TRUG 10-K & 10-Q changes, risk factors and insider trading
TruGolf Holdings, Inc. · Nasdaq · Sporting & Athletic Goods, Nec · CIK 1857086 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “The conversion of our outstanding Series A Preferred Stock, or any additional shares of Series A Preferred Stock we issue in the future upon the exercise of the Series A Preferred Warrants, into Class A common stock will dilute the ownership interest of our stockholders.”
New heading “We have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Stock Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our Class A common stock may be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.”
Removed heading “Our international operations involve inherent risks which could result in harm to our business.”
Removed heading “We face risks associated with operating in international markets.”
Removed heading “Global economic, political and industry conditions constantly change and unfavorable conditions may have a material adverse effect on our business and results of operations.”
Removed heading “We could be subject to changes in tax rates, adoption of new tax laws, additional tax liabilities or increased volatility in our effective tax rate.”
Removed heading “Future sales of shares of our common stock by existing stockholders could depress the market price of our commons stock.”
Largest changes
“We have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Stock Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our Class A common stock may be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.”see in full comparison
“We are a global company with worldwide operations. Volatile economic, political and market conditions, such as political or economic instability, civil unrest, trade sanctions, acts of terrorism in the regions or hostilities, including the recent conflict between Russia and Ukraine, may have a negative impact on our operating results and our ability to achieve our business objectives. We may not have insight into economic and political trends that could emerge and negatively affect our business. In addition, significant or volatile changes in exchange rates between the U.S. …”see in full comparison
“As we expand our business internationally a larger volume of our products will begin to be sold outside of the U.S. Accordingly, we are subject to the risks generally associated with global trade and doing business abroad, which include foreign laws and regulations, varying consumer preferences across geographic regions, political unrest, disruptions or delays in cross-border shipments and changes in economic conditions and countries in which our products are sold. …”see in full comparison
“Delisting from Nasdaq would adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. …”see in full comparison
“There continues to be a significant and growing volatility and uncertainty in the global economy, which has gone on during and after the Coronavirus pandemic affecting all business sectors and industries. In addition, the on-going uncertainty in Europe and any resulting disruption could adversely impact our net sales in EMEA and globally unless and until economic conditions in that region improve and the prospects of national debt defaults in Europe decline. …”see in full comparison
“Pursuant to Nasdaq Listing Rule, the Company submitted a plan of compliance with Nasdaq, which was accepted, and which provided until March 31, 2025, to evidence compliance with the Equity Rule.. 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 Equity Rule. Accordingly, the Staff indicated that unless the Company requested a hearing panel (a “Panel”) appeal of the delist determination, its securities would be delisted. …”see in full comparison
Full comparison: every changed paragraph (48)
We
expect to
derive substantially all of our sales from sales of branded products and services we own. The reputation and integrity of our
brands are essential to the success of our business. We believe that our consumers value the status and reputation of brands we promote,
and the superior quality, performance, functionality and durability that our brands represent. Building, maintaining and enhancing the
status and reputation of our brands’ image is important to expanding our consumer base. Our continued success and growth depend
on our ability to protect and promote our brands, which, in turn, depends on factors such as quality, performance, functionality and
durability of our products and services, our communication activities, including advertising and public relations, and our management
of the consumer experience, including direct interfaces through customer service and warranty repairs. We may decide to make substantial
investments in these areas in order to maintain and enhance our brand, and such investments may not be successful.
Our
growth strategy is based upon increasingexpanding the numbersales of our clientsgolf simulator hardware and software products, developing our consolidatedfranchise revenueoperations, byincreasing
recurring makingsoftware successfulsubscription acquisitionsrevenue, and
integrating businessespursuing thatstrategic providegrowth comparable or complementary cyber security services.opportunities. As of December 31, 2024,2025, our business was not
profitable. Without adequate funding, a significant increase in revenue, and satisfaction of our outstanding payables, we may not be
able to achieve profitability in the existing lines of business and attract further capital. As of April 14,15, 2025,2026, we had available cash
resources of approximately $9,000,000.$7,800,000.
We
expect to continue to finance our operations with available net operating cash flows and will need to raise additional capital in the
future by issuing equity or other forms of securities, which could significantly reduce the percentage ownership of our existing stockholders
and substantially dilute the equity of purchasersexisting of our common stock in this offering.shareholders. Furthermore, any newly issued securities could
have rights, preferences, and privileges senior to those of our existing common stock and may have a dilutive impact on the ownership
interest of existing stockholders.
Our
international operations involve inherent risks which could result in harm to our business.
As
we expand our business internationally a larger volume of our products will begin to be sold outside of the U.S. Accordingly, we are
subject to the risks generally associated with global trade and doing business abroad, which include foreign laws and regulations, varying
consumer preferences across geographic regions, political unrest, disruptions or delays in cross-border shipments and changes in economic
conditions and countries in which our products are sold. This includes, for example, the uncertainty surrounding the effect of Brexit,
including changes to the legal and regulatory framework that apply to the United Kingdom and its relationship with the European Union,
as well as new and proposed changes affecting tax laws and trade policy in the U.S. and elsewhere as further described in other risks
in this section. The U.S. presidential administration has indicated a focus on policy reforms that discourage U.S. corporations from
outsourcing manufacturing and production activities to foreign jurisdictions, including tariffs or penalties on goods manufactured outside
the U.S., which may require us to change the way we conduct business and adversely affect our results of operations.
We
rely heavily on supply chain reliability and predictability in producing, transporting and delivering our products. The COVID-19 pandemic,
Ukraine war, the Israel-Hamas war,Pandemic,
wars, inflationary trends, shifts in consumer purchasing patterns, availability of transport, labor shortages
in the shipping, trucking, and warehousing industries, port strikes, infrastructure congestion, equipment shortages and other factors
have all contributed to delivery delays, greater costs and uncertainty in arranging and scheduling transport of our products. If we are
unable to reliably and consistently arrange shipment and storage of our products, we may be unable to ship, deliver and store our products
in which case, we will have to reverse sales and issue refunds to purchasers of our products. Changes in U.S. and international trade
policies, including to import and export tariffs and trade policy agreements, to address supply chain issues or otherwise could also
have a significant impact on our activities both in the United States and internationally. Supply chain disruptions and adverse consequences
from aggressive trade policies could have a material adverse impact on our profitability and financial performance.
We
face risks associated with operating in international markets.
We
operate in a global marketplace and international sales growth is a key element of our growth strategy. We are subject to risks associated
with our international operations, including but not limited to:
Any
of these risks could have an adverse impact on our results of operations, financial position or growth strategy. Furthermore, some of
our international operations are conducted in parts of the world that experience corruption to some degree. Our employees and resellers
could take actions that violate applicable anti-corruption laws and regulations. Violations of these laws, or allegations of such violations,
could have an adverse impact on our reputation, our results of operations or our financial position.
Foreign
exchange movements may also negatively affect the relative purchasing power of consumers and their willingness to purchase discretionary
premium goods, such as our products, which would adversely affect our net sales. We do not currently use the derivative markets to hedge
foreign currency fluctuations.
We
also use Information Technology Systems to process financial information and results of operations for internal reporting purposes to
comply with regulatory financial reporting, legal and tax requirement. If the Information Technology Systems suffer seversevere damage, disruption
or shutdown and our business continuity plans, or those of our vendors, do not effectively resolve the issues in a timely manner, we
could experience delays in reporting our financial results, which could result in lost revenues and profits, as well as reputational
damage. Furthermore, we depend on Information Technology Systems and personal data collection for digital marketing, digital commerce,
consumer engagement and the marketing and use of our digital products and services. We also rely on our ability to engage in electronic
communications throughout the world between and among our employees as well as with other third-parties, including customers, suppliers,
vendors and consumers. Any interruption in the Information Technology Systems may impede our ability to engage in the digital space and
result in lost revenues, damage to our reputation and loss of consumers.
Global
economic, political and industry conditions constantly change and unfavorable conditions may have a material adverse effect on our business
and results of operations.
We
are a global company with worldwide operations. Volatile economic, political and market conditions, such as political or economic instability,
civil unrest, trade sanctions, acts of terrorism in the regions or hostilities, including the recent conflict between Russia and Ukraine,
may have a negative impact on our operating results and our ability to achieve our business objectives. We may not have insight into
economic and political trends that could emerge and negatively affect our business. In addition, significant or volatile changes in exchange
rates between the U.S. dollar and other currencies may have a material adverse impact upon our liquidity, revenues, costs and operating
results.
We
establish relationships with professional athletes, as well as other public figures such as teaching pros and influencers, to develop,
evaluate and promote our products, as well as establish product authenticity with consumers. However, as competition in our industry
has increased, the costs associated with establishing and retaining such sponsorships and other relationships have increased. If we are
unable to maintain our current associations with professional athletes, or other public figures, or to do so at a reasonable cost, we
could lose the high visibility or on-field authenticity associated with our products, and we may be required to modify and substantially
increase our marketing investments. Any substantial deterioration in these relationships, or substantial deterioration of our relationship
with their talent managers or other key personnel, could adversely affect our business. As a result, our brands, net revenues, expenses
and profitability could be harmed. If certain endorsers were to stop using our products contrary to their endorsement agreements, our
business could be adversely affected.
Actions
taken by athletes or other endorsers,endorsers associated with our products that harm the reputations of those athletes or endorsers,endorsers could also
seriously harm our brand image with consumers and, as a result, could have an adverse effect on our sales and financial condition.
Actions
taken by athletes or other endorsers, associated with our products that harm the reputations of those athletes or endorsers,endorsers could also
seriously harm our brand image with consumers and, as a result, could have an adverse effect on our sales and financial condition. Poor
performance by our endorsers, a failure to continue to correctly identify future athletes, public figures or sports organizations, to
use and endorse our products or a failure to enter into cost-effective endorsement arrangements with prominent athletes, public figures,
figures and sports organizations could adversely affect our brand, sales and profitability. weWe are also subject to laws, regulations and industry
standards relating to endorsements and influencer marketing. Many of these laws, regulations and industry standards are changing and
may be subject to differing interpretations, are costly to comply with or inconsistent among jurisdictions.
Our
business may be adversely affected by the Ukraine-Russia war and the Israel-Hamas war, as well as macro-economic conditions such as inflation,
employment levels, wage and salary levels, trends in consumer confidence and spending, reduction in consumer net worth, interest rates,
the availability of consumer credit and taxation and tariff policies which may influence on public spending confidence. Recent dramatic
downturns in the strength of the global stock markets, currencies and key economies have highlighted many, if not all, of these risks.
There
continues to be a significant and growing volatility and uncertainty in the global economy, which has gone on during and after the Coronavirus
pandemic affecting all business sectors and industries. In addition, the on-going uncertainty in Europe and any resulting disruption
could adversely impact our net sales in EMEA and globally unless and until economic conditions in that region improve and the prospects
of national debt defaults in Europe decline. Further or future downturns may adversely affect traffic on our on-line sales portals and
could materially impact and adversely affect our results of operations, financial position and growth strategy.
Our
management is responsible for establishing and maintaining adequate internal control over our financial reporting. As defined in Exchange
Act Rule 13a-15(f), internal controls over financial reporting is a process designed by, or under the supervision of, the principal executive
and principal financial officer and effected by the board of directors of the Company (the “Board of Directors”),Company, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that:
However,
ourOur auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to
Section 404 until we are no longer a “smaller reporting company”.
As
a public company, we are required to comply with numerous financial reporting and legal requirements, including those pertaining to audits
and internal control. The costs of maintaining public company requirements could be significant and may preclude us from seeking financing
or equity investment on terms acceptable to us and our shareholders. We estimate these costs to be in excess of $250,000 per year and
may be higher if our business volume or business activity increases significantly. Our current estimate of costs does not include the
necessary expenses associated with compliance, documentation and specific reporting requirements of Section 404 as we will not be subject
to the full reporting requirements of Section 404 until we no longer qualify as a “smaller reporting company”.
If
we do not effectively assist our users in deploying our products and services, succeed in helping our users quickly resolve post-deployment
issues and provide effective ongoing support, or itif potential customers perceive that we may not be able to achieve the foregoing, our
ability to sell our products and services would be adversely affected, and our reputation with potential users could be harmed. In addition,
if we expand our operations internationally, our technical support team will face additional challenges, including those associated with
delivering support, training and documentation in languages other than the English language. As a result, our failure to deliver and
maintain high-quality technical support services to our users could result in customers choosing to use our competitors’ products
or services in the future.
Customer
may experience difficulty in integrating E6 Connect or E6 ApexGOLF with third-party applications, which would inhibit sales.
E6
Connect and E6 ApexGOLF may serve a customer base with a wide variety of constantly changing hardware, operating system software, packaged
software applications and networking platforms. If E6 Connect or E6 ApexGOLF fails to gain broad market acceptance due to its inability to
support a variety of these platforms, our operating results may suffer. Our business depends, in part, on the following factors:
Our
trademarks, copyrights, patents, designs and other intellectual property rights are important to our success and our competitive position.
We devote significant resources to the registration and protection of our trademarks and patents. In spite of our efforts, counterfeiting
and design copies may still occur. If we are unsuccessful in challenging the usurpation of these rights by third-parties, this could
adversely affect our future sales, financial condition and results of operations. Our efforts to enforce our intellectual property rights
can potentially be met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights.
Unplanned increases in legal fees and other costs associated with protecting outour intellectual property rights could result in higher
operating expenses. Additionally, legal regimes outside the U.S., particularly those in Asia, including China, may not always protect
intellectual property rights to the same degree adas U.S. laws, or the time required to enforce our intellectual property rights under
these legal regimes may be lengthy and delay our recovery.
We
could be subject to changes in tax rates, adoption of new tax laws, additional tax liabilities or increased volatility in our effective
tax rate.
We
are subject to the tax laws in the U.S. and numerous foreign jurisdictions. Current economic and political conditions make tax laws and
regulations, or their interpretation and application, in any jurisdiction subject to significant change. On December 22, 2017, the U.S.
enacted the Tax Cuts and Jobs Act (the “Tax Act”), which includes a number of significant changes to previous U.S. tax laws
that impact us, including provisions for a one-time transition tax on deemed repatriation of undistributed foreign earnings, and a reduction
in the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, among other changes. The Tax Act also transitions
U.S. international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on
non-U.S. earnings, which has the effect of subjecting certain earnings of foreign subsidiaries to U.S. taxation.
Portions
of our operations may be subject to a reduced tax rate or are free of tax under various tax holidays and rulings. We also utilize rulings
and other agreements to obtain certainty in treatment of certain tax matters. These holidays and rulings expire in whole or in part from
time to time and may be extended when certain conditions are met or terminated if certain conditions are not met. The impact of any changes
in conditions would be the loss of certainty in treatment this potentially impacting our effective income tax rate.
We
may also be subject to the examination of our tax returns by the U.S. Internal Revenue Service (“IRS”) and other tax authorities.
We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision
for income taxes. Although we believe our tax provisions are adequate, the final determination of tax audits and any related disputes
could be materially different from our historical income tax provisions and accruals. The results of audits or related disputes could
have an adverse effect on our financial statements for the period or periods for which the applicable final determinations are made.
The
Federal Trade Commission (“FTC”) regulates the use of endorsements and testimonials in advertising as well as relationships
between advertisers and social media influencers pursuant to principles described in the FTC’s Guides Concerning the Use of Endorsements
and Testimonials in Advertising, or the Endorsement Guides. The Endorsement Guides providerequire thatendorsements anto endorsement must reflectexpress the honest
endorser’s genuine opinion of the endorser and cannotprohibit be used to make a claim about a productclaims that the product’s marketer couldn’tcould
not itself legally
make.legally. They also say that if there is a connection between an endorser and the marketer that consumers would not expect and it would affect
how consumers evaluate the endorsement, that connection should be disclosed. Another principle in the Endorsement Guides applies to ads
that feature endorsements from people who achieved exceptional, or even above average, results from using a product. If the advertiser
doesn’t have proof that the endorser’s experience represents what people will generally achieve using the product as described
in the ad, then an ad featuring that endorser must make clear to the audience what results they can generally expect to achieve and the
advertiser must have a reasonable basis for its representations regarding those generally expected results. Although the Endorsement
Guides are advisory in nature and do not operate directly with the force of law, they provide guidance about what the FTC staff generally
believes the Federal Trade Commission Act, or FTC Act, requires in the context using of endorsements and testimonials in advertising
and any practices inconsistent with the Endorsement Guides can result in violations of the FTC Act’s proscription against unfair
and deceptive practices.
We
are currently a “smaller reporting company”. For as long as we continue to be a smaller reporting company, we may choose
to take advantage of certain exemptions from reporting requirements applicable to other publicly reporting companies that are not smaller
reporting companies. These include not being required to comply with the auditor attestation of our internal controls over financial
reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and not being required to provide certain
disclosures regarding executive compensation required of larger publicly reporting companies. We cannot predict if investors will find
our common shares less attractive if we choose to rely on these exemptions. If some investors find our common shares less attractive
as a result of any choices to reduce future disclosure, there may be a less active trading market for our shares and our share price
may be more volatile. Further, as a result of these scaled regulatory requirement,requirements, our disclosure may be more limited than that of other
publicly reporting companies and you may not have the same protections afforded to shareholders of such companies.
The conversion of our outstanding Series A Preferred Stock, or any additional shares of Series A Preferred Stock we issue in the future upon the exercise of the Series A Preferred Warrants, into Class A common stock will dilute the ownership interest of our stockholders.
Our Series A Preferred Stock provide that if, while the Series A Preferred Stock are outstanding, we sell any Class A common stock and/or Class A common stock equivalents other than in connection with certain exempt issuances, at a purchase price per share less than the conversion price of the Series A Preferred Stock in effect immediately prior to such sale, then immediately after such sale the exercise price of the Series A Preferred Stock then in effect will be reduced to an amount equal to the new issuance price, and, the number of shares issuable upon conversion of the Series A Preferred Stock will be proportionately adjusted such that the aggregate price will remain unchanged, subject to the floor price provided for in the Series A Preferred Stock. In addition, if on any six month anniversary after the date the Series A Preferred Stock are issued (each, a “Reset Date”), the conversion price then in effect is greater than the closing price of the Class A common stock as of such applicable Reset Date (each, a “Reset Price”), immediately after the close of trading on such applicable Reset Date the conversion price shall automatically lower to the Reset Price. The next Reset Date will be on April 22, 2026. Finally, if at any time on or after the date of issuance there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Class A common stock, the conversion price shall be reduced to 120% of the quotient determined by dividing (x) the sum of the volume weighted average price of the Class A common stock for each of the five trading days with the lowest volume weighted average price of the Class A common stock during the fifteen consecutive trading day period ending and including the trading day immediately preceding the sixteenth trading day after such event date, divided by (y) five. If the conversion price of the Series A Preferred Stock decreases, the number of shares underlying the Series A Preferred Stock will increase, which would materially dilute the ownership of our stockholders.
Future
sales of shares of our common stock by existing stockholders could depress the market price of our commons stock.
We
had an aggregate of 29,881,672 issued and outstanding shares of Class A common stock as of April 14, 2025. Our current directors and
executive officers beneficially own approximately 16.8%, or 5,357,306 shares of our outstanding Class A common stock. The remainder of the
outstanding shares may be sold, subject to certain volume limitations, pursuant to Rule 144 or other available exemptions. Also, in
the future, we may issue additional securities in connection with financings and acquisitions. The amount of our common stock issued
in connection with an investment or acquisition could constitute a material portion of our then outstanding stock. Due to these
factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or
the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of
our common stock .
Certain
of the Company’s large shareholders, including our officers and directors, represented approximately 66.3%49.5% of the Company’s
voting rights as of AprilDecember 14,31, 2025. Therefore, these shareholders would be able to exert significant influence over certain matters,
including including
matters that must be resolved by the general meeting of shareholders, such as the election of members to the board of directors
or the
declaration of dividends or other distributions. To the extent that the interests of these shareholders may differ from the interests
of the Company’s other shareholders, the Company’s other shareholders may be disadvantaged by any actions that these shareholders
may seek to pursue .pursue.
We have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Stock Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our Class A common stock may be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.
On August 19, 2024, we received a delist notice from the Staff of Nasdaq notifying us that the listing of our Class A common stock was not in compliance with the minimum market value of publicly held securities requirement and the minimum shareholders’ equity requirement set forth in Nasdaq Listing Rules. On November 5, 2024, we received a delist notice from the Staff of Nasdaq notifying us that the listing of our Class A common stock was not in compliance with the minimum bid price requirement of $1.00 per share set forth in Nasdaq Listing Rules.
We requested a hearing before a Nasdaq hearing panel (the “Panel”) to present a plan to regain compliance with all the continued listing requirements of Nasdaq and such hearing was held May 15, 2025. On May 30, 2025, the Panel provided us an exception with various milestones to regain compliance, including with Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) until July 8, 2025, and the minimum shareholders’ equity requirement until July 30, 2025. In addition, the Panel directed that the listing of our Class A common stock be transferred to the Nasdaq Capital Market, effective at the open of business on June 3, 2025.
On July 17, 2025, the Staff confirmed that we had regained compliance with the Bid Price Rule as required by the Panel’s decision. On August 1, 2025, we received a letter from Nasdaq notifying us that we had demonstrated compliance with Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”), as required by the Panel’s decision, and, following our phase down to the Nasdaq Capital Market on June 3, 2025, we demonstrated compliance with the minimum market value of publicly held securities required by Nasdaq Listing Rule 5550(a)(5).
Pursuant to the letter, in application of Listing Rule 5815(d)(4)(B), we will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter. If, within that one-year monitoring period, the Staff finds us again out of compliance with the Equity Rule, notwithstanding Rule 5810(c)(2), we will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff will not be permitted to grant additional time for us to regain compliance with respect to that deficiency, nor will we be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff will issue a delist determination letter and we will have an opportunity to request a new hearing.
Delisting from Nasdaq would adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investors and general investors that will consider investing in our common stock, a reduction in the number of market makers in our common stock, a reduction in the availability of information concerning the trading prices and volume of our common stock, a reduction in the number of broker-dealers willing to execute trades in shares of our common stock or interest in business development opportunities. Further, we would likely become a “penny stock”, which would make trading of our common stock more difficult.
We
have received notices of delinquency from the Nasdaq for violations of listing rules and there is no assurance that we will regain compliance
and maintain our listing on the Nasdaq.
On
August 19, 2024, the Company received a written notification from the Listing Qualifications Department (the “Staff”) of
the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, the Company’s stockholders’ equity was ($10,508,104),
and therefore, the Company was not in compliance with Nasdaq’s Listing Rule 5450(b)(1)(A), which requires a $10,000,000 minimum
stockholders’ equity standard (the “Equity Rule”).
Pursuant
to Nasdaq Listing Rule, the Company submitted a plan of compliance with Nasdaq, which was accepted, and which provided until March 31,
2025, to evidence compliance with the Equity Rule.. 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 Equity Rule. Accordingly, the Staff indicated that unless the Company requested a hearing panel (a “Panel”) appeal of
the delist determination, its securities would be delisted. The Company appealed Nasdaq’s determination to a Panel pursuant to
the procedures set forth in the Nasdaq Listing Rule 5800 Series which stayed the suspension of the Company’s securities. The hearing
with the Panel is scheduled 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 $1
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 then 10 business
days prior to the expiration of the Compliance Period, in order to regain compliance.
On
November 5, 2024, the Company received an additional written notice (the “MVPHS Notice”) from the Staff notifying the Company
that, for 30 consecutive business days ended August 8, 2024, the Company’s market value of publicly held securities (“MVPHS”)
closed below the $15,000,000 MVPHS threshold required for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(C)
(the “MVPHS Rule”). Nasdaq stated in its letter that in accordance with Nasdaq Listing Rule 5810(c)(3)(D), the Company has
a compliance period of 180 calendar days from the date of the MVPHS Notice, and it may regain compliance if at any time during the Compliance
Period the MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days.
There
can be no assurances that the Company will be able to satisfy Nasdaq’s continued listing requirements. If the Company’s common
stock ceases to be listed for trading on the Nasdaq Market, the Company would expect its common stock would be traded on one of the three
tiered marketplaces of the OTC Markets Group.
Management's Discussion & Analysis (MD&A)
New heading “References in this management’s discussion and analysis to “we,” “us,” “our,” “the Company,” “our Company” or “TruGolf” refer to TruGolf Holdings, Inc. and its subsidiaries.”
New heading “Results of Operations”
New heading “Year Ended December 31, 2025 Compared with Year Ended December 31, 2024”
New heading “Cost of Goods Sold and Gross Profit”
New heading “Summary of Cash Flows”
New heading “Debt Obligation and Near-Term Maturities”
New heading “Capital Expenditure Requirements”
New heading “Sufficiency of Capital Resources”
New heading “Known Trends, Events, and Uncertainties”
New heading “Critical Accounting Estimates”
Removed heading “Principal External Factors Affecting Our Operating Results”
Removed heading “Principal Components of Revenues, Costs and Expenses”
Removed heading “Cost of Revenues”
Removed heading “Salaries, Wages and Benefits”
Removed heading “Selling, General and Administrative”
Removed heading “Interest Expense”
Removed heading “Principal Cash Flows”
Removed heading “Critical Accounting Policies and Significant Judgments and Estimates”
Removed heading “Disaggregated Revenue”
Removed heading “Comparisons of the Years ended December 31, 2024 and 2023”
Removed heading “Cost of Revenues”
Removed heading “Operating Expenses”
Removed heading “Working Capital”
Removed heading “Operating Activities”
Removed heading “Effects of Inflation”
Removed heading “Convertible Notes”
Removed heading “Conversion Rights of the Notes.”
Removed heading “Redemption Rights of Notes.”
Removed heading “Recently Issued Accounting Pronouncements”
Removed heading “Recently Adopted Accounting Pronouncements”
Removed heading “Recent Accounting Pronouncements”
Removed heading “Use of Estimates”
Largest changes
“The emergence and effects of public health crises, such as pandemics and epidemics, along with geopolitical conflicts, including the consequences of the ongoing war between Russia and Ukraine and between Israel and various factors in the Middle East, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.”see in full comparison
“Events of Default. The PIPE Convertible Notes contain standard and customary events of defaults (each, an “Event of Default”), including but not limited: (i) the suspension from trading or the failure to list our Class A common stock within certain time periods; (ii) failure to pay to the holder any amount of principal, Make-Whole Amount, interest, late charges or other amounts when due; (iii) the failure to timely file or make effective a registration statement on Form S-3 pursuant to the Registration Rights Agreement we entered into with the holders, (iv) our failure to cure a conversion …”see in full comparison
“Holder Bankruptcy Event of Default Mandatory Redemption. Upon any bankruptcy Event of Default, we shall immediately redeem in cash all amounts due under the PIPE Convertible Notes at a 25% premium unless the holder waives such right to receive such payment.”see in full comparison
“On August 13, 2024, the Company entered into waiver and amendment agreements (the “Waivers”), pursuant to which the Company and the PIPE Investors agreed to waive certain breaches or defaults by the Company. In connection with the Waiver, the Company issued an aggregate of 192,151 shares in satisfaction of certain registration statement delay payments and issued an aggregate of 157,582 shares in satisfaction of outstanding interest payments. …”see in full comparison
“Alternate Conversion Upon Event of Default. Following the occurrence and during the continuance of an Event of Default (as defined below), each holder may alternatively elect to convert all or any portion of such holder’s PIPE Convertible Notes at the “Alternate Conversion Price” equal to the lesser of (i) the Conversion Price, and (ii) 90% of the lowest VWAP of the Class A common stock during the five (5) consecutive trading days immediately prior to such conversion.”see in full comparison
“Going forward, our inventory valuation is subject to risk from rapid changes in product technology and customer demand, particularly as we continue to evolve our simulator hardware lineup. A deterioration in demand for existing hardware models or the introduction of new products that render current inventory obsolete could require additional write-downs beyond those already recorded. Management reviews inventory for impairment indicators on a quarterly basis.”see in full comparison
Full comparison: every changed paragraph (153)
The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. This management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our filings with the Securities and Exchange Commission (“SEC”) that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. See “Forward-Looking Statements; Risk Factor Summary.”
References in this management’s discussion and analysis to “we,” “us,” “our,” “the Company,” “our Company” or “TruGolf” refer to TruGolf Holdings, Inc. and its subsidiaries.
Overview
The
following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with
our financial statements and the related notes contained elsewhere in this Annual Report on Form 10-K and is intended to provide information
necessary to understand our audited consolidated financial statements for the year ended December 31, 2024 compared to the year ended
December 31, 2023 and highlight certain other information which, will enhance a reader’s understanding of our financial condition,
changes in financial condition, and results of operations. In particular, the discussion is intended to provide an analysis of significant
trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2024,
as compared to the year ended December 31, 2023. These historical financial statements may not be indicative of our future performance.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements,
all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing,
particularly in “Item 1A. Risk Factors.”
Our
Business
We design, develop, manufacture, and sell golf simulators and related software for residential and commercial applications. Our product offerings include portable, professional, commercial, and custom simulators, as well as standalone software products including E6 Connect and E6 GOLF. We also offer multi-sport gaming applications. Our operations are conducted through our wholly-owned subsidiary, TruGolf, Inc., a Nevada corporation (“TruGolf Nevada”), which has been developing indoor golf simulation software and hardware since 1999.
On January 31, 2024, we consummated a business combination pursuant to which TruGolf Nevada became our wholly-owned subsidiary, and our name was changed from Deep Medicine Acquisition Corp. to TruGolf Holdings, Inc. We commenced trading on the Nasdaq Capital Market under the ticker symbol “TRUG” on February 1, 2024.
During the year ended December 31, 2025, several significant developments shaped our financial results and capital structure:
Franchise Operations. Through our subsidiary TruGolf Links Franchising, LLC (“Links”), formed in May 2024, we continued to develop our indoor golf franchise model, generating $13,125 in franchise revenue during the year ended December 31, 2025.
Reverse Stock Split. On June 23, 2025, we effected a 1-for-50 reverse stock split of our Class A and Class B common stock. On March 27, 2026, we effected a 1-for-10 reverse stock split of our Class A and Class B common stock. All share and per share amounts in this discussion have been retroactively adjusted to reflect both reverse stock splits.
Nasdaq Compliance. Following a Nasdaq hearing panel process, we regained full compliance with all Nasdaq continued listing requirements by August 1, 2025. We are currently subject to a one-year Mandatory Panel Monitor through August 2026, during which any subsequent non-compliance with the Equity Rule would result in an expedited delisting determination.
PIPE Note Extinguishment. In July 2025, we exchanged the entire outstanding principal balance of our PIPE Convertible Notes ($3,938,311) for 3,938 shares of our Series A Convertible Preferred Stock, reducing our total debt obligations and eliminating a significant source of dilution from note conversions.
Dividend Note Settlement. In April 2025, we settled approximately $3.9 million in outstanding dividend notes payable through the issuance of Class A and Class B common stock, eliminating these legacy obligations.
Results of Operations
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
The following table sets forth our results of operations for each of the years set forth below:
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.
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:
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.
Principal
External Factors Affecting Our Operating Results
We
believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks
and challenges, including those discussed below and in the section entitled “Risk Factors”.
Principal
Components of Revenues, Costs and Expenses
RevenuesRevenue
Net revenues decreased $2,403,652, or 11.3%, to $18,878,997 for the year ended December 31, 2025, compared to $21,282,649 for the year ended December 31, 2024. The following discussion presents each revenue category separately.
Golf Simulators: Golf simulator revenue, which includes hardware and perpetual software licenses, increased $973,234, or 7.1%, to $14,681,994 for the year ended December 31, 2025, compared to $13,708,760 for the year ended December 31, 2024, primarily driven by increased unit volumes in our commercial channels coupled with growth in residential installations.
Content Software Subscriptions: Content software subscriptions revenue decreased $3,566,239, or 49.0%, to $3,710,245 for the year ended December 31, 2025, compared to $7,276,484 for the year ended December 31, 2024. The decrease is due to how the Company sold its content subscription licenses during the year ended December 31, 2025, which has resulted in $1,329,184 in deferred revenue to be recognized over the next twelve months.
Franchise Revenue: Franchise revenue of $13,125 was recognized for the year ended December 31, 2025, representing initial fees from our TruGolf Links Franchising subsidiary, which was formed in May 2024. No franchise revenue was recognized in the prior year.
Other Revenue: Other revenue, which includes shipping income, installation income, and other ancillary items, increased $176,228 to $473,633 for the year ended December 31, 2025, from $297,405 for the year ended December 31, 2024, primarily driven by an increase in sales of ancillary products used with our MultiSport Arcade system.
Cost of Goods Sold and Gross Profit
Cost of goods increased by $1,957,869, or 26.5% to $9,359,380 for the year ended December 31, 2025, as compared to $7,401,511 for the year ended December 31, 2024. Substantially all of the increase was attributable to $2,199,985 in non-recurring inventory adjustments arising from the reconciliation of inventory records in connection with the Company’s transition to a new accounting system during the year. Management does not expect similar adjustments to recur following the completion of the system transition. Excluding these adjustments, cost of goods sold would have been $7,159,395, relatively flat year-over-year, consistent with prior year levels relative to revenue volume. Management believes this adjusted measure provides useful information to investors as it reflects the Company’s ongoing cost structure without the impact of the system transition-related adjustments.
Gross profit decreased $4,361,521, or 31.4%, to $9,519,617 for the year ended December 31, 2025, compared to $13,881,138 for the year ended December 31, 2024. Gross margin declined to 50.4% from 65.2%, primarily reflecting the impact of the inventory reconciliation adjustments described above and the decline in higher-margin content software subscription revenue. Excluding the $2,199,985 inventory adjustments, adjusted gross profit of $11,719,602 and adjusted gross margin would have been approximately 62.1%, compared to 65.2% in the prior year. Management presents these adjusted measures to provide investors with additional insight into the Company’s underlying operating performance exclusive of the system transition-related adjustments.
Our
revenues come from the sale of TruGolf software and hardware, which products are sold through a global network of authorized resellers,
retail outlets and direct-to-consumer through a dedicated TruGolf sales team.
Cost
of Revenues
Cost
of revenues consists primarily of costs that are directly related to the delivery of our TruGolf hardware and software products, excluding
depreciation but including direct material, labor, manufacturing overhead, reserves for estimated warranty costs and charges to write-down
the inventory carrying value when it exceeds the estimated net realizable value.
Total operating expenses decreased $362,128, or 2.3%, to $15,621,971 for the year ended December 31, 2025, compared to $15,984,099 for the year ended December 31, 2024. While the aggregate change was nominal, this overall stability masks significant and largely offsetting movements within individual expense categories, each of which is discussed below.
Salaries, Wages and Benefits: Salaries, wages, and benefits decreased $4,698,464, or 50.4%, to $4,615,951 for the year ended December 31, 2025, compared to $9,314,415 for the year ended December 31, 2024. The decrease reflects a significant increase in the portion of employee compensation capitalized as software development costs during the year. During the year ended December 31, 2025, the Company capitalized $3,231,490 in software development costs, including the associated employee compensation, representing a full year of capitalization activity compared to partial year in 2024, during which capitalization commenced on March 1, 2024. The increase in capitalized compensation reduced the amount of salary expense recognized in the consolidated statements of operations and is consistent with the Company’s continued investment in its suite of software platforms. Total compensation costs incurred, including both expensed and capitalized amounts, were relatively consistent with prior year levels.
Selling, General and Administrative: SG&A increased $4,336,336, or 65.0%, to $11,006,020 for the year ended December 31, 2025, compared to $6,669,684 for the year ended December 31, 2024. The increase was primarily driven by the following: (i) outside contractor costs increased $1,329,017, reflecting the Company’s increased utilization of third-party contractors to supplement the internal capabilities following the shift of employee compensation to capitalized software development costs described above; (ii) amortization expense increased $976,600, all of which reflects the increase in amortization of capitalized software development costs from $161,350 in 2024 to $1,137,950 in 2025, as the Company’s software projects were completed and placed into operation during the year. The significant increase from the prior year reflects the fact that capitalization commenced on March 1, 2024, with the first full year of amortization recognized in 2025. This amortization is expected to continue at similar or higher levels in future periods as the capitalized development portfolio continues to amortize over its estimated three-year useful lives; (iii) professional fees increased $280,797, reflecting higher legal and accounting costs associated with the Company’s public company compliance obligations and financial statement preparation; and (iv) credit card processing fees increased $140,763, consistent with changes in the Company’s revenue mix and payment processing activity during the year.
Royalties
We
have agreements with certain software golf hardware vendors who bundle our tracking and golf course software with their hardware. We
pay them a royalty based on the number of units or subscriptions they sell. The royalty percentages typically range between 20% to 30%.
The royalty agreements are for one year, with automatic renewals unless each party gives a thirty-day written notice of the intent to
cancel the contract prior to the renewal date.
Salaries,
Wages and Benefits
Salaries,
wages and benefits are expenses earned by our employees in the executive, information technology, finance and accounting, human resources,
administrative functions and outside contractors. Also included in salaries, wages and benefits are employer payroll taxes, health, dental
and life insurance expenses.
Selling,
General and Administrative
Sales
and marketing expenses consist primarily of advertising, training events, brand building, product marketing activities and installation
and shipping costs. We expect sales and marketing costs will continue to increase as we expand our international selling and marketing
activities, hire additional personnel, and build brand awareness through advertising and training.
General
and administrative expenses consist primarily of professional fees paid for legal, accounting, auditing, and consulting services, bad
debt, licenses and association dues, facilities (including rent and utilities) bank and credit card processing fees and other expenses
related to general and administrative activities.
We
anticipate that our general and administrative expenses will continue to increase as we continue hiring to support our growth. We also
anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, and investor and public relations expenses
associated with operating as a public registrant.
Interest
Expense
Interest
expense consists of interest expenses associated with issuing notes and balances outstanding under our debt obligations and the gross
sales royalty payable, the amortization of debt issuance costs and original issue discounts associated with such borrowings.
Principal
Cash Flows
We
generate cash primarily from our operating activities and, historically, we have used cash flows from operating activities and available
borrowings under certain notes payable as the primary sources of funds to purchase inventory and to fund working capital and capital
expenditures, growth and expansion opportunities (see also “Liquidity and Capital Resources” below). The management of our
working capital is closely tied to operating cash flows, as working capital can be impacted by, among other things, our accounts receivable
activities, the level of inventories, which may increase or decrease in response to current and expected demand, and the size and timing
of our trade accounts payable payment cycles.
Critical
Accounting Policies and Significant Judgments and Estimates
Our
management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements.
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements
and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and
expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on
historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates
under different assumptions or conditions.
Our
significant accounting policies are described in Note 3 to our audited consolidated financial statements included elsewhere in this Annual
Report.
Disaggregated
Revenue
ResultsLoss
ofFrom Operations
Loss from operations increased $3,999,393 to $(6,102,354) for the year ended December 31, 2025, compared to $(2,102,961) for the year ended December 31, 2024. The widening operating loss was driven primarily by the $4,361,521 decline in gross profit, which was largely attributable to the inventory reconciliation adjustments and the decline in higher-margin software subscription revenue, while total operating expenses remained essentially flat year-over-year.
Comparisons
of the Years ended December 31, 2024 and 2023
What changed in the latest 10-Q
Risk Factors
New heading “We are not currently in compliance with Nasdaq’s continued listing requirements related to the bid price of our common stock and if we are unable to regain compliance with the listing requirements, our common stock will be delisted from Nasdaq which could have a material adverse effect on our financial condition and could make it more difficult for stockholders to sell their shares.”
Largest changes
“We are not currently in compliance with Nasdaq’s continued listing requirements related to the bid price of our common stock and if we are unable to regain compliance with the listing requirements, our common stock will be delisted from Nasdaq which could have a material adverse effect on our financial condition and could make it more difficult for stockholders to sell their shares.”see in full comparison
“Delisting from Nasdaq would adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. …”see in full comparison
“Since July 31, 2026, the closing price of our common stock has been below $1.00, and if our common stock remains below $1.00 for 30 consecutive business days we will not be in compliance with Nasdaq Listing Rule 5550(a)(2) (the “bid price rule”). In accordance with Nasdaq rules, we would normally be provided with a grace period of 180 calendar days to regain compliance with the bid price rule. …”see in full comparison
“Our common stock is listed on Nasdaq, and we are therefore subject to its continued listing requirements, including requirements with respect to the market value of publicly held shares, market value of listed shares, minimum bid price per share, and minimum stockholder’s equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements, we may be delisted from Nasdaq.”see in full comparison
Full comparison: every changed paragraph (4)
We are not currently in compliance with Nasdaq’s continued listing requirements related to the bid price of our common stock and if we are unable to regain compliance with the listing requirements, our common stock will be delisted from Nasdaq which could have a material adverse effect on our financial condition and could make it more difficult for stockholders to sell their shares.
Our common stock is listed on Nasdaq, and we are therefore subject to its continued listing requirements, including requirements with respect to the market value of publicly held shares, market value of listed shares, minimum bid price per share, and minimum stockholder’s equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements, we may be delisted from Nasdaq.
Since July 31, 2026, the closing price of our common stock has been below $1.00, and if our common stock remains below $1.00 for 30 consecutive business days we will not be in compliance with Nasdaq Listing Rule 5550(a)(2) (the “bid price rule”). In accordance with Nasdaq rules, we would normally be provided with a grace period of 180 calendar days to regain compliance with the bid price rule. However, since we completed a reverse stock split in March 2026, which is within the last one-year period, if we do not meet the bid price rule, we will not be eligible for any compliance period and the Nasdaq Staff will provide written notification to us that our common stock may be delisted. We would then be entitled to appeal the Staff’s determination to a Nasdaq Listing Qualifications Panel and request a hearing. There can be no assurance that, if we do appeal the delisting determination by the Staff to the Nasdaq Listing Qualifications Panel, that such appeal would be successful.
Delisting from Nasdaq would adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investors and general investors that will consider investing in our common stock, a reduction in the number of market makers in our common stock, a reduction in the availability of information concerning the trading prices and volume of our common stock, a reduction in the number of broker-dealers willing to execute trades in shares of our common stock or interest in business development opportunities. Further, we would likely become a “penny stock”, which would make trading of our common stock more difficult.
Management's Discussion & Analysis (MD&A)
New heading “Other Expenses, net”
New heading “Comparison of the Six Months Ended June 30, 2026, to the Six Months Ended June 30, 2025”
New heading “Cost of Revenues”
New heading “Operating Expenses”
Largest changes
“Comparison of the Six Months Ended June 30, 2026, to the Six Months Ended June 30, 2025”see in full comparison
“Cost of revenue increased by $174,375, or 3.9% for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. …”see in full comparison
Cost ofsee in full comparisonrevenuesrevenueincreaseddecreased by$537,152,$211,372, or29.8%,8.3% for the three months endedMarchJune31,30, 2026, as compared to the three months endedMarch 31,June 30, 2025. Theincreasedecrease was partially attributable to (i) the allocation of salaries and wages of warehouse employees of$229,649,$330,204 during the three months endedMarchJune31,30, 2026, compared to its absence during the prior yearperiod andperiod, (ii) the increase in shipping costs of$165,199$192,590 during the three months endedMarchJune31,30, 2026 as compared to the prior year period, (iii) inventory adjustments decreased by $328,276, reflecting reduced inventory write-downs and other inventory-related adjustments, and (iv) other product cost variances decreased by $405,890 as compared to the prior year period.
Full comparison: every changed paragraph (36)
This
Quarterly Report on Form 10-Q for the three and six months ended MarchJune 31,30, 2026 (“Form 10-Q”) contains certain
“forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended
(“Securities Act”), and Section
21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All
statements other than statements of historical
facts contained in this Form 10-Q, including statements regarding the financial
position, business strategy and the plans and objectives
of management for our future operations, are forward-looking statements.
These forward-looking statements are based on the beliefs of
management, as well as assumptions made by and information currently
available to us. When used in this Form 10-Q, the words “anticipate,”
“believe,” “estimate,”
“expect,” “forecasts,” “may,” “will,”
“should,” “seek,”
“scheduled,” “intend,” “plan,” and “expect”
and variations of these words or similar
expressions (or the negative versions of such words or expressions) are intended to identify
forward-looking statements.
These
forward lookingforward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk
Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the U.S. Securities and
Exchange Commission (“SEC”) on April 15, 2026 (the “Form 10-K”). Moreover, we operate in a very competitive and
rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can
we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions,
the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking statements.
On
March 27, 2026, the Company completed a 1-for-10
reverse stock split of the Class A common stock and Class B common stock of the
Company’s issued and outstanding common stock, effective
as of March 27, 2026 (the “2026 Reverse Stock Split”, and
together with the 2025 Reverse Stock
Split, the “Reverse Stock Split”) and began trading on a 2026 Reverse Stock
Split-adjusted basis on Nasdaq on March 27, 2026.
As a result of the 2026 Reverse Stock Split, the number of Class A common stock
outstanding as of December 31, 2025, was reduced from
5,355,626 to approximately 535,563 and the number of Class B common stock
outstanding was reduced from 199,999 to 19,999, and the number
of authorized shares of Class A common stock was reduced from
1,000,000,000 shares to 100,000,000 shares, and the number of authorized shares of Class B common stock was reduced from 1,000,000,000 shares10,000,000 to 100,000,000 shares.1,000,000. All share amounts have been retroactively
adjusted for the Reverse Stock
Split.
Comparison
of the Three Months Ended MarchJune 31,30, 20262026, to the Three Months Ended MarchJune 31,30, 2025
Revenues
remainedincreased relativelyby consistent$1,481,316, or 34.4% for the three months ended MarchJune 31,30, 2026, decreasing by $217,563, or 4.2%, compared to the three months
ended MarchJune 31,30, 2025. The decrease wasincrease
is primarily attributable to thehigher decreaseproduct acceptance, which resulted in golfincreased simulatorrevenue revenue,recognition whichfrom decreasedproduct bysales, $228,321,as towell $3,664,866as
the duringrecognition of previously deferred revenue upon satisfaction of the threeapplicable monthsrevenue endedrecognition March 31, 2026, as compared to the
prior year period.criteria.
Cost
of revenuesrevenue increaseddecreased by $537,152,$211,372, or 29.8%,8.3% for the three months ended MarchJune 31,30, 2026, as compared to the three months ended March
31,June 30, 2025.
The increasedecrease was partially attributable to (i) the allocation of salaries and wages of warehouse employees of $229,649,
$330,204 during the three
months ended MarchJune 31,30, 2026, compared to its absence during the prior year period andperiod, (ii) the increase in shipping costs of $165,199$192,590 during
the three months ended MarchJune 31,30, 2026 as compared to the prior year period, (iii) inventory adjustments decreased by $328,276, reflecting
reduced inventory write-downs and other inventory-related adjustments, and (iv) other product cost variances decreased by $405,890 as
compared to the prior year period.
Total
operating expenses decreasedincreased by $694,360, or 14.9%,$44,668, for the three months ended MarchJune 31,30, 2026, as compared to the three months ended
March 31,June 30, 2025.
Salaries, Wages and Benefits
Salaries, wages and benefits increased by $234,355, or 23.3%, to 1,240,565 for the three months ended June 30, 2026, compared to $1,006,210 the three months ended June 30, 2025. The increase was primarily due to a reduction in employee compensation capitalized as software development costs, which resulted in a greater portion of payroll cost being recognized as operating expense during the current-year period. Employee compensation capitalized as software development costs decreased to $933,603 for the three months ended June 30, 2026, from $1,298,247 in the prior year period.
Selling, General and Administrative
Salaries, Wages and Benefits: Salaries, wages
and benefits decreased by $1,153,405, or 59.2%, to $793,411 for the three months ended March 31, 2026, compared to $1,946,816 for the prior
year period. The decrease reflects a significant increase in the portion of employee compensation capitalized as software development
costs during the period. During the three months ended March 31, 2026, the Company capitalized $1,066,064 in software development costs
associated with employee compensation, compared to $270,531 during the prior year period.
Selling,
Generalgeneral and Administrative:administrative SG&A increaseddecreased by $459,045,$189,687, or 16.8%,7.2%, to $3,184,164$2,447,339 for the three months ended MarchJune 31,30, 2026, compared
to $2,725,119 $2,637,026,
for the priorthree yearmonths period.ended June 30, 2025. The increaseoverall decrease was primarily drivenattributable to a $323,248 decrease in bad debt expense
in accordance with the Company’s accounting policy for recording the allowance for doubtful accounts, as well as a $166,619 decrease
in other selling, general and administrative expenses. These decreases were partially offset by thean following:increase (i)in amortization expense related
to capitalized
software costs increased to $469,213$286,513 infor 2026the three months ended June 30, 2026, from $100,000$111,188 infor 2025,the (ii)comparable prior-year period,
and an increase in rent expense of $104,644 during the three months
ended March 31, 2026, as compared to the prior year period,$124,855, primarily relatedresulting tofrom a lease modification executed during the year ended December 31,
31, 2025, which resulted in an increase inincreased the associatedCompany’s monthly rent,lease and (iii) an increase in professional fees of $166,634 primarily driven by $149,890 in legal fees related to the
Company’s franchising efforts that were not active during the prior year period.payments.
Other Expenses, net
Other expenses, net decreased by $1,225,642, or 84.4%, for the three months ended June 30, 2026, compared with the three months ended June 30, 2025. The decrease was primarily attributable to the elimination of interest expense associated with the PIPE convertible notes following their exchange for Series A Preferred Stock in July 2025 as well as the settlement of the dividend notes payable in April 2025.
Comparison of the Six Months Ended June 30, 2026, to the Six Months Ended June 30, 2025
Revenues
Revenues increased by $1,112,348 for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase is primarily attributable to higher product acceptance, which resulted in increased revenue recognition from product sales, increase in revenue from the franchise division, as well as the recognition of previously deferred revenue upon satisfaction of the applicable revenue recognition criteria.
Cost of Revenues
Cost of revenue increased by $174,375, or 3.9% for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The increase was partially attributable to (i) the allocation of salaries and wages of warehouse employees of $528,277 during the six months ended June 30, 2026, compared to its absence during the prior year period, (ii) the increase in shipping costs of $227,341 during the six months ended June 30, 2026 as compared to the prior year period, (iii) inventory adjustments decreased by $379,210, reflecting reduced inventory write-downs and other inventory-related adjustments, and (iv) other product cost variances decreased by $202,033 as compared to the prior year period.
Operating Expenses
Salaries, Wages and Benefits
Salaries, wages and benefits decreased by $919,050, or 31.1%, to $2,033,976 for the six months ended June 30, 2026, compared to $2,953,026 for the six months ended June 30, 2025. The decrease was primarily attributable to a lower amount of employee compensation being capitalized as software development costs during the current-year period. The Company capitalized $1,999,668 of employee compensation as software development costs during the six months ended June 30, 2026, compared to $1,568,778 during the corresponding prior year period.
Selling, General and Administrative
Selling, general and administrative increased by $269,358, or 5.0%, to $5,631,503 for the six months ended June 30, 2026, compared to $5,362,145, for the six months ended June 30, 2025. The overall increase was primarily attributable to an increase in amortization expense related primarily to capitalized software costs of $755,726 for the six months ended June 30, 2026, compared to $211,488 for the six months ended June 30, 2025, and an increase in rent expense of $124,855, primarily resulting from a lease modification executed during the year ended December 31, 2025, which increased the Company’s monthly lease payments. The increases were partially offset by an decrease of $264,318 in bad debt expense in accordance with the Company’s accounting policy for recording the allowance for doubtful accounts, a decrease of $212,235 in legal fees, as well as a $192,540 decrease in other selling, general and administrative expenses.
Other
incomeexpenses, (expenses)net decreased by $1,283,383,$2,509,025, or 89.4%,86.9%, for the threesix months ended MarchJune 31,30, 2026, as compared towith the threesix months ended June 30,
March 31, 2025. The decrease was primarily attributable to the elimination of interest obligationsexpense associated with the PIPE Convertible
Notesconvertible notes following
their exchange for Series A Preferred Stock in July 2025 as well as the settlement of the dividend notes payable in April
2025.
As
of MarchJune 31,30, 2026, we had cash on hand of $10,936,670$8,474,349 and a working capital deficit of $1,282,452,$2,345,394 as compared to cash on hand of $12,569,263
$12,569,263 and a working capital surplus of $1,076,496 as of December 31, 2025. The decrease in working capital is primarily
attributable to a decrease
in cash on hand of $1,632,593,$4,094,910, an increase of accounts receivable, net of $254,128,$204,304, an increase in
inventory of $497,411$528,059, and an increase
in prepaid expenses of $72,704, which was partially offset by an increase in accounts payable of $419,485 and$481,822, an increase in other current
liabilities of $129,704 and a decrease in deferred revenue
of $1,050,144.$379,836 and a decrease of $150,000 in note payable to related parties.
The
Company’s operating activities consume the majority of its cash resources. The Company anticipates that it will continue to
incur incur
operating losses as it executes its development plans for 2026, as well as other potential strategic and business development
initiatives. 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 primarily with the sale of equity and
convertible notes.notes, although no assurances can be given that such financing will be available on acceptable terms or at all. 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.
During
the three months ended March 31, 2026, our net cash used in operating activities was $122,196 as compared to $449,119 during the three
months ended March 31, 2025. The period over period change was primarily attributable to favorable changes in working capital,
including increases in deferred revenue and accounts payable, partially offset by changes in inventory and accounts receivable.
The current period also reflected $1,087,513 and $231,940 lower non-cash adjustments related to stock issued for
make-whole provisions on debt conversion and amortization of convertible note discounts, respectively, compared to the prior year period.
During
the threesix months ended MarchJune 31,30, 2026, our net cash used in investingoperating activities was $1,144,302 as$1,400,386 compared to net cash used in
investing activities of $334,690$1,354,546 during the threesix months
ended MarchJune 31,30, 2025. The increase in cash used in investing activities was
primarily due to an increase in capitalized costs for software development.
During
the threesix months ended MarchJune 31,30, 2026, our net cash used in financinginvesting activities was $366,095$2,175,802 as compared to net cash providedused byin investing
activities of
$2,517,552 $1,614,744 during the threesix months ended MarchJune 31,30, 2025. The decreaseincrease in cash providedused byin financinginvesting activities was primarily due
to to
$2,520,000an increase in cashcapitalized proceedscosts fromfor thesoftware Convertible PIPE Notes in 2025.development.
During the six months ended June 30, 2026, our net cash used in financing activities was $518,726 compared to net cash provided of $2,246,572 during the six months ended June 30, 2025. The decrease in cash provided by financing activities was primarily due to repurchase of treasury stock and cash payment of $150,000 for repayment of notes payable to a related party during the six months ended June 30, 2026, compared to $268,500 of such payments during the six months ended June 30, 2025, as well as $2,520,000 in cash proceeds from the convertible PIPE notes in 2025.
The
preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect reported amounts of assets, liabilities, revenues, and expenses. The following estimates involve the highest degree of judgment
and uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
TheseThe descriptions should be read in conjunction with Note 2 —– Summary of Significant Accounting Policies, which describes the underlying
underlying accounting policies.
We
estimate our allowance for current expected credit losses on accounts receivable using a rate loss model that considers customer payment
history, aging, current economic conditions, and management’s judgment regarding ultimate collectability. As of MarchJune 31,30, 2026,
we recorded an allowance of $1,611,930$1,372,500 against gross accounts receivable of $2,926,767,$2,637,513, representing a reserve rate of 55.1%.52.0%. The reserve
rate reflects the concentration of our receivables among a limited number of commercial customers and the extended payment terms common
in our industry.
Capitalized
Software Development Costs and Technological Feasibility and Useful Life We
capitalize software development costs once technological feasibility is established and cease capitalization when the product is available
available for general release. As of MarchJune 31,30, 2026, capitalized software development costs, net of accumulated amortization, were
$4,230,512, $4,877,603, and
amortization expense was $469,213$755,726 for the threesix months ended MarchJune 31,30, 2026, compared to $100,000$433,058 for the three
six months ended MarchJune 31,30, 2025.
For
a discussion of recently issued accounting developments and their impact on our unaudited condensed consolidated financial statements,
statements, refer to Note 2— Summary of Significant Accounting Policies in our Financial Statements.
TRUG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding TRUG (13F)
None of the 59 investors we track reported a position in their latest 13F.