S-1/A: TruGolf Holdings Navigates Nasdaq Compliance and Funding Challenges Amidst Growth in Indoor Golf Market

TruGolf Holdings, Inc. is addressing Nasdaq listing deficiencies and securing new capital through an equity purchase facility and convertible notes, while reporting increased revenue and expanding its indoor golf simulator and software business.

Summary

• TruGolf Holdings, Inc. (TRUG) is an indoor golf software and hardware company, operating through its subsidiary TruGolf, Inc. (Nevada Corporation) and TruGolf Links Franchising, LLC.
• The company reported a net loss of $2,670,322 for the three months ended March 31, 2025, compared to a net loss of $1,301,864 for the same period in 2024.
• Revenue increased by 8% to $5,389,230 for Q1 2025, up from $5,012,022 in Q1 2024, primarily due to increased product acceptance and market penetration, and the rollout of its franchise model.
• Cost of revenues decreased by 12% to $1,726,199 in Q1 2025, mainly due to a $100,237 decrease in inventory adjustments and a $160,000 decrease in shipping costs.
• Operating expenses increased by 23% to $4,897,255 in Q1 2025, driven by a 49% increase in selling, general and administrative expenses, including $364,000 in contracted labor, $160,000 in marketing, and $180,000 in professional fees.
• Other expenses increased by 301% to $1,436,098 in Q1 2025, largely due to interest expense, amortization of PIPE Convertible Notes debt discount, and make-good interest expense on converted notes.
• As of March 31, 2025, the company had cash on hand of $12,615,820 and a working capital surplus of $29,551, an improvement from a working capital deficiency of $982,237 as of December 31, 2024.
• The improvement in working capital was primarily a result of $2,250,000 gross proceeds from PIPE Convertible Notes issued in Q1 2025, partially offset by a $1,000,000 increase in deferred revenue.
• The company is addressing Nasdaq listing deficiencies related to minimum Market Value of Publicly Held Shares, minimum bid price, and minimum shareholders' equity, having received a temporary exception until July 8, 2025 (Bid Price Rule) and July 30, 2025 (MVPHS and Equity Rules).
• A one-for-fifty (1:50) reverse stock split was completed on June 23, 2025, reducing Class A common stock from approximately 40.5 million to 0.81 million shares, and Class B common stock from 10 million to 0.2 million shares, to help regain Nasdaq compliance.
• The company entered into an Equity Purchase Facility Agreement (EPFA) on May 14, 2025, with an institutional investor, allowing it to sell up to $20 million in Class A common stock, subject to stockholder approval.
• On April 21, 2025, approximately $3.9 million in outstanding notes payable (including accrued interest) were converted into 165,663 shares of Class B common stock and 84,662 shares of Class A common stock at a conversion price of $15.60 per share.
• The company's PIPE Convertible Notes program has seen additional funding, with $2.1 million in principal issued on December 16, 2024, and $2.8 million on January 8, 2025, for gross proceeds of $1.89 million and $2.52 million, respectively.
• PIPE Warrants were exchanged for Series A Preferred Stock and new warrants to purchase Series A Preferred Stock on April 22, 2025, with each Series A Preferred Stock convertible into a maximum of 500 shares of Class A Common Stock at a floor conversion price of $3.50 per share.

Sentiment

Score: 4

Explanation: The company shows revenue growth and improved working capital, indicating some operational progress. However, the significant increase in net loss and operating loss, coupled with ongoing Nasdaq compliance issues and reliance on dilutive financing, points to substantial financial challenges and uncertainty. The positive strategic initiatives are overshadowed by the immediate financial and regulatory hurdles.

Positives

• Revenue increased by 8% for the three months ended March 31, 2025, compared to the same period in 2024, indicating growing product acceptance and market penetration.
• Cost of revenues decreased by 12% in Q1 2025, driven by lower inventory adjustments and shipping costs, contributing to improved gross profit.
• Total gross profit increased by $610,032 in Q1 2025 compared to Q1 2024.
• Working capital improved significantly from a deficiency of $982,237 as of December 31, 2024, to a surplus of $29,551 as of March 31, 2025.
• The company secured an Equity Purchase Facility Agreement (EPFA) for up to $20 million, providing a potential source of future capital.
• Conversion of $3.9 million in notes payable into common stock reduces debt obligations and strengthens the balance sheet.
• The company's Apogee launch monitor and E6 Apex software are highlighted as competitive advantages due to accuracy, ease-of-use, and photorealistic graphics.
• TruGolf's software is compatible with 90% of golf technology hardware in the global market, unifying the space and expanding customer reach.
• The company is expanding into a franchise model for indoor golf entertainment venues, with a pre-sales requirement designed to ensure profitability for franchisees.
• Plans to create a Virtual Golf Association (VGA) and monetize extensive swing data collected since 2017 present new revenue opportunities.
• Strategic partnerships with former NFL players Ezekiel Elliott and Brice Butler are expected to enhance brand visibility and market reach.
• The company has diversified its supply chain for raw materials and parts, mitigating risk by having multiple sources for key components like cameras and screens.

Negatives

• Net loss increased significantly to $2,670,322 for the three months ended March 31, 2025, from $1,301,864 in the prior year period.
• Operating loss increased to $1,234,224 in Q1 2025 from $943,685 in Q1 2024.
• Other expenses increased by 301% in Q1 2025, primarily due to higher interest expense and amortization of debt discounts.
• The company has an accumulated deficit of approximately $23.8 million as of March 31, 2025, and expects to incur further operating losses through the end of 2025.
• Negative cash flows from operations were $449,119 for the three months ended March 31, 2025.
• The company received multiple Nasdaq deficiency letters for failing to meet minimum Market Value of Publicly Held Shares, minimum bid price, and minimum shareholders' equity requirements.
• There is no assurance that the company will regain or maintain Nasdaq compliance, and delisting could occur.
• The dual-class stock structure concentrates voting power with founders, limiting influence for other investors and potentially affecting stock price.
• Sales of a substantial number of shares by selling securityholders could significantly depress the market price of Class A Common Stock.
• The conversion of Series A Preferred Stock into Class A Common Stock will materially dilute the ownership interest of existing stockholders.
• The company has a material weakness in its internal controls, which could lead to unreliable financial reporting and misinformation.
• Reliance on a single vendor for turf (Controlled Products) and screens (Allied) poses supply chain risk, despite ongoing negotiations for alternative suppliers.
• The company's ability to sell products is dependent on the quality of technical support, and failure to deliver high-quality support could harm sales and reputation.
• The company has not yet monetized its extensive swing data, despite preliminary discussions with a third party.

Risks

• Dependence on the strength and reputation of brands, which could be harmed by product defects, recalls, counterfeit products, or ineffective marketing.
• Need to raise additional capital to fund business plans and growth strategy, which could result in significant dilution to existing stockholders or unfavorable terms.
• Increasing costs for raw materials, labor, and freight could negatively affect gross margin and profitability.
• Continued disruption in supply chain reliability and predictability could materially adversely impact operations, leading to delivery delays and increased costs.
• Inability to effectively respond to changes in market trends and consumer preferences could adversely affect market share, net sales, and profitability.
• Challenges in appealing to new consumers (e.g., female and young golfers) while maintaining loyalty of core consumers could adversely affect net sales and brand image.
• Dependence on existing management and key employees, with failure to retain or attract qualified new personnel (e.g., a chief financial officer) potentially hindering growth strategy.
• Ineffective marketing through online advertising and social media, or unsuccessful traditional advertising, could adversely affect business.
• Significant security breaches of information technology systems or failure to comply with privacy and security laws could damage reputation, brands, and business.
• Global economic, political, and industry conditions (e.g., wars, inflation, exchange rate fluctuations) may have a material adverse effect on business and results of operations.
• Intense competition in the sports equipment and technology industries, requiring continuous innovation and effective response to competitors.
• Failure to continue technical innovation and maintain high-quality products could lead to declining consumer demand.
• Inability to obtain or maintain high-quality endorsers, or negative actions by endorsers, could harm brand image and financial condition.
• Seasonality of business operations, with expected fluctuations in sales volume and operating results, particularly higher revenues in Q1 and Q4.
• Failure to accurately forecast consumer demand could lead to excess inventories or inventory shortages, impacting operating margins and cash flows.
• Ineffective functioning of technology-based systems for online shopping could materially adversely affect operating results and digital commerce growth.
• Significant investments in business and operations may fail to produce expected returns, adversely affecting financial results.
• Sensitivity to consumer spending and general economic conditions, with downturns potentially impacting product purchases.
• Material weakness in internal controls, leading to unreliable financial reporting and potential regulatory action.
• High costs of being a public company, potentially precluding financing or equity investment on acceptable terms and threatening going concern status.
• Dependence on quality of technical support, with failure to deliver high-quality services adversely affecting sales and reputation.
• Difficulty in integrating E6 Connect or E6 Apex with third-party applications could inhibit sales.
• Failure to adequately protect intellectual property and curb counterfeit merchandise could injure brand and negatively affect sales.
• Potential for product liability lawsuits or claims, which could harm financial condition and liquidity.
• Fluctuations in tax obligations and effective tax rate, and potential changes in tax laws, could negatively affect operating results.
• Non-compliance with FTC Endorsement Guides or other advertising standards could lead to investigations, penalties, and reputational damage.
• Reduced disclosure requirements as a smaller reporting company may make common shares less attractive to investors, leading to less active trading or more volatile share price.
• Anti-takeover provisions in governing documents could delay or prevent a change of control, limiting stockholders' ability to receive a premium for shares.
• Sales of a substantial number of securities by selling securityholders could cause the price of securities to decrease significantly.
• Dilution of ownership interest of stockholders due to conversion of Series A Preferred Stock into Class A Common Stock, especially with potential conversion price adjustments.

Future Outlook

The company expects to continue incurring operating losses into the near future as it executes its development plans for 2025 and other strategic initiatives. It plans to fund these losses through equity sales and convertible notes. The strategic plan focuses on extensive promotion of the Apogee hardware, aligning operations to manage demand, optimizing service and installation teams, and implementing new marketing initiatives including a redesigned website and expanded social media campaigns. The company also plans to open a regional office in EMEA, formalize international distributor partnerships, establish a joint venture office in Asia, and launch new VGA online tournaments. Future product releases include the next generation of Apogee, the Mini Trainer, and portable frame systems, while phasing out legacy launch monitor products.

Management Comments

• "We believe that it is important to understand the macro-economic trends of indoor golf as a sport, as a culture, and as a movement, to better understand the market for our indoor golfing simulators and software."
• "Our planned products are aligned directly with these findings as our Apogee launch monitor is an indoor only, and ceiling mounted device ideally for commercial facilities, yet equally beneficial to residential use."
• "Our software, both E6 CONNECT, and APEX have power tools for commercial facilities to make playing, improving and enjoying golf easier than ever."
• "While our software is available on 90% of hardware in the market this allows us to access customers for use indoor, outdoor, and residential, as well as commercial."
• "In addition to these hardware and software solutions targeting directly the market segments we will be launching a franchise solution to capitalize on the powerful demand for commercial offerings."
• "We believe that all of these factors combine to create a significant opportunity to capitalize on a growing sport, a growing segment of that sport, and a convergence of demand and popularity seldom seen in virtual participation athletics indoor golf."
• "Our primary objective is to drive engagement, advocacy, and sales of our product portfolio, with an initial focus on expanding our Apogee hardware rollout and reinforcing our softwares market penetration, while also continuing to roll out our planned franchise offering, the VGA and working to monetize our swing and other data."
• "Our secondary marketing objective is to increase overall awareness and reputation of our collective products and brand in each vertical to drive consumer preference and adoption."
• "Management believes the plan outlined above provides an opportunity for the Company to continue as a going concern."

Industry Context

The indoor golf market is experiencing significant growth, with off-course golf activities (including simulators) eclipsing on-course play for the first time in 2022, reaching approximately $27.9 million. The total addressable market for golf products was estimated at $1.4 billion in 2022, with a CAGR of 11.05% forecast to reach $3.8 billion by 2031. North America holds the largest market share at 36%. Indoor golf simulators account for 69% of the total market. TruGolf Nevada currently holds a 4.28% market share. The company's strategy aligns with these trends by focusing on indoor, commercial-oriented products like the Apogee launch monitor and E6 Apex software, and by launching a franchise solution to capitalize on commercial demand. The decline in outdoor golf (due to costs, environmental factors, course closures, and time commitment) further supports the growth opportunity in indoor golf.

Comparison to Industry Standards

• TruGolf Nevada currently maintains a 4.28% market share in the total addressable market for golf products, which was estimated at $1.4 billion in 2022.
• The company's E6 Connect software is compatible with over twenty-four third-party golf technology hardware manufacturers, covering roughly 90% of golf technology hardware in the global market, allowing for peer-to-peer play across different systems, which is a significant competitive advantage over hardware-only providers like Trackman, FullSwing, Foresight, and GolfZon.
• TruGolf's hardware offerings range from under $400 to over $100,000 for custom projects, providing a wider pricing range compared to competitors who often focus on a narrow price range (e.g., indoor/fixed launch monitors from Uneekor, FullSwing, FlightScope, and Foresight typically range from $10,000 to $50,000, while portable devices from Trackman, Garmin, and Voice Caddie are priced between $600 and $20,000).
• The company's proprietary physics and gaming engine, developed over four decades, delivers highly precise ball flight, bounce, roll, and object collision dynamics, influenced by customizable environmental factors, which is presented as unmatched by competitors.
• E6 Apex software aims to provide pixel-accurate versions of golf courses, with accuracy within 2 inches on fairways and 2 centimeters on greens, enabling a true handicapping system that bridges indoor and outdoor play, differentiating it from lower-quality, lower-price point fantasy simulator solutions.
• The Apogee launch monitor's auto-calibration function (less than five minutes, compared to 20-30 minutes for older TruFlight systems) and Laser Launchpad are designed to improve 'Pace of Play' (POP) compared to traditional outdoor golf (18 holes in 1 hour indoors vs. 3 hours outdoors) and potentially other indoor systems.
• Competitors like Trackman, GolfZon, Uneekor, and FullSwing also offer proprietary software, typically charging annual recurring subscriptions ranging from $300 to $5,000, while software-only competitors like GSPro, The Golf Club, and World Golf Tour offer subscriptions between $200 and $1,000. TruGolf's pricing structure for its E6 software is not explicitly detailed for direct comparison but is a key revenue stream.

Corporate Governance

Legal Proceedings

• No material pending legal proceedings in which the Company or any of its subsidiaries is a party or in which any director, officer, or affiliate, or 5% owner is a party adverse to the Company, or has a material interest adverse to the Company, as of the filing date.

Related Party Transactions

• The company has two notes payable with ARJ Trust, a trust indirectly controlled by the CEO, totaling $650,000 as of March 31, 2025, with 8.50% annual interest rates. Maturity dates were extended to September 30, 2025.
• A $1,750,000 zero interest rate note payable with McKettrick (a former shareholder) for share repurchase, with an outstanding principal balance of $800,000 as of March 31, 2025. Annual installments of $250,000 are due on December 21 each year, maturing December 1, 2027.
• A $220,000 zero interest rate note payable with Carver (a former shareholder) for share repurchase, with an outstanding principal balance of $111,000 as of March 31, 2025. Semi-annual installments of $18,500 are due on March 31 and September 30 each year, maturing October 1, 2027.
• The CEO loaned the company an aggregate of $2 million for operating expenses during 2024, with a zero interest rate and no stated maturity date. The principal balance was $2,000,000 as of March 31, 2025.
• On April 21, 2025, approximately $3.9 million in outstanding notes payable (including accrued interest) originally issued in November 2022, including those held by officers and directors, were converted into 165,663 shares of Class B common stock and 84,662 shares of Class A common stock at $15.60 per share.
• Christopher Jones, Steven R. Johnson, and David Ashby, as TruGolf Founders, hold Class B Common Stock with 25 votes per share, representing approximately 88.6% of the voting power for director elections, giving them concentrated control.

Stakeholder Impact

• **Shareholders:** Face significant dilution risk from the conversion of Series A Preferred Stock and the Equity Purchase Facility Agreement. The dual-class structure limits influence for Class A shareholders. Nasdaq listing compliance issues create uncertainty and potential for delisting, impacting liquidity and share price. Ongoing operating losses and accumulated deficit pose a risk to investment value.
• **Employees:** The company continues to invest in its workforce, with increased salaries, wages, and benefits. Stock-based compensation plans are in place to incentivize employees. However, the company's going concern risk could impact job security.
• **Customers:** Benefit from continued product innovation (Apogee, E6 Apex), expansion of product offerings (multi-sport games), and planned franchise locations for increased accessibility. However, potential supply chain delays and reliance on technical support quality could affect customer experience.
• **Suppliers:** The company is diversifying its supplier base for key components, which could create new opportunities for some suppliers while potentially reducing reliance on single vendors. Rectified past delivery delays indicate improved supplier relationships.
• **Creditors:** The company has significant debt obligations, including PIPE Convertible Notes and related party notes. The conversion of notes to equity reduces some debt, but the company's ongoing losses and need for further financing indicate continued reliance on debt or equity, impacting creditor risk assessment.

Next Steps

• Hold a special meeting of stockholders no later than 90 calendar days following May 14, 2025, to seek approval for the issuance of shares under the Equity Purchase Facility Agreement (EPFA).
• Continue efforts to regain and maintain compliance with Nasdaq listing rules, specifically the Bid Price Rule by July 8, 2025, and the MVPHS and Equity Rules by July 30, 2025.
• Execute the extensive promotion of the Apogee hardware and align marketing, sales, manufacturing, installation, and service operations to manage customer demand.
• Optimize service and installation teams through organizational realignment and allocation of additional resources to manage seasonal fluctuations.
• Implement new marketing initiatives, including the launch of a redesigned website, expanded paid social media campaigns, and ongoing public relations efforts.
• Onboard new strategic partners for the Virtual Golf Association (VGA) online tournaments.
• Open a regional office serving Europe, the Middle East, and Africa (EMEA) and formalize two additional international distributor partnerships.
• Establish the newly announced joint venture office in Asia.
• Launch the next generation of Apogee, the Mini Trainer, and portable frame systems.
• Continue phasing out legacy launch monitor products such as TruTrack and TruFlight.
• Continue to evaluate the impact of new accounting pronouncements (ASU 2023-09 and ASU 2025-01) on consolidated financial statements and disclosures.

Key Dates

Recommendation

Keywords

Indoor Golf, Golf Simulators, Golf Software, E6 Connect, Apogee Launch Monitor, Nasdaq Compliance, Convertible Notes, Equity Purchase Facility, Franchising, Virtual Golf Association, Sports Technology, SEC Filing, S-1/A, Financial Performance, Risk Factors, Capital Raise, Reverse Stock Split, Corporate Governance, Related Party Transactions