TruGolf Holdings, Inc.

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The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. This management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our filings with the Securities and Exchange Commission (“SEC”) that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. See “Forward-Looking Statements; Risk Factor Summary.”

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References in this management’s discussion and analysis to “we,” “us,” “our,” “the Company,” “our Company” or “TruGolf” refer to TruGolf Holdings, Inc. and its subsidiaries.

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Overview

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Business

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We design, develop, manufacture, and sell golf simulators and related software for residential and commercial applications. Our product offerings include portable, professional, commercial, and custom simulators, as well as standalone software products including E6 Connect and E6 GOLF. We also offer multi-sport gaming applications. Our operations are conducted through our wholly-owned subsidiary, TruGolf, Inc., a Nevada corporation (“TruGolf Nevada”), which has been developing indoor golf simulation software and hardware since 1999.

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On January 31, 2024, we consummated a business combination pursuant to which TruGolf Nevada became our wholly-owned subsidiary, and our name was changed from Deep Medicine Acquisition Corp. to TruGolf Holdings, Inc. We commenced trading on the Nasdaq Capital Market under the ticker symbol “TRUG” on February 1, 2024.

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During the year ended December 31, 2025, several significant developments shaped our financial results and capital structure:

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**Franchise Operations.**Through our subsidiary TruGolf Links Franchising, LLC (“Links”), formed in May 2024, we continued to develop our indoor golf franchise model, generating $13,125 in franchise revenue during the year ended December 31, 2025.

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**Reverse Stock Split.**On June 23, 2025, we effected a 1-for-50 reverse stock split of our Class A and Class B common stock. On March 27, 2026, we effected a 1-for-10 reverse stock split of our Class A and Class B common stock. All share and per share amounts in this discussion have been retroactively adjusted to reflect both reverse stock splits.

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**Nasdaq Compliance.**Following a Nasdaq hearing panel process, we regained full compliance with all Nasdaq continued listing requirements by August 1, 2025. We are currently subject to a one-year Mandatory Panel Monitor through August 2026, during which any subsequent non-compliance with the Equity Rule would result in an expedited delisting determination.

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**PIPE Note Extinguishment.**In July 2025, we exchanged the entire outstanding principal balance of our PIPE Convertible Notes ($3,938,311) for 3,938 shares of our Series A Convertible Preferred Stock, reducing our total debt obligations and eliminating a significant source of dilution from note conversions.

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**Dividend Note Settlement.**In April 2025, we settled approximately $3.9 million in outstanding dividend notes payable through the issuance of Class A and Class B common stock, eliminating these legacy obligations.

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Year Ended December 31, 2025 Compared with Year Ended December 31, 2024

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The following table sets forth our results of operations for each of the years set forth below:

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Revenue

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Net revenues decreased $2,403,652, or 11.3%, to $18,878,997 for the year ended December 31, 2025, compared to $21,282,649 for the year ended December 31, 2024. The following discussion presents each revenue category separately.

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Golf Simulators: Golf simulator revenue, which includes hardware and perpetual software licenses, increased $973,234, or 7.1%, to $14,681,994 for the year ended December 31, 2025, compared to $13,708,760 for the year ended December 31, 2024, primarily driven by increased unit volumes in our commercial channels coupled with growth in residential installations.

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Content Software Subscriptions: Content software subscriptions revenue decreased $3,566,239, or 49.0%, to $3,710,245 for the year ended December 31, 2025, compared to $7,276,484 for the year ended December 31, 2024. The decrease is due to how the Company sold its content subscription licenses during the year ended December 31, 2025, which has resulted in $1,329,184 in deferred revenue to be recognized over the next twelve months.

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Franchise Revenue: Franchise revenue of $13,125 was recognized for the year ended December 31, 2025, representing initial fees from our TruGolf Links Franchising subsidiary, which was formed in May 2024. No franchise revenue was recognized in the prior year.

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Other Revenue: Other revenue, which includes shipping income, installation income, and other ancillary items, increased $176,228 to $473,633 for the year ended December 31, 2025, from $297,405 for the year ended December 31, 2024, primarily driven by an increase in sales of ancillary products used with our MultiSport Arcade system.

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Cost of Goods Sold and Gross Profit

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Cost of goods increased by $1,957,869, or 26.5% to $9,359,380 for the year ended December 31, 2025, as compared to $7,401,511 for the year ended December 31, 2024. Substantially all of the increase was attributable to $2,199,985 in non-recurring inventory adjustments arising from the reconciliation of inventory records in connection with the Company’s transition to a new accounting system during the year. Management does not expect similar adjustments to recur following the completion of the system transition. Excluding these adjustments, cost of goods sold would have been $7,159,395, relatively flat year-over-year, consistent with prior year levels relative to revenue volume. Management believes this adjusted measure provides useful information to investors as it reflects the Company’s ongoing cost structure without the impact of the system transition-related adjustments.

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Gross profit decreased $4,361,521, or 31.4%, to $9,519,617 for the year ended December 31, 2025, compared to $13,881,138 for the year ended December 31, 2024. Gross margin declined to 50.4% from 65.2%, primarily reflecting the impact of the inventory reconciliation adjustments described above and the decline in higher-margin content software subscription revenue. Excluding the $2,199,985 inventory adjustments, adjusted gross profit of $11,719,602 and adjusted gross margin would have been approximately 62.1%, compared to 65.2% in the prior year. Management presents these adjusted measures to provide investors with additional insight into the Company’s underlying operating performance exclusive of the system transition-related adjustments.

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Total operating expenses decreased $362,128, or 2.3%, to $15,621,971 for the year ended December 31, 2025, compared to $15,984,099 for the year ended December 31, 2024. While the aggregate change was nominal, this overall stability masks significant and largely offsetting movements within individual expense categories, each of which is discussed below.

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Salaries, Wages and Benefits: Salaries, wages, and benefits decreased $4,698,464, or 50.4%, to $4,615,951 for the year ended December 31, 2025, compared to $9,314,415 for the year ended December 31, 2024. The decrease reflects a significant increase in the portion of employee compensation capitalized as software development costs during the year. During the year ended December 31, 2025, the Company capitalized $3,231,490 in software development costs, including the associated employee compensation, representing a full year of capitalization activity compared to partial year in 2024, during which capitalization commenced on March 1, 2024. The increase in capitalized compensation reduced the amount of salary expense recognized in the consolidated statements of operations and is consistent with the Company’s continued investment in its suite of software platforms. Total compensation costs incurred, including both expensed and capitalized amounts, were relatively consistent with prior year levels.

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Selling, General and Administrative: SG&A increased $4,336,336, or 65.0%, to $11,006,020 for the year ended December 31, 2025, compared to $6,669,684 for the year ended December 31, 2024. The increase was primarily driven by the following: (i) outside contractor costs increased $1,329,017, reflecting the Company’s increased utilization of third-party contractors to supplement the internal capabilities following the shift of employee compensation to capitalized software development costs described above; (ii) amortization expense increased $976,600, all of which reflects the increase in amortization of capitalized software development costs from $161,350 in 2024 to $1,137,950 in 2025, as the Company’s software projects were completed and placed into operation during the year. The significant increase from the prior year reflects the fact that capitalization commenced on March 1, 2024, with the first full year of amortization recognized in 2025. This amortization is expected to continue at similar or higher levels in future periods as the capitalized development portfolio continues to amortize over its estimated three-year useful lives; (iii) professional fees increased $280,797, reflecting higher legal and accounting costs associated with the Company’s public company compliance obligations and financial statement preparation; and (iv) credit card processing fees increased $140,763, consistent with changes in the Company’s revenue mix and payment processing activity during the year.

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Loss From Operations

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Loss from operations increased $3,999,393 to $(6,102,354) for the year ended December 31, 2025, compared to $(2,102,961) for the year ended December 31, 2024. The widening operating loss was driven primarily by the $4,361,521 decline in gross profit, which was largely attributable to the inventory reconciliation adjustments and the decline in higher-margin software subscription revenue, while total operating expenses remained essentially flat year-over-year.

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Other Income (Expense)

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Total other expense, net was $(9,125,539) for the year ended December 31, 2025, compared to $(6,692,458) for the year ended December 31, 2024, an increase in expense of $2,433,081. The net change reflects significant offsetting movements within individual components, as described below.

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Interest Income: Interest income increased $159,308 to $265,708 for the year ended December 31, 2025, compared to $106,400 for the year ended December 31, 2024, reflecting higher average cash balances held during the year.

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Interest Expense: Interest expense decreased $3,675,931, or 53.0%, to $3,256,687 for the year ended December 31, 2025, compared to $6,932,618 for the year ended December 31, 2024. The decrease reflects 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 2025, both of which significantly reduced the Company’s average interest-bearing debt balance during the year.

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Gain on Fair Value Adjustment: No gain on fair value adjustment was recorded for the year ended December 31, 2025, compared to a gain of $142,319 for the year ended December 31, 2024. The prior year gain related to the revaluation of derivative liabilities associated with the PIPE Warrants, which were exchanged in April 2025 and no longer exist.

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Loss on Extinguishment of Debt: Loss on extinguishment of debt was $6,135,160 for the year ended December 31, 2025, compared to $270,594 for the year ended December 31, 2024. The 2025 loss arose primarily from the exchange of the outstanding PIPE Convertible Notes for Series A Preferred Stock in July 2025. The improvement in interest expense discussed above is directly related to these same transactions, and both items should be considered together when evaluating the net economic impact of the debt restructuring activity completed during 2025.

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Gain on Investment: No gain on investment was recorded for the year ended December 31, 2025, compared to a gain of $262,035 for the year ended December 31, 2024. The prior year gain related to short-term money market investments.

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Net Loss

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Net loss was $15,227,893 for the year ended December 31, 2025, compared to $8,795,419 for the year ended December 31, 2024, an increase of $6,432,474. The increase in net loss was driven by the $4,361,521 decline in gross profit and the $6,135,160 loss on extinguishment of debt, partially offset by a $3,675,931 reduction in interest expense resulting from the debt restructuring transactions completed during the year.

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Our primary sources of liquidity are cash on hand, cash generated from operations, proceeds from equity financings, and available borrowings under our JP Morgan Chase line of credit. Our primary uses of cash are funding operations, capitalized software development costs, and scheduled debt service obligations.

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Cash Position

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The following table presents our cash position as of December 31, 2025 and 2024:

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our financial statements and the related notes contained elsewhere in this Annual Report on Form 10-K and is intended to provide information necessary to understand our audited consolidated financial statements for the year ended December 31, 2024 compared to the year ended December 31, 2023 and highlight certain other information which, will enhance a reader’s understanding of our financial condition, changes in financial condition, and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2024, as compared to the year ended December 31, 2023. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.”

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Our Business

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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.

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Our team has built award-winning video games (includingLinks, 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.

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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.

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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).

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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.

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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:

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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.

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Principal External Factors Affecting Our Operating Results

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We believe that our performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section entitled “Risk Factors”.

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Principal Components of Revenues, Costs and Expenses

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Revenues

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Our revenues come from the sale of TruGolf software and hardware, which products are sold through a global network of authorized resellers, retail outlets and direct-to-consumer through a dedicated TruGolf sales team.

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Cost of Revenues

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Cost of revenues consists primarily of costs that are directly related to the delivery of our TruGolf hardware and software products, excluding depreciation but including direct material, labor, manufacturing overhead, reserves for estimated warranty costs and charges to write-down the inventory carrying value when it exceeds the estimated net realizable value.

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Royalties

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We have agreements with certain software golf hardware vendors who bundle our tracking and golf course software with their hardware. We pay them a royalty based on the number of units or subscriptions they sell. The royalty percentages typically range between 20% to 30%. The royalty agreements are for one year, with automatic renewals unless each party gives a thirty-day written notice of the intent to cancel the contract prior to the renewal date.

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Salaries, Wages and Benefits

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Salaries, wages and benefits are expenses earned by our employees in the executive, information technology, finance and accounting, human resources, administrative functions and outside contractors. Also included in salaries, wages and benefits are employer payroll taxes, health, dental and life insurance expenses.

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Selling, General and Administrative

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Sales and marketing expenses consist primarily of advertising, training events, brand building, product marketing activities and installation and shipping costs. We expect sales and marketing costs will continue to increase as we expand our international selling and marketing activities, hire additional personnel, and build brand awareness through advertising and training.

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General and administrative expenses consist primarily of professional fees paid for legal, accounting, auditing, and consulting services, bad debt, licenses and association dues, facilities (including rent and utilities) bank and credit card processing fees and other expenses related to general and administrative activities.

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We anticipate that our general and administrative expenses will continue to increase as we continue hiring to support our growth. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, and investor and public relations expenses associated with operating as a public registrant.

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Interest Expense

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Interest expense consists of interest expenses associated with issuing notes and balances outstanding under our debt obligations and the gross sales royalty payable, the amortization of debt issuance costs and original issue discounts associated with such borrowings.

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Principal Cash Flows

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We generate cash primarily from our operating activities and, historically, we have used cash flows from operating activities and available borrowings under certain notes payable as the primary sources of funds to purchase inventory and to fund working capital and capital expenditures, growth and expansion opportunities (see also “Liquidity and Capital Resources” below). The management of our working capital is closely tied to operating cash flows, as working capital can be impacted by, among other things, our accounts receivable activities, the level of inventories, which may increase or decrease in response to current and expected demand, and the size and timing of our trade accounts payable payment cycles.

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Critical Accounting Policies and Significant Judgments and Estimates

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Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements. Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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Our significant accounting policies are described in Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report.

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Disaggregated Revenue

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Revenues

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Revenues increased by $1,275,013, or 6%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase is primarily attributable to the increase of our product acceptance and greater penetration in the industry market.

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Cost of Revenues

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Cost of revenues decreased by $554,256, or 7%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease is primarily attributable to a decrease in inventory adjustments of approximately $350,000 and a decrease in various cost of sales expenses of approximately $100,000.

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Operating Expenses

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Total operating expenses decreased by $4,727,982, or 22%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. Selling, general and administrative expenses decreased by $4,357,648, or 40%, due to the Company granting the issuance of 821 shares of common stock to two consultants in March 2023 for consulting services with a fair value of approximately $4,500,000.

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Other Income (Expenses)

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Other income (expenses) increased by $5,069,561, or 312%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase is primarily attributable to interest expense, amortization expense of the original issue discounts, and the write-off of remaining original issue discounts upon conversion related to the PIPE Convertible loans issued and converted during the year ended December 31, 2024, of approximately $5,900,000. This was partially mitigated by gains on fair value adjustment of warrants and investment of $142,319 and $262,035, respectively.