TruGolf Holdings, Inc. 10-Q

Item 1A. Risk Factors. In addition to the other information set forth in this report, you should carefully consider the factors set forth below and discussed in the section entitled “Risk Factors” in the Form S-1 (file number 333-277068), filed with the SEC on February 14, 2024, which are incorporated herein by reference. The risks described in such reports are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. We are currently not in compliance with the listing requirements of The Nasdaq Capital Market, and if we are unable to regain and maintain compliance with the listing requirements of The Nasdaq Capital Market, our common stock will be delisted from The Nasdaq Capital Market which could have a material adverse effect on our financial condition and could make it more difficult for shareholders to sell their shares. Our common stock is listed on The Nasdaq Capital Market, 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 The Nasdaq Capital Market. On July 15, 2024, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that since we had failed to file our Form 10-Q for the period ended March 31, 2024 we no longer complied with Nasdaq Listing Rule 5250(c)(1). We have filed the Form 10-Q, but there is no assurance that we will not incur similar deficiencies in the future. On August 19, 2024, we received a deficiency letter from the Staff notifying us that we were not in compliance with Nasdaq Global Market’s Listing Rule 5450(b)(1)(A), which requires a $10,000,000 minimum stockholders’ equity standard. We have been 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 our time frame to complete the plan. If the plan is accepted, Nasdaq can grant an extension of up to 180 calendar days from the date of the letter, or until April 1, 2025, to evidence compliance. If the plan is not accepted, we will have the right to appeal and our Class A common stock would remain listed on The Nasdaq Global Market until the completion of the appeal process. To regain compliance, we must have stockholders’ equity of at least $10 million. On November 5, 2024, we received two additional deficiency letters from the Staff notifying us that we were not in compliance with the requirement to have market value of publicly held shares (“MVPHS”) of $15,000,000 and that we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share. We have a compliance period of 180 calendar days (or May 5, 2025) in which to regain compliance with both deficiencies. We can regain compliance with the MVPHS requirement, if at any time during this compliance period our MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days, We can regain compliance with the bid price requirement, if at any time during this compliance period our closing bid price is at least $1.00 for a minimum of ten consecutive business days, In the event we do not regain compliance with these requirements prior to the expiration of the compliance period, we will receive written notification that our securities are subject to delisting. Delisting from The Nasdaq Capital Market 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 or interest in business development opportunities. We have required the holders of our PIPE Convertible Notes on two occasions to waive requirements under the instruments and related agreements in order to avoid being in default on the PIPE Convertible Notes, and there is no assurance such holders will agree to future waivers if fall out of compliance with the requirements set forth in such instruments. We currently have outstanding an aggregate of $8,155,625 in principal amount of PIPE Convertible Notes. In August and November 2024, the holders of our PIPE Convertible Notes have agreed to waive requirements under the instruments and related agreements in order to avoid having us be in default on the PIPE Convertible Notes. The waiver we received in November 2024 requires us to comply with the continued listing requirements of the Nasdaq Stock Market before January 15, 2025; provided that with respect to the minimum bid price requirement to the extent we are in compliance with all other Nasdaq Stock Market listing requirements and have filed a preliminary proxy statement to hold a special meeting to vote on a reverse stock split to remedy the bid price failure, the waiver shall be extended to March 15, 2025. As such, we will be required to satisfy the stockholders’ equity and MVPHS requirements prior to January 15, 2025 or receive another waiver from the holders of our PIPE Convertible Notes, or we will be in default on the PIPE Convertible Notes, which would accelerate the PIPE Convertible Notes and allow the holders to convert the PIPE Convertible Notes at the “Alternate Conversion Price” which is equal to the lesser of (i) the Conversion Price then in effect, and (ii) 90% of the lowest volume weighted average price of the Class A common stock during the five consecutive trading days immediately prior to such conversion. 41