What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-20 · 150 added, 107 removed, 95 unchanged (73% of the section changed)

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Note Regarding Forward Looking Statements

Quarterly Report on Form 10-Q for the three months ended March 31, 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.

Quarterly Report on Form 10-Q for the three and six months ended June 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”).

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.

forward-looking statements in this Form 10-Q are not guarantees of future performance, conditions or results, and involve a number of

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statements speak only as of the date of this Form 10-Q and are subject to numerous risks, including, but not limited to the following:

occurrence of any event, change, or other circumstances, including the outcome of any legal proceedings that may be instituted against

ability to maintain the listing of our securities on Nasdaq, and the potential liquidity and trading of our securities;

occurrence of any event, change, or other circumstances, including the outcome of any legal

proceedings that may be instituted against us;

ability to maintain the listing of our securities on Nasdaq, and the potential liquidity

and trading of our securities;

risk of disruption to our current plans and operations;

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;

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;

related to our business;

in applicable laws or regulations;

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;

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;

ability to maintain existing license agreements;

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We also offer multi-sport gaming applications.

Our franchise operations are conducted through our wholly-owned subsidiary, TruGolf Links Franchising, LLC, (“Links”)

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 common stock was reduced from 1,000,000,000 shares to 100,000,000 shares.

All share amounts have been retroactively

adjusted for the Reverse Stock Split.

Our franchise operations are conducted through our wholly-owned subsidiary,

TruGolf Links Franchising, LLC, (“Links”)

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 10,000,000 to 1,000,000.

All share amounts have been retroactively adjusted for the Reverse Stock

of Operations

of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025

of the Three Months Ended June 30, 2026, to the Three Months Ended June 30, 2025

Cost of revenue

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Operating loss

Other income (expenses)

Other expenses, net

Loss before income taxes

$ (3,321,470 )

$ (2,670,322 )

remained relatively consistent for the three months ended March 31, 2026, decreasing by $217,563, or 4.2%, compared to the three months

ended March 31, 2025.

The decrease was primarily attributable to the decrease in golf simulator revenue, which decreased by $228,321, to $3,664,866 during the three months ended March 31, 2026, as compared to the

prior year period.

of revenues increased by $537,152, or 29.8%, for the three months ended March 31, 2026, as compared to the three months ended March

The increase was partially attributable to (i) the allocation of salaries and wages of warehouse employees of $229,649,

during the three months ended March 31, 2026, compared to its absence during the prior year period and (ii) the increase in shipping costs of $165,199 during the three months ended March 31, 2026 as compared to the

prior year period.

operating expenses decreased by $694,360, or 14.9%, for the three months ended March 31, 2026, as compared to the three months ended

March 31, 2025.

increased by $1,481,316, or 34.4% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

is primarily attributable to higher product acceptance, which resulted in increased revenue recognition from product sales, as well as

the recognition of previously deferred revenue upon satisfaction of the applicable revenue recognition criteria.

of revenue decreased by $211,372, or 8.3% for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.

The decrease was partially attributable to (i) the allocation of salaries and wages of warehouse employees of $330,204 during the three

months ended June 30, 2026, compared to its absence during the prior year period, (ii) the increase in shipping costs of $192,590 during

the three months ended June 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.

operating expenses increased by $44,668, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.

Wages and Benefits

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.

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.

General and Administrative

general and administrative decreased by $189,687, or 7.2%, to $2,447,339 for the three months ended June 30, 2026, compared to $2,637,026,

for the three months ended June 30, 2025.

The overall decrease was primarily attributable 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 an increase in amortization expense related

to capitalized software costs to $286,513 for the three months ended June 30, 2026, from $111,188 for the comparable prior-year period,

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.

Expenses, net

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

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.

of the Six Months Ended June 30, 2026, to the Six Months Ended June 30, 2025

Cost of revenue

Total gross profit

Operating expenses

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

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, general and administrative

Operating loss

Other expenses, net

Loss before income taxes

$ (1,895,102 )

$ (5,991,792 )

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

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.

Wages and Benefits

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.

General and Administrative

SG&A increased by $459,045, or 16.8%, to $3,184,164 for the three months ended March 31, 2026, compared

to $2,725,119 for the prior year period.

The increase was primarily driven by the following:

(i) amortization expense related to capitalized

software costs increased to $469,213 in 2026 from $100,000 in 2025, (ii) an increase in rent expense of $104,644 during the three months

ended March 31, 2026, as compared to the prior year period, primarily related to a lease modification during the year ended December

31, 2025, which resulted in an increase in the associated monthly rent, 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.

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.

Income (Expenses)

income (expenses) decreased by $1,283,383, or 89.4%, for the three months ended March 31, 2026, as compared to the three months ended

March 31, 2025.

The decrease was primarily attributable to the elimination of interest obligations 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

expenses, net decreased by $2,509,025, or 86.9%, for the six months ended June 30, 2026, compared with the six months ended June 30,

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.

and Capital Resources

of March 31, 2026, we had cash on hand of $10,936,670 and a working capital deficit of $1,282,452, as compared to cash on hand of

of June 30, 2026, we had cash on hand of $8,474,349 and a working capital deficit of $2,345,394 as compared to cash on hand of $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, an increase of accounts receivable, net of $254,128, an increase in

inventory of $497,411 which was partially offset by an increase in accounts payable of $419,485 and an increase in deferred revenue

of $1,050,144.

The decrease in working capital is primarily attributable to a decrease

in cash on hand of $4,094,910, an increase of accounts receivable, net of $204,304, an increase in inventory of $528,059, and an increase

in prepaid expenses of $72,704, which was partially offset by an increase in accounts payable of $481,822, an increase in other current

liabilities of $129,704 and a decrease in deferred revenue of $379,836 and a decrease of $150,000 in note payable to related parties.

Company’s operating activities consume the majority of its cash resources.

The Company anticipates that it will continue to incur

operating losses as it executes its development plans for 2026, 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.

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.

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.

the three months ended March 31, 2026, our net cash used in investing activities was $1,144,302 as compared to net cash used in

investing activities of $334,690 during the three months ended March 31, 2025.

The increase in cash used in investing activities was

primarily due to an increase in capitalized costs for software development.

the three months ended March 31, 2026, our net cash used in financing activities was $366,095 as compared to net cash provided by of

$2,517,552 during the three months ended March 31, 2025.

The Company anticipates that it will continue to

incur operating losses as it executes its development plans for 2026, as well as other potential strategic and business development

In addition, the Company has had and expects to have negative cash flows from operations, at least into the near

The Company has previously funded, and plans to continue funding, these losses primarily with the sale of equity and

convertible notes, although no assurances can be given that such financing will be available on acceptable terms or at all.

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.

the six months ended June 30, 2026, our cash used in operating activities was $1,400,386 compared to $1,354,546 during the six months

ended June 30, 2025.

the six months ended June 30, 2026, our net cash used in investing activities was $2,175,802 as compared to net cash used in investing

activities of $1,614,744 during the six months ended June 30, 2025.

The increase in cash used in investing activities was primarily due

to an increase in capitalized costs for software development.

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

$2,520,000 in cash proceeds from the Convertible PIPE Notes in 2025.

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.

Accounting Estimates

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and uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

These descriptions should be read in conjunction with Note 2 — Summary of Significant Accounting Policies, which describes the

underlying accounting policies.

The descriptions should be read in conjunction with Note 2 – Summary of Significant Accounting Policies, which describes the underlying

accounting policies.

for Current Expected Losses

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history, aging, current economic conditions, and management’s judgment regarding ultimate collectability.

As of March 31, 2026,

As of June 30, 2026,

we recorded an allowance of $1,372,500 against gross accounts receivable of $2,637,513, representing a reserve rate of 52.0%.

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Software Development Costs and Technological Feasibility and Useful Life

capitalize software development costs once technological feasibility is established and cease capitalization when the product is

available for general release.

As of March 31, 2026, capitalized software development costs, net of accumulated amortization, were

$4,230,512, and amortization expense was $469,213 for the three months ended March 31, 2026, compared to $100,000 for the three

months ended March 31, 2025.

capitalize software development costs once technological feasibility is established and cease capitalization when the product is available

for general release.

As of June 30, 2026, capitalized software development costs, net of accumulated amortization, were $4,877,603, and

amortization expense was $755,726 for the six months ended June 30, 2026, compared to $433,058 for the six months ended June 30, 2025.

estimates embedded in this balance involve significant judgment.

First, the determination of when technological feasibility is

achieved affects the amount of costs eligible for capitalization versus those that must be expensed as incurred.

An earlier or later

feasibility determination could materially change the amount capitalized in any given period.

Second, we amortize capitalized

software costs over an estimated useful life of three years.

If the actual useful life of our software products proves shorter than

three years due to technological change or loss of market relevance, we would be required to accelerate amortization or record an

impairment charge.

Conversely, if useful lives are longer than estimated, our amortization expense may be overstated.

$4,230,512 net balance subject to this estimate, a change in the estimated useful life from three years to two years would increase

annual amortization expense by approximately $702,000, which would be material to our results of operations.

First, the determination of when technological feasibility is achieved

affects the amount of costs eligible for capitalization versus those that must be expensed as incurred.

An earlier or later feasibility

determination could materially change the amount capitalized in any given period.

Second, we amortize capitalized software costs over

an estimated useful life of three years.

If the actual useful life of our software products proves shorter than three years due to technological

change or loss of market relevance, we would be required to accelerate amortization or record an impairment charge.

Conversely, if useful

lives are longer than estimated, our amortization expense may be overstated.

Given the $4,877,603 net balance subject to this estimate,

a change in the estimated useful life from three years to two years would increase annual amortization expense by approximately $813,000,

which would be material to our results of operations.

Accounting Developments

a discussion of recently issued accounting developments and their impact on our unaudited condensed consolidated financial

statements, refer to Note 2—Summary of Significant Accounting Policies in our Financial Statements.

a discussion of recently issued accounting developments and their impact on our unaudited condensed consolidated financial statements,

refer to Note 2— Summary of Significant Accounting Policies in our Financial Statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis