systems sold
and delivered to GPSI Asia during 2008. These GPS system sales were done under
terms of a Master Supply Agreement between the Company and GPSI Asia, Ltd. In
addition, the Company recorded $47,000 in commission expense and $46,000 in
installation expense for work performed by GPSI Asia. The Company also prepaid,
to GPSI Asia, $78,000 for installation services performed in China, which is
recorded in prepaid expenses and other current assets in the Company’s balance
sheet at December 31, 2008. Included in accounts payable and accrued liabilities
at December 31, 2008 is $10,000 due to GPSI Asia.
 
 In 2008,
the Company was charged $820,000, primarily for the cost of the interim
management company paid by Leisurecorp on behalf of the Company and $211,000 for
legal costs incurred by GWSE in connection with the June 2008
financing.  At December 31, 2008 the $820,000 owed to Leisurecorp,
along with $1,200,000 which is payable to GWSE, is included in accounts
payable.
 
 We also
have a registration rights agreement and a shareholder agreement with GWSE,
Leisurecorp, and two of our former Chief Executive Officers.
 
 ITEM 14.  PRINCIPAL
ACCOUNTANT FEES AND SERVICES
 
 Prior to
December 2008,  Sherb & Co. was our independent registered
certified public accounting firm; however, effective December 2008, Sherb &
Co. was terminated as our independent accountant.  The Company
subsequently engaged Moore Stephens Lovelace, P.A. in December 2008 as the
Company’s independent registered public accountant.  Item 15 includes
the principal accounting fees and services for both Sherb & Co. and Moore
Stephens Lovelace, P.A.
  27
 Table of Contents
 
 Sherb
& Co.
 
 The
following table summarizes the aggregate fees billed to the Company by Sherb
& co for professional Services.
 
 2008
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        2007Audit
      Fees 1
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        118,000
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        110,000Audit
      Related Fees 1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        27,000
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        10,000Tax
      Fees 1
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        17,000
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        15,000Total
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        162,000
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        135,0001            
      Audit and Audit Related Fees.Fees
      for audit services billed in 2008 and 2007 consisted of:· audit of the
      Company’s annual financial statements for and 2007.· reviews of the Company’s quarterly financial statements
      for 2006, 2007 and 2008.2             
      Tax Fees.Fees
      for tax services billed in 2008 and  2007 consisted
      of:·Tax consultation
      services for 2007.·United States Tax
      Returns for 2007.
  Moore
Stephens Lovelace
 
 Moore
Stephens Lovelace were engaged in December 2008 and have served as our
independent public accountants for this Annual Report on Form 10-K for year
ended December 31, 2008.  The following table summarized the aggregate
fees billed to the Company by Moore Stephens Lovelace for professional services
performed in 2008:
 
 2008Audit
      Fees 1
                          
                          $
                          $25,000
 
 1         Audit Fees.
 
 Fees for
audit services billed in 2008 consisted of the initial deposit for the audit of
the Company’s annual financial statements for 2008.
 
 
 All audit related services, tax
services and other services rendered by our independent accountants were
pre-approved by our Board of Directors.  The Board has adopted a
pre-approval policy that provides for the pre-approval of all services performed
for us by the Principal Accountant.  The policy authorizes the Board
to delegate to one or more of its members pre-approval authority with respect to
permitted services.  Pursuant to this policy, the Board delegated such
authority to the Chairman.  Pre-approval is generally provided for up
to one year and any pre-approval is detailed as to the particular service or
category of services.  The independent auditor and management are
required to periodically report to the Board regarding the extent of services
provided of the non-audit services listed above is compatible with maintaining
the independence of the Principal Accountant.
  28
 Table of Contents
 
 ITEM 15. EXHIBITS
 Exhibit Number
                                                        Description3.1
                                                        Articles
      of Incorporation as filed with the Nevada Secretary of State on December
      12, 1995 (1)3.2
                                                        Certificate
      of Amendment to the Articles of Incorporation as filed with the Nevada
      Secretary of State on January 3, 2000 (2)3.3
                                                        Certificate
      of Amendment to the Articles of Incorporation as filed with the Nevada
      Secretary of State on January 20, 2000 (2)3.4
                                                        Certificate
      of Amendment to Articles of Incorporation (8)3.5
                                                        Bylaws
      (1)3.6
                                                        Amendments
      to Bylaws (5)3.7
                                                        Amendment
      to Bylaws (7)4.1
                                                        Stock
      Purchase Warrant, dated January 18, 2008 (5)4.1
                                                        GWSE
      Warrant (14)4.2
                                                        Registration
      Rights Agreement, dated January 18, 2008 (5)10.1
                                                        Loan
      & Security Agreement Silicon Valley, dated as of , 2008
      (3)10.1
                                                        Amendment
      to Loan and Security Agreement between Silicon Valley Bank and GPS
      Industries, Inc. (12)10.1
                                                        Employment
      Agreement dated as of June 16, 2008 between the Company and David
      Chessler. (13)10.1
                                                        Loan
      Agreement (14)10.2
                                                        Guaranty
      Agreement, dated as of February 26, 2008 (3)10.2
                                                        Facility
      Fee Agreement between GPS Industries, Inc. and Great White Shark
      Enterprises, LLC. (12)10.2
                                                        Agreement
      dated as of June 12, 2008 between the Company and Tulip.
    (13)10.2
                                                        Convertible
      Note in the principal amount of $5,500,000 in favor of Tulip.
      (13)10.2
                                                        GTL
      Note (14)10.3
                                                        Employment
      Agreement Golf Academies & Ben Porter, dated as of June 1, 2007
      (3)10.3
                                                        GWSE
      Note (14)10.4
                                                        Employment
      Agreement Golf Academies & Phil Lewin, dated as of June 1, 2005
      (3)10.4
                                                        Master
      Equipment Purchase Agreement with GTL. (14)10.5
                                                        Intellectual
      Property Security Agreement dated September 20, 2005 by and between the
      Company and Secured Party named therein (3)10.5
                                                        Master
      Equipment Purchase Agreement with GTI. (14)10.6
                                                        Form
      of Callable Secured Convertible Note (3)10.6
                                                        Remarketing
      Agreement with GTI. (14)10.7
                                                        Form
      of Warrant issued in connection with the Callable Secured Convertible
      Notes (3)10.7
                                                        Remarketing
      Agreement with GTI (14)10.8
                                                        First
      Amendment to Stock Purchase Agreement, dated as of May 28, 2005 by and
      among Optimal Golf Solutions, Inc., Darryl Cornish, Charles Houston, and
      the Company (9)10.9
                                                        Securities
      Purchase Agreement, dated November 13, 2006, by and among GPS Industries,
      Inc. and the purchasers named therein (5)10.10
                                                        Form
      of Registration Rights Agreement, dated December 29, 2006, between the
      Company, Great White Shark Enterprises, Inc., Leisurecorp LLC, Robert C.
      Silzer, Sr. and Douglas Wood (5)10.11
                                                        Form
      of Promissory Notes to be issued to Great White Shark Enterprises, Inc.
      and Leisurecorp LLC (5)10.12
                                                        Agreement,
      dated November 8, 2006, by and among GPS Industries, Inc. and the note
      purchasers set forth on the signature page thereof regarding the repayment
      of the Callable Secured Convertible Notes (5)10.13
                                                        Settlement
      Agreement dated October 26, 2006 among GPS Industries, ProLink Solutions
      LLC, Elumina Iberica S.A. and Elumina Iberica Limited
  (6)10.14
                                                        Shareholder
      Agreement, dated December 29, 2006, between the Company, with Great White
      Shark Enterprises, Inc., Leisurecorp LLC, Robert C. Silzer, Sr. and
      Douglas Wood (7)10.15
                                                        Second
      Amendment to Stock Purchase Agreement dated as of December 8, 2006 by and
      among the Company, the Sellers an Optimal Golf Solutions, Inc.
      (4)10.16
                                                        Employment
      Agreement, dated December 19, 2006, between GPS Industries, Inc. and
      Robert C. Silzer, Sr.**10.17
                                                        Patent
      License Agreement, dated January 12, 2009, between GPS Industries, Inc.
      and Golfview Investors, LLC. **10.18
                                                        Office
      Lease, dated September 1, 2008, by and between Jordyn Holdings III, LLC
      and GPS Industries, Inc.**10.19
                                                        Replacement
      Patent License Agreement, dated December 31, 2008. between GPS Industries,
      Inc. and Optimal IP Holdings, LP.**10.20
                                                        Settlement
      Agreement, dated December 31, 2008, by GPS Industries, Inc. and Optimal IP
      Holdings, LP.**10.21
                                                        Termination,
      Release and GPS Cart Systems Agreement, dated March 26, 2009, between
      Leisurecorp, LLC and GPS Industries, Inc.**10.22
                                                        Promissory
      Note, dated April 2, 2009, between GPS Industries, Inc. and Hansen,
      Inc.**10.23
                                                        Promissory
      Note, dated April 2, 2009, by D Wood Holdings, LLC**10.24
                                                        Mutual
      Release, dated November 30, 2008, between Robert C. Silzer, Sr., GPS
      Industries, Inc., Greg Norman, Great White Shark Enterprises, Inc., Bart
      Collins, Leisurecorp, LLC and David Spencer.**10.25
                                                        Fire
      at the Flag Assignment Agreement, dated November 20, 2008, between Robert
      C. Silzer, Sr, Dream Shot, Inc. and GPS Industries,
  Inc.**
  29
 Table of Contents
  10.26
                                                                                                                      Agreement,
      dated February 3, 2009, between David L. Chessler, DC Leasing and GPS
      Industries, Inc.**16.1
                                                                                                                      Letter
      from Sherb & Co., LLP to the Securities and Exchange Commission dated
      December 11, 2008 (15)21.1
                                                                                                                      Subsidiaries
      of GPS Industries, Inc. (9)21.2
                                                                                                                      Subsidiaries
      of GPS Industries, Inc. **23.1
                                                                                                                      Consent
      of Sherb & Co.**23.2
                                                                                                                      Consent
      of Moore Stephens Lovelace, PA.**31.1
                                                                                                                      Certification
      of the Registrant's Principal Executive Officer under Exchange Act Rule
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.**31.2
                                                                                                                      Certification
      of the Registrant's Principal Financial Officer under Exchange Act Rule
      15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.**32.1
                                                                                                                      Certification
      of the Registrant's Principal Executive Officer under 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.**32.2
                                                                                                                      Certification
      of the Registrant's Principal Financial Officer under 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.**99.1
                                                                                                                      Financial
      Statements – Uplink Corporation year ended Jun 30, 2006 & 2005 Report
      of Independent Auditors99.1
                                                                                                                      GPS
      Industries, Inc. press release, dated June 19, 2008.
  (13)EX-1
                                                                                                                      Joint
      Filing Agreement – Rule 13d-1 under the Securities Exchange Act of 1934 -
      Alan Rogers & David Spencer (10)EX-7
                                                                                                                      Promissory
      Note - Leisure Corp, dated November 13, 2006EX-1
                                                                                                                      Joint
      Filing Agreement - Security Exchange Act of 1934 Statement on Schedule 13d
      – GWSE99.6
                                                                                                                      Promissory
      Note - GWSE, date November 13,
2006
  *
Indicates a management contract or compensatory plan or
arrangement.
 ** Filed
with this Annual Report on Form 10-K.
  (1)
                              Previously
      filed by us on June 4, 1999 as an exhibit to our Registration Statement on
      Form 10SB12G and incorporated herein by reference.(2)
                              Previously
      filed by us on April 14, 2000 as an exhibit to our Annual Report on Form
      10-KSB and incorporated herein by reference.(3)
                              Previously
      filed by us on March 6, 2008 as an exhibit to our Current Report on Form
      8-K and incorporated herein by reference.(4)
                              Previously
      filed by us on December 15, 2006 as an exhibit to our Current Report on
      Form 8-K and incorporated herein by reference.(5)
                              Previously
      filed by us on January 18,2008 as an exhibit to our Current Report on Form
      8-K and incorporated herein by reference.(6)
                              Previously
      filed by us on November 1, 2006 as an exhibit to our Current Report on
      Form 8-K and incorporated herein by reference.(7)
                              Previously
      filed by us on January 8, 2007 as an exhibit to our Current Report on Form
      8-K and incorporated herein by reference.(8)
                              Previously
      filed by us on December 12, 2006 as an appendix to our proxy
      statement.(9)
                              Previously
      filed by us on October 21, 2005 as an exhibit to our Registration
      Statement on Form SB-2 and incorporated herein by
    reference.(10)
                              Previously
      filed by us on January 8, 2007 Promissory Note Leisure
    Corp.(11)
                              Previously
      filed by us on January 17, 2007 Promissory Note GWSE(12)
                              Previously
      filed by us on May 2, 2008 as an exhibit to our Current Report on Form 8-K
      and incorporated herein by reference.(13)
                              Previously
      filed by us on June 16, 2008 as an exhibit to our Current Report on Form
      8-K and incorporated herein by reference.(14)
                              Previously
      filed by us on November 18, 2008 as an exhibit to our Current Report on
      Form 8-K and incorporated herein by reference.(15)
                              Previously
      filed by us on December 11, 2008 as an exhibit to our Current Report on
      Form 8-K and incorporated herein by
reference.
  30
 Table of Contents
  SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
  GPS
      INDUSTRIES, INC.Date:
      April 14, 2009
                  By:
                  /s/ David
      ChesslerName:
      David ChesslerTitle:
      Chief Executive Officer
                    (Principal
      Executive Officer)
  In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant in the capacities and
on the dates indicated.
 
 Signature
                                                      
                                                      Title
                                                      
                                                      Date/s/
      David Chessler
                                                      
                                                      Chief
      Executive Officer
                                                      
                                                      April
      14, 2009David
      Chessler
                                                      
                                                      (Principal
      Executive Officer)/s/
      Russell R. Lee III
                                                      
                                                      Chief
      Financial Officer
                                                      
                                                      April
      14, 2009Russell
      R. Lee III
                                                      
                                                      (Principal
      Accounting Officer)/s/
      Bart Collins
                                                      
                                                      Director
                                                      
                                                      April
      14, 2009Bart
      Collins/s/
      Declan Hogan
                                                      
                                                      Director
                                                      
                                                      April
      14, 2009Declan
      Hogan/s/
      Tony Sole
                                                      
                                                      Director
                                                      
                                                      April
      14, 2009Tony
      Sole
  
  31