TRUG

Business Context and Reporting Period

Company: TruGolf Holdings, Inc. (Nasdaq: TRUG)
Reporting Period: Fiscal Year Ended December 31, 2025
Business Overview: TruGolf designs, manufactures, and sells indoor golf simulation hardware (launch monitors, simulators) and software (E6 GOLF, E6 CONNECT) for residential and commercial markets. The company also operates a franchise subsidiary, TruGolf Links Franchising, LLC.
Corporate Status: Emerging Growth Company; Smaller Reporting Company. The company completed a redomestication from Delaware to Nevada in March 2026 (subsequent event).

Key Financial Metrics (Year Ended Dec 31, 2025)

Note: Debt figures exclude the $1.0M perpetual gross sales royalty payable.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 11.3% to $18.9M. While hardware sales increased 7.1% to $14.7M, content software subscription revenue plummeted 49.0% to $3.7M due to changes in license sales timing, resulting in $1.3M of deferred revenue.
• Gross Margin Compression: Gross margin dropped from 65.2% to 50.4%. This was primarily driven by a one-time, non-recurring inventory adjustment of $2.2M related to an accounting system transition. Excluding this adjustment, adjusted gross margin was approximately 62.1%.
• Operating Expenses: Total operating expenses remained relatively flat ($15.6M vs $16.0M). However, the composition shifted significantly: Salaries decreased 50.4% due to capitalizing $3.2M in software development costs, while SG&A increased 65.0% due to higher contractor costs and amortization of capitalized software.
• Debt Restructuring: The company extinguished all PIPE Convertible Notes ($3.9M principal) by exchanging them for Series A Convertible Preferred Stock. This resulted in a $6.1M non-cash loss on extinguishment of debt but significantly reduced interest expense by 53.0%.
• Stock Splits: The company effected a 1-for-50 reverse stock split in June 2025 and a 1-for-10 reverse stock split in March 2026. All share data is retroactively adjusted.

Guidance, Outlook, Risks, and Contingencies

• Liquidity Outlook: Management believes existing resources (~$7.8M unrestricted cash + $1.2M credit line availability) are sufficient to fund operations for at least the next 12 months. However, long-term liquidity depends on revenue growth and potential future capital raises.
• Nasdaq Compliance: The company regained compliance with Nasdaq listing requirements in August 2025 but is subject to a one-year Mandatory Panel Monitor. Failure to maintain compliance during this period could lead to expedited delisting.
• Internal Controls: The company identified a material weakness in internal controls over financial reporting due to a lack of risk assessment procedures, insufficient documentation, and the absence of a full-time CFO. Remediation plans are underway.
• Key Risks:
  • Capital Needs: The company is not profitable and may need to raise additional capital, potentially causing dilution.
  • Supply Chain: Reliance on specialized components and potential disruptions could impact margins and delivery.
  • Competition: Intense competition from major players (TrackMan, Foresight, etc.) in the golf simulation market.
  • Seasonality: Sales are historically stronger in Q4 and Q1 due to weather patterns.
• Unusual Items: The $2.2M inventory adjustment and $6.1M debt extinguishment loss are significant non-cash or one-time items impacting the reported net loss.

Investor Verification Checklist

• Inventory Adjustments: Verify the nature and finality of the $2.2M inventory reconciliation adjustment to ensure it is truly non-recurring.
• Software Revenue Recognition: Confirm the timing and recognition schedule of the $1.3M deferred software revenue to assess future revenue visibility.
• Capitalized Software Costs: Review the amortization schedule for the $3.2M capitalized software development costs and the assumptions regarding their useful life (estimated at 3 years).
• Nasdaq Monitoring: Monitor the company's status during the one-year Mandatory Panel Monitor period to assess delisting risk.
• Internal Control Remediation: Track progress on hiring a full-time CFO and implementing formal internal control policies to address the material weakness.
• Debt Maturities: Verify the repayment plan for the $1.75M in debt obligations due within the next 12 months, including the ARJ Trust note and related party loans.