TruGolf Holdings, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Note Regarding Forward-Looking Statements The following discussion highlights the current operating environment and summarizes the financial position of Trugolf Holdings, Inc. and its subsidiaries as of September 30, 2025, and should be read in conjunction with (i) the unaudited interim condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and (ii) the audited consolidated financial statements and accompanying notes thereto included in our 2024 Annual Report on Form 10-K for the year ended December 31, 2024. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to refer to the business and operations of TruGolf. This Form 10-Q contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2025, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation: ● the occurrence of any event, change, or other circumstances, including the outcome of any legal proceedings that may be instituted against us; ● the ability to maintain the listing of our securities on Nasdaq, and the potential liquidity and trading of our securities; ● the risk of disruption to our current plans and operations; ● the ability to recognize the anticipated benefits of our business and the Business Combination, which may be affected by, among other things, competition and the ability to grow, manage growth profitably, and retain key employees; ● costs related to our business; ● changes in applicable laws or regulations; ● our ability to meet future capital requirements to fund our operations, which may involve debt and/or equity financing, and to obtain such debt and/or equity financing on favorable terms, and our sources and uses of cash; ● our ability to maintain existing license agreements; ● our ability to achieve and maintain profitability in the future; ● our financial performance; and ● other factors disclosed under the section entitled “Risk Factors”. Company Overview Corporate History TruGolf Nevada, was formed as a Utah corporation on October 4, 1995, under the name TruGolf Incorporated, and was a subsidiary of Access Software. On June 9, 1999, TruGolf Nevada changed its name to TruGolf, Inc. Upon the acquisition of Access Software by Microsoft Corp. in August 1999, the core programming and graphics team of the LinksTM video game series were spun out to TruGolf Nevada. 21 Effective on April 26, 2016, TruGolf Nevada filed Articles of Merger with the State of Utah, Department of Commerce, and on April 28, 2016, TruGolf Nevada filed Articles of Merger with the Secretary of State of Nevada, pursuant to which TruGolf, Inc., a Utah corporation, merged with and into TruGolf Nevada, pursuant to a Plan of Merger. TruGolf Nevada was the surviving corporation and, in connection with the Plan of Merger, TruGolf Nevada affected a four-for-one forward stock split of its outstanding common stock. TruGolf Holdings, Inc. (f/k/a Deep Medicine Acquisition Corp.) (“TruGolf”, and together with its subsidiaries, the “Company”), was incorporated on July 8, 2020, as a Delaware corporation and formed for the purpose of effecting a business combination, with no material operation of its own. On March 31, 2023, we entered into an Agreement and Plan Of Merger (the “Merger Agreement”) with TruGolf Nevada, DMAQ Merger Sub Inc. (“Merger Sub”), a Nevada corporation and our wholly-owned subsidiary, Bright Vision Sponsor LLC, a Delaware limited liability company, in the capacity as representative for our stockholders at the time of the Merger Agreement, Christopher Jones, an individual, in the capacity as TruGolf Nevada’s representative, and TruGolf Nevada (together, the “Merger Parties”). On July 21, 2023, the Merger Parties entered into an Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”), pursuant to which the Merger Agreement was amended and restated to provide, among other things, that (i) contingent earnout shares will be issued after the Closing, if and when earned, upon the Company meeting the milestones specified in the Restated Merger Agreement, rather than being issued at the closing of the merger and being placed into escrow subject to potential forfeiture; and (ii) the share price of the Company’s common stock used in the calculation of the number of shares to be issued to the Sellers as merger consideration shall be $10.00, as opposed to the price at which the Company redeems the shares of common stock held by its public stockholders in connection with the closing of this business combination. On January 31, 2024, we consummated the business combination (the “Closing”). As a result of the Closing and the transactions contemplated by the Merger Agreement, (i) Merger Sub merged with and into TruGolf Nevada, with TruGolf Nevada surviving the Merger as a wholly-owned subsidiary of TruGolf, and (ii) TruGolf’s name was changed from Deep Medicine Acquisition Corp. to TruGolf Holdings, Inc. TruGolf’s Class A common stock commenced trading on the Nasdaq Global Market LLC under the ticker “TRUG” on February 1, 2024. Business Overview Since 1983, the Company has been passionate about driving the golf industry with innovative, indoor golf solutions. We build products that capture the spirit of golf. Our mission is to help grow the game by making it more available, more approachable and more affordable, through technology – because we believe golf is for everyone. Our team has built award-winning video games (including Links, a popular sports game for PC), innovative hardware solutions, and an all-new e-sports platform to connect golfers around the world with TruGolf E6 Connect Software, our premier software engine. Since TruGolf’s beginning, we have continued to define and redefine what is possible with golf technology. In addition to offering a variety of custom, professional, and portable golf simulators, TruGolf’s latest launch monitor, Apogee, was created to improve accuracy and to make using the launch monitor easier. Features of Apogee include: a unique Apogee Voice Assistant, a voice command system that allows users to navigate their TruGolf E6 Connect Software gameplay within rounds and practice sessions; Laser Launchpad, a laser indicator that shows users where to place the ball and when the system is ready to record a swing and Point-of-Impact (POI) slow-motion replay video. Our suite of hardware offerings in the golf technology space is expansive, offering something for virtually everyone from gamers to beginners to professionals, and all consumers in between. Hardware offerings are sold through a global network of authorized resellers, retail outlets and direct-to-consumer through a dedicated TruGolf sales team. Our suite of hardware offerings ranges from entry level pricing at just under $400, to well over $100,000 for custom projects, creating a wide range of pricing options for nearly all consumers, and providing TruGolf with a competitive advantage in creating a wide consumer base as compared to its competitors (who often only focus in a narrow consumer price range). 22 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: ● Game Analysis – rewards TruGolf software users who measure their game. Users can set specific goals (e.g., shots hit per month, speed and distance gains, dispersion reduction) and earn points for hitting milestones. At the end of each month, users can see how they compared against all other users utilizing the Game Analysis features. ● Connected Golf – rewards users for joining with their friends and playing golf online. Earn points for playing a new course or linking up to play nine holes with another player utilizing TruGolf software. ● Virtual Golf Association Events – events are worldwide leaderboard format, flighted by handicap, where users play and compete to shoot the lowest score. These contests include stroke play, closest to the pin, match play, stableford, and more. Users earn points based on how they finish in their division. In totality, TruGolf’s business model is designed to be positioned as the hub of golf technology, with groundbreaking hardware technologies that we believe can become the industry standard and unify the industry as a whole by serving as the leader of golf technology software solutions through its TruGolf’s software. Reverse Stock Split On June 23, 2025, the Company filed a Certificate of Amendment to the Company’s Amended and restated Certificate of Incorporation with the Secretary of the State of Delaware to effect a 1-for-50 reverse stock split of the Class A and Class B shares of the Company’s issued and outstanding common stock, effective as of 12:01 a.m. Eastern Time on June 23, 2025 (the “Reverse Stock Split”) and began trading on a Reverse Stock Split-adjusted basis on Nasdaq on June 23, 2025. As a result of the Reverse Stock Split, the number of Class A common shares outstanding was reduced from 40,532,150 to 810,617 and the number of Class B common shares outstanding was reduced from 10,000,000 to 200,000, and the number of authorized shares of common stock remained unchanged. All share amounts have been retroactively adjusted for the Reverse Stock Split. Revenue The Company derives our revenue through the sales of our golf simulators, perpetual software licenses, content software subscriptions, and franchising. 23 Results of Operations Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024 Our financial results for the nine months ended September 30, 2025 are summarized as follows in comparison to the nine months ended September 30, 2024. 2025 2024 Variance Revenue, net $ 13,806,059 $ 15,121,980 $ (1,315,921 ) Cost of revenue 5,383,786 5,183,328 200,458 Total gross profit 8,422,273 9,938,652 (1,516,379 ) Operating Expenses: Royalties 420,480 719,668 (299,188 ) Salaries, wages and benefits 3,517,650 4,654,560 (1,136,910 ) Selling, general and administrative 8,701,887 5,420,872 3,281,015 Operating loss (4,217,744 ) (856,448 ) (3,361,296 ) Other income (expenses) (9,052,292 ) (2,074,922 ) (6,977,370 ) Loss before income taxes $ (13,270,036 ) $ (2,931,370 ) $ (10,338,666 ) Revenues Revenues decreased by $1,315,921, or 9%, for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The decrease is primarily attributable to the change in how the Company sold its content subscription licenses during the nine months ended September 30, 2025 as compared to prior years leading to an increase in deferred revenues. Cost of Revenues Cost of revenues increased by $200,458, or 4%, for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The increase is primarily attributable to an increase in simulator costs of $338,627 and a decrease in other costs of $163,184. Operating Expenses Total operating expenses increased by $1,844,917, or 17%, for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. This was primarily due to (i) an increase of professional fees of $1,011,516, or 55%, due to an increase in fees related to the PIPE Exchange Agreements and other SEC filing requirements, and (ii) an increase in other selling, general and administrative expenses of $1,932,682, or 105%, due primarily to an increase in amortization expense related to capitalized software of $472,965, which is offset by a decrease in salaries, wages and benefits of $1,136,910, due primarily to an increase in salaries being capitalized for time spent on developing new versions of the Company’s platform software. Other Income (Expenses) Other income (expenses) increased by $6,977,370, or 336%, for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The increase is primarily attributable to a loss on extinguishment of debt of $6,135,160 that resulted from the PIPE Exchange Agreements and an increase in interest expense, amortization expense of the PIPE Convertible Notes debt discount, the write-off of remaining debt discounts upon the conversion of related to the PIPE Convertible Notes, and the make-good interest expense upon the conversion of related PIPE Convertible Notes. Comparison of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024 Our financial results for the three months ended September 30, 2025 are summarized as follows in comparison to the three months ended September 30, 2024. 2025 2024 Variance Revenue, net $ 4,105,965 $ 6,236,795 $ (2,130,830 ) Cost of revenue 1,258,628 1,924,093 (665,465 ) Total gross profit 2,847,337 4,312,702 (1,465,365 ) ‍ Operating Expenses: Royalties 56,465 166,631 (110,166 ) Salaries, wages and benefits 564,624 1,695,678 (1,131,054 ) Selling, general and administrative 3,339,742 1,578,112 1,761,630 Operating loss (1,113,494 ) 872,281 (1,985,775 ) Other income (expenses) (6,164,750 ) (932,456 ) (5,232,294 ) Loss before income taxes $ (7,278,244 ) $ (60,175 ) $ (7,218,069 ) 24 Revenues Revenues decreased by $2,130,830, or 34%, for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease is primarily attributable to the change in how the Company sold its content subscription licenses during the three months ended September 30, 2025 as compared to prior years leading to an increase in deferred revenues. Cost of Revenues Cost of revenues decreased by $665,465, or 35%, for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The decrease is primarily attributable to the decrease in revenue. The gross profit margin remained consistent for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. Operating Expenses Total operating expenses increased by $520,410, or 15%, for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. Selling, general and administrative expenses increased by $1,761,630, or 111%, due primarily to an increase in professional fees of $410,260, an increase in contract labor of $269,653, and an increase in amortization expense related to capitalized software of $153,960. This was offset by a decrease in salaries, wages and benefits of $1,131,054, or 67%, due primarily to an increase in salaries being capitalized for time spent on developing new versions of the Company’s platform software. Other Income (Expenses) Other income (expenses) increased by $5,232,069, or 561%, for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The increase is primarily attributable to a loss on extinguishment of debt of $6,135,160 that resulted from the PIPE Exchange Agreements and is offset by a decrease in interest expense, amortization expense of the PIPE Convertible Notes debt discount, the write-off of remaining debt discounts upon the conversion of related to the PIPE Convertible Notes, and the make-good interest expense upon the conversion of related PIPE Convertible Notes due to the PIPE Convertible Notes being exchanged for Series A Preferred Convertible Stock and Series A Preferred Warrants as part of the PIPE Exchange Agreements. Liquidity and Capital Resources As of September 30, 2025, we had cash on hand of $13,535,121 and a working capital surplus of $4,159,517, as compared to cash on hand of $10,882,077 and a working capital deficiency of $982,237 as of December 31, 2024. The increase in working capital surplus is primarily attributable to an increase in cash on hand of $2,653,044, an increase of accounts receivable, net of $847,603, an increase in prepaid expenses and other current assets of $584,504 and a decrease in dividend notes payable of $3,905,561 which was offset primarily by an increase in deferred revenue of $3,073,610. The Company’s operating activities consume the majority of its cash resources. The Company anticipates that it will continue to incur operating losses as it executed its development plans for 2025, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company has previously funded, and plans to continue funding, these losses with the sale of equity and convertible notes. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. 25 Working Capital September 30, December 31, 2025 2024 Current assets $ 19,158,839 $ 14,792,931 Current liabilities 14,999,322 15,775,168 Working capital surplus (deficiency) $ 4,159,517 $ (982,237 ) The increase in current assets is primarily due to an increase in cash on hand of $2,653,044, an increase of accounts receivable, net of $847,603, and an increase in prepaid expenses and other current assets of $584,504. The decrease in current liabilities is primarily due to a decrease in dividend notes payable of $3,905,561 which was offset primarily by an increase in deferred revenue of $3,073,610. Cash Flows For the Nine Months Ended September 30, 2025 2024 Cash Flows: Net cash provided by (used in) operating activities $ (1,978,411 ) $ 3,071,781 Net cash used in investing activities $ (2,493,600 ) $ (1,967,533 ) Net cash provided by financing activities $ 7,125,055 $ 950,373 Operating Activities Net cash used in operating activities was $1,978,411 for the nine months ended September 30, 2025, which was primarily due to the net loss of $13,270,036 and an increase in accounts receivable, net of $922,416, which was partially offset by non-cash expenses of $9,766,236, an increase in deferred revenue of $3,073,610, and an increase in accrued and other current liabilities of $595,020. Net cash provided by operating activities was $3,071,781 for the nine months ended September 30, 2024, which was primarily due to the net loss of $2,931,370 and an increase in accounts receivable, net of $2,143,225, which was partially offset by non-cash expenses of $974,145 and the liquidation of the marketable securities account of $2,478,953. Investing Activities Net cash used in investing activities was $2,493,600 for the nine months ended September 30, 2025, which was due to the increase in capitalized software of $2,395,596 and the purchase of equipment of $98,004. Net cash used in investing activities was $1,967,533 for the nine months ended September 30, 2024, which was the result of an increase in capitalized software of $1,967,418. Financing Activities Net cash provided by financing activities was $7,125,055 for the nine months ended September 30, 2025, which was primarily due to $2,520,000 of net proceeds from PIPE Convertible Notes and $4,999,500 of proceeds from the exercise of Series A Preferred Warrants. Net cash provided by financing activities was $950,373 for the nine months ended September 30, 2024, the Company received net proceeds from the Merger of $2,325,315, made debt payments of $294,005, paid $15,716 of assumed liabilities, paid $100,000 on a loan assumed in the Merger, and paid off the line of credit of $1,980,937. The Company received proceeds of $1,000,000 from the Company’s chief executive officer. 26 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk from the information provided in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of TruGolf Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2024.