TruGolf Holdings, Inc. (TRUG) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the three-month period ended March 31, 2026. TruGolf Holdings, Inc. designs, develops, and sells golf simulators and related software for residential and commercial use. The company recently completed a redomestication from Delaware to Nevada and executed a 1-for-10 reverse stock split effective March 27, 2026. All share data in this filing is retroactively adjusted for the split.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Revenue | $5,020,262 | $5,237,825 |
| Gross Profit | $2,682,996 | $3,437,711 |
| Gross Margin | 53.4% | 65.6% |
| Net Loss | $(1,447,294) | $(2,670,322) |
| Net Loss Per Share (Basic/Diluted) | $(2.75) | $(44.24) |
| Cash and Cash Equivalents | $8,836,670 | $10,469,263 (Dec 31, 2025) |
| Working Capital | $(1,282,452) Deficit | $1,076,496 Surplus (Dec 31, 2025) |
| Total Debt (Current + Non-Current) | $3,615,336 | N/A |
Note: Total Debt includes $2.25M in related party notes, $802,738 in bank line of credit, and other notes payable.
Material Changes vs. Prior Period
- Revenue Decline: Net revenue decreased by 4.2% ($217,563) primarily due to a $228,321 drop in golf simulator hardware sales.
- Margin Compression: Gross margin fell from 65.6% to 53.4%. Cost of revenue increased 29.8% due to the reclassification of warehouse employee salaries to cost of revenue and higher shipping costs.
- Operating Expense Reduction: Total operating expenses decreased 14.9% to $3.98M. Salaries and wages dropped 59.2% as the company capitalized $1.07M in software development costs (compared to $270k in the prior year).
- Improved Net Loss: Net loss improved by $1.22M year-over-year, driven largely by a significant reduction in interest expense following the exchange of PIPE convertible notes for Series A Preferred Stock in July 2025.
- Liquidity Shift: The company moved from a working capital surplus of $1.08M at year-end 2025 to a deficit of $1.28M in Q1 2026, driven by cash burn and inventory buildup.
Outlook, Risks, and Unusual Items
- Capitalized Software: The company is aggressively investing in its E6 GOLF platform, capitalizing $1.07M in development costs in Q1 2026. This increases future amortization expenses.
- Series A Preferred Stock: The company holds 4,140 shares of Series A Convertible Preferred Stock with a liquidation preference of ~$3.9M. These shares accrue 10% annual dividends and have complex conversion terms that can significantly dilute common shareholders if the stock price resets.
- Going Concern: Management anticipates continued operating losses and negative cash flows. While they have $10.9M in cash, they rely on future equity or debt financing to fund operations.
- Internal Controls: The company disclosed that its disclosure controls and procedures were not effective as of March 31, 2026, due to a material weakness in internal control over financial reporting.
- Subsequent Events: A new CFO, Steven Passey, was appointed effective May 20, 2026. Additional conversions of Series A Preferred Stock occurred in April 2026.
Investor Verification Checklist
- Working Capital Deficit: Verify the sustainability of operations given the shift from a surplus to a $1.28M deficit and the burn rate of ~$1.6M in cash during the quarter.
- Inventory Valuation: Review the $64k inventory adjustment recorded during a system transition and the 55.1% allowance for doubtful accounts on receivables.
- Dilution Risk: Assess the impact of the Series A Preferred Stock conversion terms, specifically the "reset" provisions and make-whole amounts, on future share count.
- Capitalization Policy: Monitor the trend of capitalizing software costs versus expensing them, as this significantly impacts reported operating expenses and future amortization.
- Related Party Debt: Note the $2.25M in notes payable to related parties (CEO and ARJ Trust) and their repayment terms.