TRUG 10-Q
TruGolf Holdings, Inc. (TRUG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
For the transition period from __________________________ to __________________________
Commission
file number:
(Exact name of registrant as specified in its charter)
| State or Other Jurisdiction | (I.R.S. Employer | |
| of Incorporation or Organization | Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of May 15, 2025, the latest practicable date, shares of Class A common stock and shares of Class B common stock outstanding.
TRUGOLF HOLDINGS, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
TRUGOLF HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Capitalized software development costs, net | ||||||||
| Right-of-use assets | ||||||||
| Other long-term assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Deferred revenue | ||||||||
| Notes payable, current portion | ||||||||
| Notes payable to related parties, current portion | ||||||||
| Line of credit, bank | ||||||||
| Dividend notes payable | ||||||||
| Accrued interest | ||||||||
| Accrued and other current liabilities | ||||||||
| Accrued and other current liabilities - assumed in Merger | ||||||||
| Lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liabilities: | ||||||||
| Notes payable, net of current portion | ||||||||
| Note payables to related parties, net of current portion | ||||||||
| PIPE loan payable, net | ||||||||
| Gross sales royalty payable | ||||||||
| Lease liability, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ par value, million shares authorized; shares issued and outstanding, respectively | ||||||||
| Common stock, $ par value, shares authorized: | ||||||||
| Common stock - Series A, $ par value, million shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common stock - Series B, $ par value, million shares authorized; and shares issued and outstanding, respectively | ||||||||
| Treasury stock at cost, shares of common stock held, respectively | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
TRUGOLF HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the | For the | |||||||
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Revenue, net | $ | $ | ||||||
| Cost of revenue | ||||||||
| Total gross profit | ||||||||
| Operating expenses: | ||||||||
| Royalties | ||||||||
| Salaries, wages and benefits | ||||||||
| Selling, general and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expenses) income: | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on investment | ( | ) | ||||||
| Total other expense | ( | ) | ( | ) | ||||
| Loss from operations before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per common share Series A - basic and diluted | $ | ) | $ | ) | ||||
| Net loss per common share Series B - basic and diluted | $ | ) | $ | ) | ||||
| Weighted average shares outstanding Series A - basic and diluted | ||||||||
| Weighted average shares outstanding Series B - basic and diluted | ||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
TRUGOLF HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Class A Common Stock | Class B Common Stock | Treasury Stock | Paid-in | Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Gain (Loss) | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||
| Realized gain in fair value of short-term investments | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock exchanged in Merger | - | ( | ) | ( | ) | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock - Series A exchanged in Merger | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock - Series B issued in Merger | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock for interest and make good | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of notes | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation - options | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
TRUGOLF HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the | For the | |||||||
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of convertible notes discount | ||||||||
| Amortization of right-of-use asset | ||||||||
| Change in OCI | ||||||||
| Stock issued for make good provisions on debt conversion | ||||||||
| Stock options issued to employees | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Inventory, net | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ||||||
| Other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Deferred revenue | ||||||||
| Accrued interest payable | ( | ) | ||||||
| Accrued and other current liabilities | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Capitalized software, net | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from PIPE loans, net of discount | ||||||||
| Cash acquired in Merger | ||||||||
| Increase in other liabilities | ||||||||
| Costs of Merger paid from PIPE loan | ( | ) | ||||||
| Repayments of line of credit | ( | ) | ||||||
| Repayments of liabilities assumed in Merger | ( | ) | ||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Repayments of notes payable - related party | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash , cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash - beginning of year | ||||||||
| Cash, cash equivalents and restricted cash - end of year | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| PIPE note principal converted to Class A Common Stock | $ | $ | ||||||
| Notes payable assumed in Merger | $ | $ | ||||||
| Accrued liabilities assumed in Merger | $ | $ | ||||||
| Remeasurement of common stock exchanged/issued in Merger | $ | $ | ( | ) | ||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
TRUGOLF HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS
Nature of the Business
For over 40 years, TruGolf Holdings, In. (including its subsidiaries “the Company”, “we”, “us”, or “our”) has been creating indoor golf software and hardware and are focused on both the residential and commercial golf simulation industries. We design, develop, manufacture and sell golf simulators for residential and commercial applications. We offer portable, professional, commercial and custom simulators. In addition, to bundling our software with our simulators, we offer our E6 Connect and E6 Apex software as well as other gaming software on a standalone basis. We have leveraged the power of our hardware and software platform to create a collection of multi-sport games including football, soccer, soccer golf, frisbee golf, zombie dodgeball, and cowboy target practice.
TruGolf Nevada has been creating indoor golf software for 40 years. We began as a subsidiary of Access Software, Inc., a video game developer based in Salt Lake City, Utah (“Access Software”), which was co-founded in November 1982, by Christopher Jones, the Company’s largest stockholder, Chief Executive Officer, President and Chairman. In April 1999, Access Software was purchased by Microsoft Corp., for its expertise in golf software development. Following the acquisition, the core programming and graphics team of Links™, which created Links LS 1999, one of the bestselling PC sports games of 1999, were spun out to TruGolf Nevada.
Since 1999, we have focused on establishing residential and commercial golf simulation as a viable industry, and since 2007, we have focused on fabricating custom golf simulators for luxury clients. Part of our initial strategy included partnering with hardware inventors to provide them world class software. Over time, we found that it was not viable to rely on these early hardware inventors alone, we also began building and selling our own hardware. In addition, we are working with a video game company to utilize their new dynamic graphics engine which will enable us to bring photorealistic golf courses to life through our E6 software (discussed below). In addition, we have developed multiple sources and 3rd party manufacturers for the raw materials or parts for our products, including but not limited to, steel or aluminum frames, fabric, turf, screens, projectors, PCs, cameras, lasers, infrared sensors, and supporting subsystems. The availability of the frames and fabric from our principal provider, Allied ES&A, has been increased as they have moved into a much larger facility directly located in a large employee base community and we have entered into negotiations with a second supplier in order to provide alternative sourcing if needed. A third supplier, Impact Signs, has also been used in the past and TruGolf Nevada believes that it could purchase turf, and screen supplies from them as well if needed. Both turf (Controlled Products), and screen suppliers (Allied), are so specialized that we have come to rely on one vendor for each, respectively. Turf particularly experienced some delivery delays in 2022 that have been rectified, additional inventory has been secured locally, and our highest volume portable simulators have been redesigned to use less raw materials from that vendor, while adding an improved hitting surface from a second vendor, Real Feel, to mitigate risk. Negotiations with a second supplier of screen materials is in progress. Projectors (TV Specialists), PCs, lasers, IR sensors and other systems come from multiple suppliers with no historical delay in supply. We have 2 primary suppliers of cameras, IDS and Basler, and have integrated products from both in the new Apogee unit to ensure the greatest availability possible.
The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, has elected to comply with certain reduced public company reporting requirements.
Corporate History
Trugolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.) (the “Company” or “TruGolf”, “we”, “us”) was incorporated on July 8, 2020 as a Delaware corporation and formed for the purpose of effecting a business combination, with no material operation of its own. Our operations are conducted through our subsidiary TruGolf, Inc., a Nevada Corporation (“TruGolf Nevada”). TruGolf Nevada was formed as a Utah corporation on October 4, 1995, under the name “TruGolf, Incorporated”. TruGolf Nevada’s original business plan was the creation of golfing video games. On June 9, 1999, the TruGolf Nevada changed its name to “TruGolf, Inc.” Effective on April 26, 2016, TruGolf Nevada filed Articles of Merger with the State of Utah, Department of Commerce, and on April 28, 2016, TruGolf Nevada filed Articles of Merger with the Secretary of State of Nevada, pursuant to which TruGolf, Inc., a Utah corporation, merged with and into TruGolf Nevada, pursuant to a Plan of Merger. TruGolf Nevada was the surviving corporation in the merger. In connection with the Plan of Merger, TruGolf Nevada affected a four-for-one forward stock split of its outstanding common stock.
| 7 |
On January 31, 2024 the Company completed the previously announced business combination pursuant to the terms of the Agreement and Plan of Merger, dated as of July 21, 2023 (as amended, the “Merger Agreement”), which provided for, Merger Sub to merge with and into TruGolf Nevada, with TruGolf Nevada surviving as a direct, wholly owned subsidiary of Deep Medicine Acquisition Corp. (“DMAQ”), a Delaware corporation and TruGolf’s predecessor company as a consequence of the merger (together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, DMAQ changed its name to TruGolf Holdings, Inc. TruGolf Holdings, Inc.’s Class A common stock commenced trading on The Nasdaq Global Market under the ticker symbol “TRUG” on February 1, 2024.
On
May 10, 2024 the Company formed TruGolf Links Franchising, LLC (“Links”), a wholly owned subsidiary in the state of Delaware.
Links has a sole member, TruGolf, Inc. Links was formed to establish and sell franchises that would use the Company’s indoor golf
and recreational sports simulators and other equipment. Links offers a Service Area franchise agreement for a single location. It also
offers a regional developer franchise agreement that allows the franchisee to sell franchises within its region. The upfront fees range
from $
Nasdaq Compliance
On July 15, 2024, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that since it failed to file its Form 10-Q for the period ended March 31, 2024 it no longer complied with Nasdaq Listing Rule 5250(c)(1). The deficiency letter did not result in the immediate delisting of the Company’s common stock from the Nasdaq Capital Market. On August 14, 2024, the Company filed its Quarterly Report in the Form 10-Q for the period ended March 31, 2024 and the Company regained compliance with the applicable Nasdaq rule.
On
August 19, 2024, the Company received a written notification (the “ Equity Notice”) from the Listing Qualifications Department
(the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, based on the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, the Company’s stockholders’ equity was ($
Pursuant to Nasdaq Marketplace Rule 5810(c)(2)(C), the Company was provided 45 calendar days, or until November 18, 2024, to supply a specific plan to regain compliance with all Nasdaq Global Market listing requirements and the Company’s time frame to complete its plan. The Company submitted its plan of compliance on November 18, 2024, which was accepted by the Staff, and Nasdaq granted an extension of 180 calendar days from the date of the Equity Notice, or until March 31, 2025, to evidence compliance. On April 2, 2025, the Company received a delist determination letter from the Staff (the “Nasdaq Notice”) advising the Company that the Staff had determined that the Company had not regained compliance with the Global Equity Standard. Accordingly, the Staff indicated that unless the Company requests a hearing panel (a “Panel”) appeal of the delist determination by April 9, 2025, its securities would be delisted on April 11, 2025.
On April 9, 2025, the Company appealed Nasdaq’s determination to a Panel pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series to stay the suspension of the Company’s securities pending the Panel’s decision and the expiration of any additional extension period granted by the Panel following the hearing. Such hearing has been set for May 15, 2025.
On November 5, 2024, the Company received a written notification (the “Bid Notice”) from the Staff notifying the Company that, for the 30 consecutive business days ended November 4, 2024, the Company’s security did not maintain a minimum bid price of $ per share. Nasdaq stated in its letter that in accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days from the date of the Bid Notice (the “Compliance Period”), and that it may regain compliance if the closing bid on the Company’s security is at least $1 for a minimum of ten consecutive days during the Compliance Period, which will end May 5, 2025. If the Company chooses to implement a reverse stock split, it must complete the split no later than 10 business days prior to the expiration of the Compliance Period, in order to regain compliance.
On
November 5, 2024,
On May 7, 2025, the Company received written notice (the “MVPHS Notice”) from Nasdaq stating that the Company had not regained compliance with the MVPHS requirement or the bid price requirement. The Company intends to present to the Panel at the hearing a plan to regain compliance with all the continued listing requirements of Nasdaq, including the MVPHS requirement and the bid price requirement.
| 8 |
Liquidity
The
accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as
a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. At March 31, 2025,
the Company has an accumulated deficit of approximately $
To
date the Company has been funding operations primarily through the reinvestment of free cash flows generated from our business operations,
sale of equity in private placements, PIPE convertible debt instruments and revenues generated by the Company’s services. During
the three months ended March 31, 2025, the Company received $
Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development and corresponding level of expenditure for at least twelve months from the date of the issuance of these consolidated financial statements, although no assurance can be given that it will not need additional funds prior to such time.
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial information as of and for the three months ended March 31, 2025 and 2024 has been prepared in accordance with GAAP for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for such periods. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (the “SEC”). These unaudited financial statements and related notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2025.
Principles of Consolidation
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of expenses during the reported period. These assumptions and estimates could have a material effect on the financial statements. Actual results may differ materially from those estimates. The Company’s management periodically reviews estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause the Company to revise these estimates. Significant estimates include estimates used in the valuation allowance related to deferred tax assets and capitalized software costs. Actual results may differ from these estimates.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
| 9 |
Reclassifications
Certain reclassifications have been made to the unaudited condensed consolidated financial statements for the three months ended March 31, 2024 to conform to the unaudited condensed consolidated financial statement presentation for the three months ended March 31, 2025. These reclassifications had no effect on net loss or cash flows as previously reported.
Use of Estimates
Preparing unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates these estimates and judgments. Actual results could differ from those estimates.
Key estimates relate primarily to determining the net realizable value and demand for inventory, useful lives associated with property and equipment and capitalized software, valuation allowances with respect to deferred tax assets, contingencies, and the valuation and assumptions underlying share-based compensation and equity warrants. On an ongoing basis, management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Cash equivalents primarily consist of institutional money market funds, U.S. Treasury securities, certificates of deposit, and commercial paper and are carried at cost, which approximates fair value.
Concentration of Credit Risk
The Company maintains the majority of its cash and cash equivalents in accounts with large financial institutions. At times, balances in these accounts may exceed federally insured limits; however, to date, the Company has not incurred any losses on its deposits of cash and cash equivalents.
Marketable Investment Securities
The Company generally invests its excess cash in investments in corporate fixed income securities and U.S. Treasury securities. Such investments are included in cash and cash equivalents or marketable investment securities on the accompanying consolidated balance sheets and are classified based on original maturity. The Company considers all highly liquid investments with an original maturity date of 90 days or less to be cash equivalents and considers all highly liquid investments with an original maturity greater than 90 days and less than one year to be marketable securities.
Marketable fixed income securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss). Realized gains and losses on the sale of marketable securities are determined using the average cost method on a first-in, first-out basis and recorded in total other income (expense), net in the statements of operations and comprehensive loss. Each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as well as its ability and intent to hold the investment until a forecasted recovery of the carrying value occurs. Expected credit losses are recorded as an allowance through other income (expense), net on the Company’s consolidated statements of operations.
During
the three months ended March 31, 2024, the Company sold and liquidated most of its marketable securities resulting in a gain of $
| 10 |
Accounts Receivable, net
Accounts
receivable are reported at their outstanding unpaid principal balances, net of allowances for credit losses. The Company periodically
assesses its accounts and other receivables for collectability on a specific identification basis. The Company estimates its allowance
using a rate loss model based on delinquency. The estimated loss rate is based on historical experience with specific customers, understanding
of the Company’s current economic circumstances, reasonable and supportable forecasts, and the Company’s judgment as to the
likelihood of ultimate payment based upon available data. Management believes the Company’s credit risk is mitigated by the geographically
diverse customer base and its credit evaluation procedures. The actual rate of future credit losses, however, may not be similar to past
experience. The Company writes off accounts receivable against the allowance for credit losses when a balance is determined to be
uncollectable. As of March 31, 2025 and December 31, 2024, the Company’s allowance for credit losses was $
Inventory, net
The
Company’s inventory consists of raw materials and are valued at the lower of historical cost or net realizable value, where net
realizable value is considered to be the estimated selling price in the ordinary course of business, less reasonably predictable cost
of completion, disposal and transportation. Historic inventory costs are calculated on an average or specific cost basis. The Company
records inventory write-downs for excess or obsolete inventories based upon assumptions on current and future demand forecasts. As of
both March 31, 2025 and December 31, 2024, the Company had $
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated over the estimated useful lives of the related assets using the straight-line method. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term (including renewals that are reasonably assured) or the estimated useful lives of the improvements. For internal-use software, external costs and employee payroll expenses directly associated with developing new or enhancing existing software applications are capitalized subsequent to the preliminary stage of development. Internal-use software costs are amortized using the straight-line method over the estimated useful life of the software when the project is substantially complete and ready for its intended use.
| Category | Estimated Useful Life | |
| Computer equipment and software | ||
| Furniture and fixtures | ||
| Vehicles | ||
| Equipment |
Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gains or losses are included in the Company’s results of operations for the respective period.
Capitalized Software Development Costs
The Company capitalizes certain costs related to the development of our software used in our simulators. In accordance with authoritative guidance, including the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 985-20, Software – Costs of Software to be Sold, Leased, or Marketed, the Company began to capitalize these costs when the technological feasibility was established and preliminary development efforts were successfully completed, management authorized and committed project funding, and it was probable that the project would be completed and the software would be used as intended. Such costs are amortized when placed in service, on a straight-line basis over the estimated life of the related asset, estimated to be three years beginning on February 1, 2024. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded in selling, general and administrative expenses on our consolidated statements of operations. The Company does not capitalize any testing or maintenance costs. The accounting for these capitalized software costs requires management to make significant judgments, assumptions and estimates related to the timing and amount of recognized capitalized software development costs. See Note 6 – Property and Equipment, Net for further details.
| 11 |
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. For asset groups held and used, the carrying value of the asset group is considered recoverable when the estimated undiscounted future cash flows expected to be generated from the use and eventual disposition of the asset group exceed the respective carrying value. In the event the carrying value is not recoverable, an impairment charge would be recognized for the asset group to be held and used equal to the excess of the carrying value above the estimated fair value of the asset group. Impairment charges are recognized within selling, general and administrative expenses in the consolidated statements of operations. The Company did not record a loss on impairment during the three months ended March 31, 2025 and 2024, respectively.
Advertising and Marketing Costs
The
Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $
Debt with Warrants
In accordance with ASC 470-20-25, when the Company issued debt with warrants, the Company treats the fair value of the warrants as a debt discount, recorded as a contra-liability against the debt, and amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the unaudited condensed consolidated statements of operations using the straight-line method. The offset to the contra-liability is recorded as either equity or liability in the Company’s unaudited condensed consolidated balance sheets depending on the accounting treatment of the warrants. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the unaudited condensed consolidated statements of operations.
Fair Value Measurements
As defined in ASC 820, Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
| Level 1: | Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. |
| Level 3: | Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques. |
| 12 |
Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, accounts payable and accrued expenses, and other current liabilities approximate their fair values using Level 1 inputs, based on the short-term maturity of these instruments. The carrying amount of notes payable approximate the estimated fair value for this financial instrument as management believes that such debt and interest payable on the notes approximates the Company’s incremental borrowing rate. The following table shows the Company’s cash, cash equivalents, restricted cash, marketable securities, and derivative liabilities by significant investment category as of March 31, 2025 and December 31, 2024:
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Fair Value at December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Money market funds | ( | ) | ( | ) | ||||||||||||
| Corporate fixed income securities | ( | ) | ( | ) | ||||||||||||
| U.S. treasury securities | ( | ) | ( | ) | ||||||||||||
| Derivative liability(1) | ||||||||||||||||
| Fair value at December 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Derivative liability(2) | ||||||||||||||||
| Fair value at March 31, 2025 | $ | $ | $ | $ | ||||||||||||
| (1) | ||
| (2) |
Leases
A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration.
In accordance with ASC 842, Leases, the Company recognized a right-of-use (“ROU”) asset and corresponding lease liability on its balance sheets for its office space and warehouse. See Note 17 – Leases for further discussion, including the impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.
Leases
in which the Company is the lessee are comprised of office and warehouse rental. All of the leases are classified as operating leases.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company utilizes ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At March 31, 2025 and December 31, 2024, the Company’s net deferred tax asset has been fully reserved.
For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations when a determination is made that such expense is likely.
Revenue Recognition
Revenue Recognition Policy
Revenue is recognized upon satisfaction of all contractual performance obligations and transfer of control to the customer and is measured as the amount of consideration to which the Company expects to be entitled to in exchange for corresponding goods or services. Each sales transaction results in an implicit contract with the customer to deliver a product or service at the point of sale. The Company has two distinct revenue streams: golf simulators and content software subscriptions.
| 13 |
Performance obligations under our contracts consist of hardware, software consisting of perpetual licenses and subscription licenses, and support within a single operating segment.
Golf Simulators – Substantially all the Company’s sales are multiple performance obligation arrangements for its golf simulators, for which the transaction price is equivalent to the stated price of the product or service, net of any stated discounts applicable at a point in time. Golf simulators are bundled and are comprised of both hardware, a software license (for the software to operate the simulator), and a content software subscription license. Revenue from golf simulators is recognized at the point in time when installation (hardware and software) has occurred and has been accepted by the customer. For transactions where the Company utilizes a third-party to complete the installation, the Company recognizes revenue solely for the simulator hardware upon delivery to the customer or third-party installer and then recognizes the remainder of the revenue upon installation and customer acceptance.
Perpetual License – Golf simulators require specific proprietary software to run the simulations. The Company records revenue from the proprietary software products under perpetual licenses. Revenue from the perpetual licenses is recognized at the time of installation and customer acceptance.
Content Software Subscriptions – The Company offers content software subscriptions for one and twelve months. We recognize revenue from these transactions when control has passed to the customer and the performance obligations have been satisfied. Control is considered to have passed to the customer when the software license has been delivered and accepted by the customer. The content software subscription revenue is recognized over the term of the contract.
Deferred Revenue
Deferred revenue represents either customer advance payments or performance obligations that have not yet been met.
Revenue
from golf simulators and perpetual software licenses is deferred and primarily recognized upon the installation of the golf simulators
and acceptance from the customer. Revenue from content software subscriptions is deferred and recognized ratably over the life of the
subscription (one or twelve months). During the three months ended March 31, 2025, the Company recognized approximately $
Remaining Performance Obligations
As
of March 31, 2025, approximately $
Disaggregated Revenue
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues: | ||||||||
| Golf Simulators(1) | $ | $ | ||||||
| Content Software Subscriptions | ||||||||
| Franchise Revenue | ||||||||
| Other(2) | ||||||||
| Total net revenue | $ | $ | ||||||
| (1) | |
| (2) |
Cost of Revenues
Cost
of revenue includes direct materials, labor, manufacturing overhead costs and reserves for estimated warranty cost (excluding depreciation).
Cost of revenues also includes charges to write down the carrying value of the inventory when it exceeds its estimated net realizable
value and to provide for on-hand inventories that are either obsolete or in excess of forecasted demand, as consistently reviewed by
the Company. During the three months ended March 31, 2025 and 2024, the Company recorded an expense of $
| 14 |
Royalties
The
Company has royalty agreements with certain software suppliers to pay royalties based on the number of units and subscriptions sold.
The royalty percentages range between
Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. All outstanding options and warrants are considered potentially outstanding common stock. The dilutive effect, if any, of stock options or warrants is calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method.
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerators: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares Series A outstanding, basic and diluted | ||||||||
| Weighted-average common shares Series B outstanding, basic and diluted | ||||||||
| Net loss per common share Series A, basic and diluted | $ | ) | $ | ) | ||||
| Net loss per common share Series B, basic and diluted | $ | ) | $ | ) | ||||
Since the effect of common stock equivalents is anti-dilutive with respect to losses, the options, warrants and shares issuable upon conversion have been excluded from the Company’s computation of net loss per common share for the three months ended March 31, 2025 and 2024.
| Stock Options | ||||
| PIPE Convertible Notes(1) | ||||
| Common Stock - Series A warrants | ||||
| Common stock - Series B warrants | ||||
| Earnout shares - Earned in three Tranches over three years (assumes achievement of revenue and VWAP targets) | ||||
| Underwriter warrants to I-Bankers convertible at $/common share | ||||
| Total dilutive |
| (1) |
The Company has the ability to grant employees a number of different stock-based awards, including restricted shares of common stock, restricted stock units, stock options, and stock appreciation rights to purchase common stock, under the TruGolf Holdings, Inc. 2024 Incentive Plan (the “2024 Plan”). The Company records stock-based compensation expense based on the fair value of stock awards at the grant date and recognizes the expense over the employees’ service periods. For performance-based awards, recognition of stock-based compensation expense also includes management’s estimate of the probability of performance criteria as of the end of each reporting period. Stock-based compensation expense is recognized net of estimated forfeitures and expense is not recognized for awards that do not vest if service or performance conditions are not satisfied.
Pursuant to Accounting Standards Update (“ASU”) 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.
| 15 |
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these unaudited condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. The Company expects to use the extended transition period for any new or revised accounting standards during the period which the Company remains an emerging growth company.
Segment Reporting
The Company currently operates as one business segment, which is also the sole reportable segment, focusing on the manufacturing and sales of indoor golf simulators. The Company’s business offerings have similar economic and other characteristics, including the nature of products, manufacturing, types of customers, and distribution methods. The determination of a single business segment is consistent with the unaudited condensed consolidated financial information regularly provided to the Company’s chief operating decision maker (“CODM”). The Company’s CODM is its Principal Executive and Financial Officer and Director, who reviews and evaluates consolidated profit and loss and total assets for the purpose of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods.
Warrants
The fair value of the warrants is estimated on the date of issuance using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including the expected term of the warrants, expected stock price volatility, and expected dividends. These estimates involve inherent uncertainties and the application of management’s judgment. Expected volatilities used in the valuation model are based on the average volatility of the comparable publicly traded on recognized stock exchanges. The risk-free rate for the expected term of the option is based on the United States Treasury yield curve in effect at the time of the grant.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued Update 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the disclosure requirements for income tax rate reconciliation, domestic and foreign income taxes paid, and unrecognized tax benefits. The amendments of ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The Company adopted this new guidance on January 1, 2025, and the adoption did not have a material effect on the Company’s unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which amends ASU 2024-03 to clarify when public business entities (PBEs) and all other entities must begin providing the new expense-disaggregation disclosures. ASU 2025-01 does not change the underlying disclosure requirements introduced by ASU 2024-03; rather, it revises paragraph 220-40-65-1 to state explicitly that the amendments are effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption continues to be permitted. The Company is currently evaluating the impact of these amendments on its consolidated financial statements and related disclosures.
| 16 |
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable and allowance for credit losses consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Other | ||||||||
| Less allowance for credit losses | ( | ) | ( | ) | ||||
| Total accounts receivable, net | $ | $ | ||||||
NOTE 4 – INVENTORY, NET
The following summarizes inventory:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Inventory - raw materials | $ | $ | ||||||
| Less reserve allowance for obsolescence | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
NOTE 5 – MARKETABLE INVESTMENT SECURITIES
In
February 2023, the Company entered into a brokerage agreement and deposited $
NOTE 6 – PROPERTY AND EQUIPMENT, NET
The following summarizes property and equipment:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Software and computer equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Vehicles | ||||||||
| Equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total other long-term assets | $ | $ | ||||||
The
Company recorded depreciation expense was $
The following summarizes capitalized software development costs as of March 31, 2025 and December 31, 2024:
| Capitalized software, net - beginning balance, December 31, 2024 | $ | |||
| Capitalized software development costs - 2025 | ||||
| Less accumulated amortization | ( | ) | ||
| $ |
The
Company recorded amortization of capitalized software costs of $
| 17 |
NOTE 7 – ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following amounts:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accrued payroll | $ | $ | ||||||
| Credit cards | ||||||||
| Warranty reserve | ||||||||
| Sales tax payable | ||||||||
| Other accrued liabilities | ||||||||
| Total accrued and other current liabilities | $ | $ | ||||||
Accrued liabilities and other current liabilities assumed in Merger:
| Accrued tax payable | $ | |||
| Total accrued and other current liabilities assumed in Merger | $ |
NOTE 8 – NOTES PAYABLE
Notes payable consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Note payable - Ethos Management Inc. | $ | $ | ||||||
| Note payable - Mercedez-Benz | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Note payable long-term portion | $ | $ | ||||||
Ethos Management Inc.
In
January 2023, the Company entered into a financing agreement with Ethos Asset Management Inc. (the “Ethos Loan” or “Ethos”)
in the principal amount of up to $
The
Ethos Loan stipulates that fundings should happen approximately every 30 banking days, subject to Ethos completing periodic internal
audits to ensure the Company was in compliance with the terms of the loan agreement. In August 2023, Ethos informed the Company that
unrelated to the Company, Ethos was undergoing a routine audit of its portfolio, and pending the close of the audit, borrowers may experience
delays in drawing on funds when requested. In February 2024, due to the lack of additional fundings and in accordance with the terms
of the Ethos Loan, the Company sent Ethos a notice of termination for materially breaching the Ethos Loan agreement. Based on the termination
for default clause in the Ethos Loan, the Company was entitled to retain all funds disbursed by Ethos and Ethos must release the Deposit
Collateral. At the date of the Ethos Loan termination the principal and accrued interest owed on the Ethos Loan was $
Mercedes-Benz
In
November 2020, the Company entered into a $
| 18 |
Notes Assumed in Merger
As
a successor to DMAQ, the Company assumed notes payable from the Merger in the amount of $
On December 31, 2024, using the proceeds from the November 7, 2024, funding of additional PIPE Convertible Notes (See Note 9 – PIPE Convertible Notes) the Company repaid the remaining balance of such notes in full. The extinguishment of one of the convertible notes resulted in extinguishment accounting. See Note 9 – PIPE Convertible Notes for additional details.
NOTE 9 – PIPE CONVERTIBLE NOTES
On
November 2, 2023 and December 7, 2023, DMAQ executed loan agreements with certain accredited investors (together, the “Prior Loan
Agreements”) pursuant to which such investors agreed to loan DMAQ up to an aggregate $
Under
the terms of the Purchase Agreement, the Company had the right, but not the obligation, to require that the PIPE Investors purchase additional
PIPE Convertible Notes at up to two additional closings. On February 6, 2024, the first additional closing (the “First Mandatory
Additional Closing”) occurred for the sale of $
In
addition, pursuant to the Purchase Agreement, as amended, each PIPE Investor had the right, but not obligation, to require the
Company to sell to such investor its pro rata share of up to an aggregate principal amount of $
On August 13, 2024, the Company entered into waiver and amendment agreements (the “Waiver”) with the PIPE Investors. Under the Waiver, the parties agreed to, among other things: to (i) waive any defaults caused by the Company’s failure to timely file SEC reports through August 14, 2024, (ii) extend the deadline for Additional Optional Closings to 11 months following the effectiveness of the initial registration statement, (iii) permit the Company to raise non-convertible, unsecured debt financing from its affiliates, (iv) waive certain registration failures through September 3, 2024, and allow such failures to be cured through the issuance of common stock, and (v) allow interest payments due April 1, July 1, and October 1, 2024, to be paid in shares of common stock or added to the principal of the PIPE Convertible Notes, at the election of the applicable PIPE Investor. In connection with the Waiver, the Company issued shares of Class A common stock to satisfy registration delay penalties and shares of Class A common stock to satisfy accrued interest obligations. These issuances were made at the “Alternate Conversion Price” set forth in the PIPE Convertible Notes, which is defined as the lesser of the fixed conversion price or 90% of the lowest volume weighted average price (VWAP) of the Company’s Class A common stock over the five consecutive days prior to conversion. Additionally, the Company issued shares to a PIPE Investor as a result of language in the PIPE Convertible Note related to ownership percentage prior to the Merger.
| 19 |
On November 7, 2024, the Company and certain PIPE Investors entered into further amendments to the Waiver (the “Amendments”) under which the PIPE Investors agreed to waive any breaches or defaults resulting from the Company’s failure to timely file SEC reports through August 21, 2024, and extended the waiver for certain registration failures through October 3, 2024. The PIPE Investors also waived defaults related to the Company’s non-compliance with the continued listing requirements of the Nasdaq Stock Market, including (i) failure to meet the minimum stockholders’ equity threshold, (ii) failure to meet the minimum market value of publicly held shares, and (iii) failure to meet the minimum bid price requirement. These waivers are effective through January 15, 2025, but may be extended through March 15, 2025, solely with respect to the bid price deficiency, provided the Company remains in compliance with all other listing requirement and files a preliminary proxy statement to seek shareholder approval of a reverse stock split. In connection with these Amendments, the Company issued shares of Class A common stock to satisfy additional registration delay penalties and shares of Class A common stock for unpaid interest, also at the Alternate Conversion Price.
Also on
November 7, 2024, certain PIPE Investors agreed to purchase an additional $
One
of the PIPE Notes issued on November 7, 2024 was purchased in exchange for a convertible note payable and an unsecured note payable
that were previously issued to the same PIPE Investor. The exchange resulted in debt extinguishment accounting as the present value
of the future cash flows of the new PIPE Convertible Note was greater than 10% of the remaining present value of the cash flows of
the exchanged notes. As a result, the Company recorded a loss on extinguishment of debt of $
On December
16, 2024, a certain PIPE Investor agreed to purchase an additional $
On January
8, 2025, certain PIPE Investors agreed to purchase an additional $
During
the three months ended March 31, 2025, the Company converted an aggregate principal amount of $
PIPE Convertible Notes payable consisted of the following:
| PIPE Convertible Note Balance at January 1, 2024 | $ | |||
| PIPE Convertible Notes issued | ||||
| Less: Debt Discount associated with OID and Warrants | ( | ) | ||
| PIPE Convertible Notes, net | ||||
| Less: Gross PIPE Convertible Note principal converted into Class A common stock | ( | ) | ||
| Add: Accretion of debt discount | ||||
| Total PIPE Convertible Notes, net at December 31, 2024 | ||||
| PIPE Convertible Notes issued | ||||
| Less: Debt Discount associated with OID | ( | ) | ||
| PIPE Convertible Notes, net | ||||
| Less: Gross PIPE Convertible Note principal converted into Class A common stock | ( | ) | ||
| Add: Accretion of debt discount | ||||
| Total PIPE Convertible Notes, net at March 31, 2025 | $ |
During
the three months ended March 31, 2025 and 2024, amortization expense related to the Debt Discount of the PIPE Convertible Notes was $
| 20 |
NOTE 10 – RELATED PARTY NOTES AND LOANS PAYABLE
Related party notes payable consisted of the following:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Note payable - ARJ Trust | $ | $ | ||||||
| Note payable - McKettrick | ||||||||
| Note payable - Carver | ||||||||
| Loan - Chris Jones | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Note payable long-term portion | $ | $ | ||||||
Future maturities of related party notes and loan payables as of March 31, 2025:
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total | $ |
ARJ Trust
In December 2008, the Company
entered into a note payable with ARJ Trust, a trust that is indirectly controlled by the Company’s chief executive officer. The
note has a principal amount of $
In June 2010, the Company entered
into a second note payable with ARJ Trust. The note has a principal amount of $
On
The Company made interest-only
payments of $
McKettrick
In May 2019, the Company entered
into a $
Carver
In January 2021, the Company
entered into a $
Chris Jones
During the year ended December
31, 2024, the Company chief executive officer loaned the Company an aggregate of $
| 21 |
NOTE 11 – LINES OF CREDIT
JPMorgan Chase
In December 2023, the Company
entered into a $
On January 1, 2025, the maturity date of the line of credit was extended
to December 31, 2025. Upon the maturity date extension the annual interest rate was increased to the Adjusted SOFR Rate plus
The line of credit is secured
by a pledge of $
Morgan Stanley
During February 2023, the Company
entered into a variable rate line of credit with Morgan Stanley which was secured by the marketable securities held in our brokerage account
(See Note 5 – Marketable Investment Securities). The Company terminated the brokerage agreement during the year ended December
31, 2024, liquidated the vast majority of its investments and has $
NOTE 12 – DIVIDEND NOTES PAYABLE
Prior to the Merger, TruGolf
Nevada filed its tax returns as an S Corporation. Historically, all income tax liabilities and benefits of TruGolf Nevada are passed through
to the shareholders annually through distributions. dividends were declared during 2023 or 2022. During 2021, the Board of Directors
declared $ in dividends to the shareholders, payable in cash as the Company’s liquidity allows. During 2022, TruGolf Nevada
paid the shareholders an aggregate amount of $
Dividends declared, distributed, and accrued are as follows:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accrued interest on dividends payable | $ | $ | ||||||
| Dividends payable | $ | $ | ||||||
NOTE 13 – GROSS SALES ROYALTY PAYABLE
In June 2015, the Company entered
into a Royalty Purchase Agreement (the “Royalty Agreement”) with a purchaser (“Purchaser”) for a gross sales royalty.
The Purchaser agreed to purchase a sales royalty for the sum of $
| i. | If the trailing twelve-month revenue of the Company is equal to or less than $ | |
| ii. | If the trailing twelve-month revenue of the Company is equal to or greater than $ | |
| iii. | If the trailing twelve-month revenue of the Company is greater than $ |
| 22 |
The royalty percentage was fixed
at
The Royalty Agreement contains
an option for a one-time buy down of the royalty rate. At any time following the date on which the Purchaser has received royalty payments
that are, in the aggregate, equal to two times the then applicable Aggregate Installment Amount ($
The Royalty Agreement also contains an option for a buyout upon the change of control. If pursuant to a proposed change of control the acquirer under such transaction requires, as a condition to the completion of such transaction, that the Company purchase and extinguish all amounts owing or to become owing to the Purchaser hereunder, the Company will pay the greater of:
| i. | An amount equal to two times the aggregate installment amount as at the date of the change of control buyout notice; and | |
| ii. | An amount equal to A multiplied by B multiplied by C, where: |
| a. | A is equal to the aggregate installment amount as at the date of the change in control divided by $ | |
| b. | B is equal to 0.8; and | |
| c. | C is equal to the net equity value of the Company; or in the case of a proposed asset sale, the proposed net purchase price of all or substantially all of the Company’s assets. |
The Royalty Agreement does not
contain a stated maturity date or bear interest. The agreement provides for a perpetual payment obligation, whereby the Company is required
to remit a royalty equal to either
Because the gross sales royalty
payable has no stated fixed interest rate or maturity date, it is considered variable interest perpetual debt. The periodic variable payments
to the Purchaser are recorded in interest expense. The outstanding balance at March 31, 2025 and December 31, 2024, was $
NOTE 14 – STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company has authorized preferred stock of shares with a par value of $. As of March 31, 2025 and December 31, 2024, there were shares of preferred stock issued and outstanding.
Common Stock
Class A Common Stock
Class B Common Stock
Equity Transactions During the Period
| 23 |
Class A Common Stock
During the three months ended
March 31, 2025, the Company issued an aggregate of shares of Class A Common Stock with a fair value of $ per share to PIPE
Convertible Note holders for conversion of an aggregate principal amount of $
During the three months ended March 31, 2025, the Company issued an aggregate of shares of Class A Common Stock with fair values ranging from $ - $ per share to PIPE Convertible Note holders in lieu of cash for interest and make whole provisions (See Note 9 – PIPE Convertible Notes).
Warrant and Option Valuation
The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term for warrants and options issued to non-employees is the contractual life and the expected term used for options issued to employees and directors is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
Warrant Offerings
During the three months ended March 31, 2025, the Company did not issue any warrants.
Series A Warrants
On February 2, 2024, the Company
issued five year immediately vested warrants to purchase an aggregate of
In applying the Black-Scholes option pricing model to the Series A Warrants granted or issued, the Company used the following assumptions:
For the Three Months Ended March 31, | ||||
| 2024 | ||||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Expected dividends | % | |||
The weighted average estimated
fair value of the Series A Warrants granted during the three months ended March 31, 2024, was approximately $
Series A Warrants were issued during the three months ended March 31, 2025.
Series B Warrants
On February 2, 2024, the Company
issued two-and-a-half-year immediately vested
warrants to purchase an aggregate of
| 24 |
In applying the Black-Scholes option pricing model to the Series B Warrants granted or issued, the Company used the following assumptions:
For the Three Months Ended March 31, | ||||
| 2024 | ||||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Expected dividends | % | |||
The weighted average estimated
fair value of the Series B Warrants granted during the three months ended March 31, 2024, was approximately $
Series B Warrants were issued during the three months ended March 31, 2025.
A summary of the warrant activity during the three months ended March 31, 2025, is presented below:
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Warrants | Price | In Years | Value | |||||||||||||
| Outstanding, December 31, 2024 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Outstanding, March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2025 | $ | $ | ||||||||||||||
The following table presents information related to stock warrants at March 31, 2025:
| Warrants Outstanding | Warrants Exercisable | |||||||||||
| Weighted | ||||||||||||
| Outstanding | Average | Exercisable | ||||||||||
| Exercise | Number of | Remaining Life | Number of | |||||||||
| Price | Warrants | In Years | Warrants | |||||||||
| $ | ||||||||||||
| $ | ||||||||||||
The Company accounts for its stock-based compensation in accordance with the fair value recognition of ASC 718.
2024 Stock Incentive Plan
The Company did not grant options during the three months March 31, 2025 or 2024.
| 25 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Life In Years | Intrinsic Value | |||||||||||||
| Outstanding, December 31, 2024 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Outstanding, March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2025 | $ | $ | ||||||||||||||
| Options Outstanding | Options Exerciseable | |||||||||||
| Exercise Price | Outstanding Number of Options | Weighted Average Remaining Life In Years | Exerciseable Number of Options | |||||||||
| $ | ||||||||||||
Total compensation expense related to options was $ for the three months ended March 31, 2025. As of March 31, 2025, there was future compensation cost of $ with a weighted average recognition period of 0 years.
The aggregate intrinsic value totaled $ and was based on the Company’s closing stock price of $ as of March 31, 2025, which would have been received by the option holders had all option holders exercised their options as of that date.
Stock-Based Compensation Expense
For the Three Months Ended March 31, | Unrecognized at March 31, | Weighted Average Remaining Amortization Period | ||||||||||
| 2025 | 2025 | (Years) | ||||||||||
| General and administrative | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
NOTE 16 – LEASES
The Company is party to two leases: (i) office space in Centerville, Utah (the “Centerville Lease”) and (ii) a warehouse in North Salt Lake City, Utah (the “SLC Lease”). The Centerville lease is scheduled to expire in May 2028 and the SLC Lease is scheduled to expire in November 2025.
The Company has operating leases for its corporate headquarters and warehouse. The Company determines if an arrangement contains a lease at inception based on the ability to control a physically distinct asset. Operating lease right-of-use assets are recorded in the consolidated balance sheets on the initial measurement of the lease liability as adjusted to include prepaid rent and initial direct costs less any lease incentives received. Lease liabilities are measured at the commencement date based on the present value of the lease payments over the lease term. The Company separately accounts for lease and non-lease components within lease agreements. The Company uses its incremental borrowing rate to present value the lease liability as key inputs to determine the interest rate implicit in the lease are not shared by lessors.
Operating lease expense is recorded on a straight-line basis over the lease term. Right-of-use assets and lease liabilities for short-term leases are not recognized in the consolidated balance sheets. Payments for short-term leases are recognized in the consolidated statements of operations on a straight-line basis over the lease term.
| 26 |
When measuring lease liabilities
for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate
at lease inception point. The weighted average incremental borrowing rate applied was
The following table presents net lease cost and other supplemental lease information:
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Lease cost | ||||||||
| Operating lease cost (cost resulting from lease payments) | $ | $ | ||||||
| Net lease costs | $ | $ | ||||||
| Operating lease - operating cash flows (fixed payments) | $ | $ | ||||||
| Operating lease - operating cash flows (liability reduction) | $ | $ | ||||||
| Non-current leases - right-of-use assets | $ | $ | ||||||
| Current liabilities - operating lease liabilities | $ | $ | ||||||
| Non-current liabilities - operating lease liabilities | $ | $ | ||||||
Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the three months ended March 31, 2025, are as follows:
| Fiscal Year | Operating Leases | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | $ | |||
| Amount representing interest | ( | ) | ||
| Present value of net future minimum lease payments | $ | |||
NOTE 17 – SEGMENT INFORMATION
The Company currently operates
as
In addition to the significant expense categories included within net loss presented on the Company’s Consolidated Statements of Operations, see below for disaggregated amounts that comprise consulting, contract labor, personnel, business development, royalty, and marketing expenses:
| For The Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Consulting expenses | $ | $ | ||||||
| Contract labor | ||||||||
| Personnel expenses | ||||||||
| Business development expenses | ||||||||
| Royalty expenses | ||||||||
| Marketing expenses | ||||||||
| Other expenses* | ||||||||
| Total operating expenses | $ | $ | ||||||
| * |
| 27 |
NOTE 18 – COMMITMENTS AND CONTINGENCIES
Legal Claims
There are no material pending legal proceedings in which the Company or any of its subsidiaries is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of its voting securities, or security holder is a party adverse to the Company, or has a material interest adverse to the Company.
NOTE 19 – CONCENTRATION OF CREDIT RISK
Cash Deposits
Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by
the Federal Deposit Insurance Corporation (“FDIC”) up to $
NOTE 20 – SUBSEQUENT EVENTS
Dividend Notes Payable
On April 21, 2025, the Company
entered into agreements with the holders of approximately $
PIPE Convertible Notes
On April 21, 2025, the Company agreed to cancel and
rescind the conversion of $
On April 22, 2025, the Company entered into Exchange
Agreements (the “Exchange Agreements” and each, an “Exchange Agreement”), by and among the Company and each of
the Holders, pursuant to which each such Holder would exchange (i) the amounts remaining outstanding under the PIPE Convertible Notes
and certain other amounts outstanding with respect thereto in the aggregate amount (the “Note Exchange”), and (ii) the PIPE
Warrants. Pursuant to the Exchange Agreements, on the effective date of the Exchange Agreements, the PIPE Warrants were exchanged, in
reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities
Act”), into an aggregate of shares of the Company’s newly created Series A preferred stock (the “Series A Preferred
Stock” and such Series A Preferred Stock to be issued in the exchange of the PIPE Warrants, the “Initial New Exchange Preferred
Shares”, and such shares of Class A Common Stock (the “Common Stock”) issuable pursuant to the terms of the Certificate
of Designations, including, without limitation, upon conversion or otherwise, collectively, the “Initial New Exchange Conversion
Shares”), and (ii) a warrant to purchase up to
The Note Exchange will occur on the Closing Date (as defined in the Exchange Agreements), whereby the amounts owing under the PIPE Convertible Notes will be exchanged into shares of the Company’s Series A Preferred Stock. From the date of the Exchange Agreements until the date of the Note Exchange, the conversion price of the PIPE Convertible Notes was reduced to $ per share.
Additionally, the Exchange Agreements amended the Prior Purchase Agreement and contained certain covenants of the Company to, among other items, hold one or more stockholder meetings no later than 90 days following the execution of the Exchange Agreements to approve the shares of the Company’s Common Stock issuable underlying the Series A Preferred Stock upon conversion in compliance with the rules and regulations of the Nasdaq Stock Market.
Issuance of Common Stock
Subsequent to March 31, 2025, the Company issued an aggregate of shares of Class A common stock with fair values ranging from $ - $ per share to PIPE Convertible Note holders in connection with the conversion of outstanding PIPE Convertible Notes, accrued interest, and make-good provisions.
On May 5, 2025, the Company issued shares of Class A common stock with a fair value of $ per share to a PIPE Convertible Note holder in lieu of cash for accrued interest.
| 28 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Note Regarding Forward-Looking Statements
The following discussion highlights the current operating environment and summarizes the financial position of Trugolf Holdings, Inc. and its subsidiaries as of March 31, 2025, and should be read in conjunction with (i) the unaudited interim condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and (ii) the audited consolidated financial statements and accompanying notes thereto included in our 2024 Annual Report on Form 10-K for the year ended December 31, 2024.
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to refer to the business and operations of TruGolf.
This Form 10-Q contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2025, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:
| ● | the occurrence of any event, change, or other circumstances, including the outcome of any legal proceedings that may be instituted against us; | |
| ● | the ability to maintain the listing of our securities on Nasdaq, and the potential liquidity and trading of our securities; | |
| ● | the risk of disruption to our current plans and operations; | |
| ● | the ability to recognize the anticipated benefits of our business and the Business Combination, which may be affected by, among other things, competition and the ability to grow, manage growth profitably, and retain key employees; | |
| ● | costs related to our business; | |
| ● | changes in applicable laws or regulations; | |
| ● | our ability to meet future capital requirements to fund our operations, which may involve debt and/or equity financing, and to obtain such debt and/or equity financing on favorable terms, and our sources and uses of cash; | |
| ● | our ability to maintain existing license agreements; | |
| ● | our ability to achieve and maintain profitability in the future; | |
| ● | our financial performance; and | |
| ● | other factors disclosed under the section entitled “Risk Factors”. |
Company Overview
Corporate History
TruGolf Nevada, was formed as a Utah corporation on October 4, 1995, under the name TruGolf Incorporated, and was a subsidiary of Access Software. On June 9, 1999, TruGolf Nevada changed its name to TruGolf, Inc. Upon the acquisition of Access Software by Microsoft Corp. in August 1999, the core programming and graphics team of the LinksTM video game series were spun out to TruGolf Nevada.
Effective on April 26, 2016, TruGolf Nevada filed Articles of Merger with the State of Utah, Department of Commerce, and on April 28, 2016, TruGolf Nevada filed Articles of Merger with the Secretary of State of Nevada, pursuant to which TruGolf, Inc., a Utah corporation, merged with and into TruGolf Nevada, pursuant to a Plan of Merger. TruGolf Nevada was the surviving corporation and, in connection with the Plan of Merger, TruGolf Nevada affected a four-for-one forward stock split of its outstanding common stock.
TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.) (“TruGolf”, and together with its subsidiaries, the “Company”), was incorporated on July 8, 2020, as a Delaware corporation and formed for the purpose of effecting a business combination, with no material operation of its own.
| 29 |
On March 31, 2023, we entered into an Agreement and Plan Of Merger (the “Merger Agreement”) with Deep Medicine Acquisition Corp. (“DMAQ”), a Delaware Corporation, DMAQ Merger Sub Inc. (“Merger Sub”), a Nevada corporation and a wholly-owned subsidiary of DMAQ, Bright Vision Sponsor LLC, a Delaware limited liability company, in the capacity as DMAQ’s representative, Christopher Jones, an individual, in the capacity as TruGolf Nevada’s representative, and TruGolf Nevada (together, the “Merger Parties”). On July 21, 2023, the Merger Parties entered into an Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”), pursuant to which the Merger Agreement was amended and restated to provide, among other things, that (i) contingent earnout shares will be issued after the Closing, if and when earned, upon the Company meeting the milestones specified in the Restated Merger Agreement, rather than being issued at the closing of the merger and being placed into escrow subject to potential forfeiture; and (ii) the share price of the Company’s common stock used in the calculation of the number of shares to be issued to the Sellers as merger consideration shall be $10.00, as opposed to the price at which the Company redeems the shares of common stock held by its public stockholders in connection with the closing of this business combination.
On January 31, 2024, we consummated the business combination (the “Closing”) contemplated by the Restated Merger Agreement and Merger Agreement, dated as of July 21, 2023, by and among the Merger Parties. As a result of the Closing and the transactions contemplated by the Merger Agreement, (i) Merger Sub merged with and into TruGolf Nevada, with TruGolf Nevada surviving the Merger as a wholly-owned subsidiary of TruGolf, and (ii) TruGolf’s name was changed from Deep Medicine Acquisition Corp. to TruGolf Holdings, Inc. TruGolf’s Class A common stock commenced trading on the Nasdaq Global Market LLC under the ticker “TRUG” on February 1, 2024.
Business Overview
Since 1983, the Company has been passionate about driving the golf industry with innovative, indoor golf solutions. We build products that capture the spirit of golf. Our mission is to help grow the game by making it more available, more approachable and more affordable, through technology – because we believe golf is for everyone.
Our team has built award-winning video games (including Links, a popular sports game for PC), innovative hardware solutions, and an all-new e-sports platform to connect golfers around the world with TruGolf E6 Connect Software, our premier software engine. Since TruGolf’s beginning, we have continued to define and redefine what is possible with golf technology.
In addition to offering a variety of custom, professional, and portable golf simulators, TruGolf’s latest launch monitor, Apogee, was created to improve accuracy and to make using the launch monitor easier. Features of Apogee include: a unique Apogee Voice Assistant, a voice command system that allows users to navigate their TruGolf E6 Connect Software gameplay within rounds and practice sessions; Laser Launchpad, a laser indicator that shows users where to place the ball and when the system is ready to record a swing and Point-of-Impact (POI) slow-motion replay video.
Our suite of hardware offerings in the golf technology space is expansive, offering something for virtually everyone from gamers to beginners to professionals, and all consumers in between. Hardware offerings are sold through a global network of authorized resellers, retail outlets and direct-to-consumer through a dedicated TruGolf sales team. Our suite of hardware offerings ranges from entry level pricing at just under $400, to well over $100,000 for custom projects, creating a wide range of pricing options for nearly all consumers, and providing TruGolf with a competitive advantage in creating a wide consumer base as compared to its competitors (who often only focus in a narrow consumer price range).
TruGolf creates top golf technology software in the marketplace through its TruGolf E6 Connect and E6 Apex Software. Importantly, TruGolf’s software is designed not only for use with our suite of hardware offerings in the golf technology space, but also integrates with more than twenty-four third party golf technology hardware manufacturers, translating to a market integration coverage equal to roughly 90% of golf technology hardware in the global market space, which allows peer-to-peer play across these golf technology hardware manufacturers, allowing for a unification of the golf technology space. TruGolf’s software records, on average, over 725,000 indoor golf shots per day. TruGolf’s E6 Connect Software is both PC and iOS compatible and can be used both indoors and outdoors.
| 30 |
TruGolf has leveraged its unique position as one of the industry leaders in both hardware and software golf technology solutions to organize and found the Virtual Golf Association (VGA). The VGA is a gamified virtual economy that takes place inside the TruGolf E6 Connect Software. Users have a chance to earn points through play, practice, and more – providing a worldwide leaderboard of connected indoor golfers. Each shot users take rewards them with points. These points can be used to purchase in-game enhancements, or to enter virtual golf tournaments with real world prizes. The VGA is broken into three models:
| ● | Game Analysis – rewards TruGolf software users who measure their game. Users can set specific goals (e.g., shots hit per month, speed and distance gains, dispersion reduction) and earn points for hitting milestones. At the end of each month, users can see how they compared against all other users utilizing the Game Analysis features. | |
| ● | Connected Golf – rewards users for joining with their friends and playing golf online. Earn points for playing a new course or linking up to play nine holes with another player utilizing TruGolf software. | |
| ● | Virtual Golf Association Events – events are worldwide leaderboard format, flighted by handicap, where users play and compete to shoot the lowest score. These contests include stroke play, closest to the pin, match play, stableford, and more. Users earn points based on how they finish in their division. |
In totality, TruGolf’s business model is designed to be positioned as the hub of golf technology, with groundbreaking hardware technologies that we believe can become the industry standard and unify the industry as a whole by serving as the leader of golf technology software solutions through its TruGolf’s software.
Revenue
The Company derives our revenue through the sales of our golf simulators, perpetual software licenses, content software subscriptions, and franchising.
Results of Operations
Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024
Our financial results for the three months ended March 31, 2025 are summarized as follows in comparison to the three months ended March 31, 2024.
| 2025 | 2024 | Variance | ||||||||||
| Revenue, net | $ | 5,389,230 | $ | 5,012,022 | $ | 377,208 | ||||||
| Cost of revenue | 1,726,199 | 1,959,023 | (232,824 | ) | ||||||||
| Total gross profit | 3,663,031 | 3,052,999 | 610,032 | |||||||||
| | ||||||||||||
| Operating Expenses: | ||||||||||||
| Royalties | 225,320 | 329,888 | (104,568 | ) | ||||||||
| Salaries, wages and benefits | 1,946,816 | 1,841,595 | 105,221 | |||||||||
| Selling, general and administrative | 2,725,119 | 1,825,201 | 899,918 | |||||||||
| Operating loss | (1,234,224 | ) | (943,685 | ) | (290,539 | ) | ||||||
| Other income (expenses) | (1,436,098 | ) | (358,179 | ) | (1,077,919 | ) | ||||||
| Loss before income taxes | $ | (2,670,322 | ) | $ | (1,301,864 | ) | $ | (1,368,458 | ) | |||
Revenues
Revenues increased by $377,208, or 8%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase is primarily attributable to the increase of our product acceptance and greater penetration in the industry market. In addition, we began the roll out of our franchise model during the three months ended March 31, 2025.
Cost of Revenues
Cost of revenues decreased by $232,824, or 12%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease is primarily attributable to a decrease in inventory adjustments of $100,237 and a decrease in shipping costs of approximately $160,000.
Operating Expenses
Total operating expenses increased by $900,571, or 23%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Selling, general and administrative expenses increased by $899,918, or 49%, due primarily to an increase in contracted labor of approximately $364,000, an increase in marketing of approximately $160,000, and an increase in professional fees of approximately $180,000.
| 31 |
Other Income (Expenses)
Other income (expenses) increased by $1,077,919, or 301%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase is primarily attributable to interest expense, amortization expense of the PIPE Convertible Notes debt discount, the write-off of remaining debt discounts upon the conversion of related to the PIPE Convertible Notes, and the make-good interest expense upon the conversion of related PIPE Convertible Notes.
Liquidity and Capital Resources
As of March 31, 2025, we had cash on hand of $12,615,820 and a working capital surplus of $29,551, as compared to cash on hand of $10,882,077 and a working capital deficiency of $982,237 as of December 31, 2024. The increase in working capital surplus is primarily a result of the $2,250,000 gross proceeds received from the PIPE Convertible Notes issued during the three months ended March 31, 2025. The increase was partially offset by an increase in deferred revenue of approximately $1,000,000.
The Company’s operating activities consume the majority of its cash resources. The Company anticipates that it will continue to incur operating losses as it executed its development plans for 2025, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company has previously funded, and plans to continue funding, these losses with the sale of equity and convertible notes. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Working Capital
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Current assets | $ | 18,238,372 | $ | 14,792,931 | ||||
| Current liabilities | 18,208,821 | 15,775,168 | ||||||
| Working capital deficiency | $ | 29,551 | $ | (982,237 | ) | |||
The increase in current assets is primarily due to the increase in cash on hand of $1,733,743 and an increase in inventory of $1,503,632. The increase in current liabilities is primarily due to an increase in deferred revenue of $1,028,780 and accrued and other liabilities of $1,823,760.
Cash Flows
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows: | ||||||||
| Net cash provided by (used in) operating activities | $ | (449,119 | ) | $ | 2,668,617 | |||
| Net cash used in investing activities | $ | (334,690 | ) | $ | (332,342 | ) | ||
| Net cash provided by financing activities | $ | 2,517,552 | $ | 92,128 | ||||
Operating Activities
Net cash used in operating activities was $449,119 for the three months ended March 31, 2025, which was primarily due to the net loss of $2,670,322 and an increase in inventory of $1,503,632, which was partially offset by non-cash expenses of $1,526,448, an increase in deferred revenue of $1,028,780, and an increase in accrued and other current liabilities of $1,823,760.
Net cash provided by operating activities was $2,668,617 for the three months ended March 31, 2024, which was primarily due to the liquidation of the marketable securities account of $2,478,953 and an increase in accounts payable of $1,146,347. The change in the remaining operating assets and liabilities was $224,013 and non-cash expenses of $121,168.
| 32 |
Investing Activities
Net cash used in investing activities was $334,690 for the three months ended March 31, 2025, which was the result of an increase in capitalized software of $270,531 and the purchase of equipment of $64,159.
Net cash used in investing activities was $332,342 for the three months ended March 31, 2024, which was the result of the purchasing of equipment.
Financing Activities
Net cash provided by financing activities was $2,517,552 for the three months ended March 31, 2025, which was primarily due to $2,520,000 of net proceeds from PIPE Convertible Notes.
Net cash provided by financing activities was $92,128 for the three months ended March 31, 2024, the Company received net proceeds from the Merger of $2,237,213, paid off the variable rate line of credit of $1,980,937 and made debt payments of $270,795.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk from the information provided in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of TruGolf Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports 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 Chief Executive Officer, who serves as our principal executive officer, and Chief Financial Officer, who serves as our principal accounting officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Our management, with the participation of our Chief Executive Officer and acting Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our management concluded that, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of its principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
| 33 |
Material Weaknesses in Internal Control over Financial Reporting
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that our internal control over financial reporting as of March 31, 2025 was not effective.
A material weakness, as defined in the standards established by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which are indicative of many small companies with small number of staff:
| ● | lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner; | |
| ● | inadequate segregation of duties due to limited personnel consistent with control objectives; | |
| ● | lack of documentation on policies and procedures that are critical to the accomplishment of financial reporting objectives; and | |
| ● | lack of a full time Chief Financial Officer and personnel with experience and expertise in public company accounting and internal control over financial reporting. |
Management’s Plan to Remediate the Material Weakness
Our management plans to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:
| ● | identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; | |
| ● | develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures; and | |
| ● | continue the search for a qualified individual to fill our Chief Financial Officer position. |
Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in Internal Control Over Financial Reporting
Other than described above there have been no changes in our internal control over financial reporting that occurred during our first quarter of 2025 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
| 34 |
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in “Item 1A. Risk Factors” of our 2024 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Except as previously reported by us on our Current Report on Form 8-K, during the period covered by this Quarterly Report on Form 10-Q, the Company did not sell any unregistered securities.
During the three months ended March 31, 2025, the Company issued an aggregate of 3,064,420 shares of Class A common stock with a fair value ranging from $0.34 - $2.50 per share pursuant to the conversion of $1,655,000 in principal and $1,087,513 in make whole interest related to the conversion of PIPE Convertible Notes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
During the quarter ended March 31, 2025, no director or officer
On April 21, 2025, the Company entered into agreements with the holders of approximately $3.9 million in outstanding notes payable (including accrued interest) originally issued in November 2022, including officers and directors of the Company, pursuant to which such note holders converted all outstanding amounts payable to such note holders into (i) 8,283,139 shares of the Company’s Class B common stock, with respect to $2.6 million in principal and interest of such notes payable, and into (ii) 4,233,077 shares of Common Stock, with respect to $1.3 million in principal and interest of such notes payable, in each case at a conversion price of $0.31204 per share, which was above the closing price of the Company’s Common Stock prior to conversion.
On April 21, 2025, the Company agreed to cancel and rescind the conversion of $300,000 of PIPE Convertible Notes, plus interest, as a result of such noteholder not being able to take possession of such conversion shares prior to the expiration of a DWAC deposit by our transfer agent with the Depository Trust Company.
On April 22, 2025, the Company entered into Exchange Agreements (the “Exchange Agreements” and each, an “Exchange Agreement”), by and among the Company and each of the Holders, pursuant to which each such Holder would exchange (i) the amounts remaining outstanding under the PIPE Convertible Notes and certain other amounts outstanding with respect thereto in the aggregate amount (the “Note Exchange”), and (ii) the PIPE Warrants. Pursuant to the Exchange Agreements, on the effective date of the Exchange Agreements, the PIPE Warrants were exchanged, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), into an aggregate of 1,885 shares of the Company’s newly created Series A preferred stock (the “Series A Preferred Stock” and such Series A Preferred Stock to be issued in the exchange of the PIPE Warrants, the “Initial New Exchange Preferred Shares”, and such shares of Class A Common Stock (the “Common Stock”) issuable pursuant to the terms of the Certificate of Designations, including, without limitation, upon conversion or otherwise, collectively, the “Initial New Exchange Conversion Shares”), and (ii) a warrant to purchase up to 37,033 shares of Series A Preferred Stock.
The Note Exchange will occur on the Closing Date (as defined in the Exchange Agreements), whereby the amounts owing under the PIPE Convertible Notes will be exchanged into shares of the Company’s Series A Preferred Stock. From the date of the Exchange Agreements until the date of the Note Exchange, the conversion price of the PIPE Convertible Notes was reduced to $1.00 per share.
Additionally, the Exchange Agreements amended the Prior Purchase Agreement and contained certain covenants of the Company to, among other items, hold one or more stockholder meetings no later than 90 days following the execution of the Exchange Agreements to approve the shares of the Company’s Common Stock issuable underlying the Series A Preferred Stock upon conversion in compliance with the rules and regulations of the Nasdaq Stock Market.
| 35 |
ITEM 6. EXHIBITS
| Incorporated by Reference | ||||||||
|
Exhibit Number |
Exhibit Description | Form | Exhibit | Filing Date | ||||
| 10.1 | Form of January Waiver, dated as of January 16, 2025 | 8-K | 10.1 | 1/16/25 | ||||
| 10.2 | Form of Exchange Agreement | 8-K | 10.1 | 4/23/25 | ||||
| 10.3 | Form of Certificate of Designations of Rights and Preferences of Series A Convertible Preferred Stock | 8-K | 10.2 | 4/23/25 | ||||
| 10.4 | Form of Warrant to Purchase Series A Convertible Preferred Stock | 8-K | 10.3 | 4/23/25 | ||||
| 10.5 | Form of Registration Rights Agreement | 8-K | 10.4 | 4/23/25 | ||||
| 31.1* | Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer and Principal Financial Officer | |||||||
| 32.1** | Section 1350 Certification of Principal Executive Officer and Principal Financial Officer | |||||||
| 101.INS | Inline XBRL Instance Document* | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema* | |||||||
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase* | |||||||
| 101.LAB | Inline XBRL Taxonomy Label Linkbase* | |||||||
| 101.PRE | Inline XBRL Taxonomy Linkbase Document* | |||||||
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document* | |||||||
* Filed herewith.
** Furnished herewith
| 36 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRUGOLF HOLDINGS, INC.
| By: | /s/ Christopher (Chris) Jones | |
| Name: | Christopher (Chris) Jones | |
| Title: | Chief Executive Officer, Director, Interim Chief Financial Officer | |
| (Principal Executive Officer, Interim Principal Financial Officer and Interim Principal Accounting Officer) | ||
| Date: | May 15, 2025 |
| 37 |