UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO _________

Commission File Number: 001-40970

TRUGOLF HOLDINGS, INC.

(Exact name of registrant as Specified in its Charter)

Delaware	6770	85-3269086
(State or Other Jurisdiction of	(Primary Standard Industrial	(Internal Revenue Service
Incorporation or Organization)	Classification Code Number)	Employer Identification Number)

60 North 1400 West
Centerville, Utah		84014
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code:

(801) 298-1997

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol (s)		Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share		TRUG		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date, 13,255,112 shares of common stock issued and outstanding as of July 23, 2024.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TruGolf Holdings, Inc.

March 31, 2024

Index to the Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	3

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited)	4

Condensed Consolidated Statements of Shareholder’s Deficit for the Three Months Ended March 31, 2024 and 2023 (unaudited)	6

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2024 and 2023 (unaudited)	7

Notes to the Condensed Consolidated Financial Statements (unaudited)	8

TRUGOLF HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	2024			2023
ASSETS
Current assets:
Cash and cash equivalents	$	7,825,967		$	3,297,564
Restricted cash		-			2,100,000
Marketable investment securities		-			2,478,953
Accounts receivable, net		1,930,450			2,398,872
Inventory, net		2,335,653			2,119,084
Prepaid expenses		61,855			262,133

Total current assets		12,153,925			12,656,606

Property and equipment, net		166,666			234,308
Capitalized software development costs, net		363,879			-
Right-of-use assets		890,209			972,663
Other long-term assets		1,905,983			1,905,983

Total assets	$	15,480,662		$	15,769,560

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	3,206,118		$	2,059,771
Customer deposits		1,794,748			1,704,224
Notes payable, current portion		9,568			9,425
Notes payable to related parties, current portion		937,000			1,237,000
Notes payable		937,000			1,237,000
Line of credit, bank		802,738			802,738
Margin line of credit account		-			1,980,937
Convertible notes payable		954,622			954,622
Accrued interest		542,631			459,872
Accrued and other current liabilities		804,405			1,125,495
Accrued and other current liabilities - assumed in Merger		295,008			-
Lease liability, current portion		347,809			334,255
Total current liabilities		9,694,647			10,668,339

Non-current liabilities:
Notes payable, net of current portion		2,400,345			2,402,783
Note payables to related parties, net of current portion		892,500			861,000
Note payables		892,500			861,000
Notes payable assumed in the Merger		1,565,000			-
PIPE loan payable, net		4,320,947			-
Dividend notes payable		4,023,923			4,023,923
Gross sales royalty payable		1,000,000			1,000,000
Lease liability, net of current portion		574,363			668,228
Other liabilities		81,560			63,015
Total liabilities		24,553,285			19,687,288

Commitments and Contingencies		-			-

Stockholders’ deficit:
Preferred stock, $0.0001 par value, 10 million share authorized; zero shares issued and outstanding, respectively		-			-
Common stock - Series A, $0.0001 par value, 90 million shares authorized; 11,558,252 and 13,098 shares issued and outstanding, respectively.		1,154			120
Common stock - Series B, $0.0001 par value, 10 million shares authorized; 1,716,860 and 0 shares issued and outstanding, respectively.		172
Common stock		172
Treasury stock at cost, 4,692 shares of common stock held, respectively		(2,037,000	)		(2,037,000	)
Additional paid-in capital		6,623,839			10,479,738
Accumulated other comprehensive loss		-			(1,662	)
Accumulated deficit / losses		(13,660,788	)		(12,358,924	)
Total stockholders’ deficit		(9,072,623	)		(3,917,728	)

Total liabilities and stockholders’ deficit	$	15,480,662		$	15,769,560

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRUGOLF HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31,

(Unaudited)

	2024			2023

Revenues, net	$	5,012,022		$	5,083,199
Cost of revenues		1,959,023			1,141,768
Gross profit		3,052,999			3,941,431

Operating expenses:
Royalties		329,888			215,632
Salaries, wages and benefits		1,841,595			2,231,434
Selling, general and administrative		1,825,201			6,398,885
Total operating expenses		3,996,684			8,845,951
(Loss) income from operations		(943,685	)		(4,904,520	)
Other (expenses) income:
Interest income		30,587			21,497
Interest expense		(384,854	)		(468,154	)
Loss on investment		(3,912	)		-
Total other expense		(358,179	)		(446,657	)
Loss from operations before income taxes		(1,301,864	)		(5,351,177	)
Provision for income taxes		-			-
Net loss	$	(1,301,864	)	$	(5,351,177	)
Basic and diluted net loss per share attributable to common stockholders	$	(0.22	)	$	(446.15	)

Basic and diluted weighted average common shares		5,994,704			11,994

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRUGOLF HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31,

(Unaudited)

	2024			2023
Net loss	$	(1,301,864	)	$	(5,351,177	)
Other comprehensive income:
Unrealized gain in fair value of short-term investments		-			11,914
Comprehensive loss	$	(1,301,864	)	$	(5,339,263	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

TRUGOLF HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Unaudited)

	Shares		Amount		Shares			Amount			Shares		Amount		Shares			Amount			Capital			Loss			Losses			Deficit
	Preferred Stock				Common Stock- Series A						Common Stock- Series B				Treasury Stock						Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Shares			Amount			Capital			Loss			Losses			Deficit

Balance, December 31, 2022		-	$	-		11,308		$	100			-	$	-		(4,692	)	$	(2,037,000	)	$	681,956		$	-		$	(2,075,815	)	$	(3,430,759	)
Issuance of common stock for services						821			9													4,493,324									4,493,333
Unrealized gain in fair value of short term investments																									11,914						11,914
Net loss				-					-					-					-			-			-			(5,351,177	)		(5,351,177	)
Balance, March 31, 2023		-		-		12,129			109			-	$	-		(4,692	)		(2,037,000	)		5,175,280			11,914			(7,426,992	)		(4,276,689	)

Balance, December 31, 2023		-	$	-		13,098		$	120			-	$	-		(4,692	)	$	(2,037,000	)	$	10,479,738		$	(1,662	)	$	(12,358,924	)	$	(3,917,728	)
Balance		-	$	-		13,098		$	120			-	$	-		(4,692	)	$	(2,037,000	)	$	10,479,738		$	(1,662	)	$	(12,358,924	)	$	(3,917,728	)
Realized gain in fair value of short term investments		-		-												-			-						1,662			-			1,662
Common stock exchanged in Merger						(13,098	)		(120	)												(3,854,573	)								(3,854,693	)
Common stock Series A exchanged and issued in Merger						11,538,252			1,154													(1,154	)								-
Common stock Series B issued in Merger		-		-		-			-			1,716,860		172		-			-			(172	)		-			-			-
Net loss		-		-		-			-										-			-			-			(1,301,864	)		(1,301,864	)
Balance, March 31, 2024		-	$	-		11,538,252		$	1,154			1,716,860	$	172		(4,692	)	$	(2,037,000	)	$	6,623,839		$	(0	)	$	(13,660,788	)	$	(9,072,623	)
Balance		-	$	-		11,538,252		$	1,154			1,716,860	$	172		(4,692	)	$	(2,037,000	)	$	6,623,839		$	(0	)	$	(13,660,788	)	$	(9,072,623	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRUGOLF HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31,

(Unaudited)

	2024			2023
Cash flows from operating activities:
Net loss	$	(1,301,864	)	$	(5,351,177	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense		36,105			13,756
Amortization of PIPE convertible notes original issue discount		947			257,233
Amortization of right-of-use asset		82,454			72,520
Fair value of warrants in excess of fair value of debt		-			-
Expenses paid by DMAC post Merger		-			-
Bad debt expense		-			205,920
Change in OCI		1,662			-
Stock issued for services		-			4,493,333
Changes in operating assets and liabilities:
Accounts receivable, net		468,422			367,541
Inventory, net		(216,569	)		(1,122,034	)
Prepaid expenses		200,278			70,178
Other current assets		2,478,953			(40,422	)
Other assets		-			(1,875,000	)
Accounts payable		1,146,347			526,376
Customer deposits		90,524			(594,071	)
Accrued interest		82,759			128,049
Accrued and other current liabilities		(321,090	)		(158,586	)
Lease liability		(80,311	)		(65,572	)
Net cash provided by (used in) operating activities		2,668,617			(3,071,956	)

Cash flows from investing activities:
Purchase of property and equipment		(332,342	)		(46,650	)
Reduction in long term assets					(2,421,060	)
Net cash used in investing activities		(332,342	)		(2,467,710	)

Cash flows from financing activities:
Proceeds from line of credit		-			1,875,000
Repayments of liabilities assumed in the Merger		(15,716	)
Repayments of notes payable		(2,295	)		(33,616	)
Repayments of notes payable - related party		(268,500	)		-
PIPE loan, net of OID discount		4,320,000			-
Cash acquired in Merger		103,818
Costs of Merger paid from PIPE loan		(2,082,787	)		-
Repayment of line of credit		(1,980,937	)		-
Increase in other liabilities		18,545			-
Dividends paid		-			42,963
Net cash provided by (used in) financing activities		92,128			1,884,347

Net change in cash, cash equivalents, and restricted cash		2,428,403			(3,655,319	)

Cash, cash equivalents, and restricted cash, beginning of period		5,397,564			9,656,266

Cash, cash equivalents and restricted cash, end of period	$	7,825,967		$	6,000,947

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income tax	$	-		$	-
Cash paid for interest	$	302,095		$	275,735
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING and FINANCING ACTIVITIES:
Notes payable assumed in Merger	$	1,565,000		$	-
Accrued liabilities assumed in Merger	$	310,724		$	-
Remeasurement of common stock exchanged/issued in Merger	$	(1,875,724	)	$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TruGolf Holdings, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

March 31, 2024

Note 1 - Business Organization and Nature of Operations

On January 31, 2024 we completed the previously announced business combination pursuant to the terms of the Business Combination Agreement, dated as of July 21, 2023, which provided for, TruGolf Nevada being the surviving corporation of the merger and having become a direct, wholly owned subsidiary of Deep Medicine Acquisition Corp. (“DMAC”), a Delaware corporation and our predecessor company (“DMAQ”) as a consequence of the merger (together with the other transactions contemplated by the Business Combination Agreement). In connection with the consummation of the Business Combination, DMAQ changed its name to TruGolf Holdings, Inc. TruGolf Holdings, Inc.’s Class A common stock commenced trading on The Nasdaq Capital Market LLC under the ticker symbol “TRUG” on February 1, 2024.

Trugolf Holdings, Inc. (the “Company” or “TruGolf”, “we”, “us”) was incorporated on July 8, 2020 as a Delaware corporation and formed for the purpose of effecting a business combination, with no material operation of its own. Our operations are conducted through our subsidiary TruGolf, Inc., a Nevada Corporation (“TruGolf Nevada”). TruGolf Nevada was formed as a Utah corporation on October 4, 1995, under the name “TruGolf, Incorporated”. TruGolf Nevada’s original business plan was the creation of golfing video games. On June 9, 1999, the TruGolf Nevada changed its name to “TruGolf, Inc.” Effective on April 26, 2016, TruGolf Nevada filed Articles of Merger with the State of Utah, Department of Commerce, and on April 28, 2016, TruGolf Nevada filed Articles of Merger with the Secretary of State of Nevada, pursuant to which TruGolf, Inc., a Utah corporation, merged with and into TruGolf Nevada, pursuant to a Plan of Merger. TruGolf Nevada was the surviving corporation in the merger. In connection with the Plan of Merger, TruGolf Nevada affected a four-for-one forward stock split of its outstanding common stock.

For over 40 years, TruGolf, Incorporated (or “the Company”, “we”, “us”, or “our”) has been creating indoor golf software and hardware and are focused on both the residential and commercial golf simulation industries. We design, develop, manufacture and sell golf simulators for residential and commercial applications. We offer portable, professional, commercial and custom simulators. In addition, to bundling our software with our simulators, we offer our E6 Connect software and gaming software on a standalone basis. We have leveraged the power of our hardware and software platform to create a collection of multi-sport games including football, soccer, soccer golf, frisbee golf, zombie dodgeball, and cowboy target practice.

TruGolf Nevada has been creating indoor golf software for 40 years. We began as a subsidiary of Access Software, Inc., a video game developer based in Salt Lake City, Utah (“Access Software”), which was co-founded in November 1982, by Christopher Jones, the Company’s largest stockholder, Chief Executive Officer, President and Chairman. In April 1999, Access Software was purchased by Microsoft Corp., for its expertise in golf software development. Following the acquisition, the core programming and graphics team of Links™, which created Links LS 1999, one of the bestselling PC sports games of 1999, were spun out to TruGolf Nevada.

Since 1999, we have focused on establishing residential and commercial golf simulation as a viable industry, and since 2007, we have focused on fabricating custom golf simulators for luxury clients. Part of our initial strategy included partnering with hardware inventors to provide them world class software. Over time, we found that it was not viable to rely on these early hardware inventors alone, we also began building and selling our own hardware. In addition, we are working with a video game company to utilize their new dynamic graphics engine which will enable us to bring photorealistic golf courses to life through our E6 software (discussed below). In addition, we have developed multiple sources and 3^rd party manufacturers for the raw materials or parts for our products, including but not limited to, steel or aluminum frames, fabric, turf, screens, projectors, PCs, cameras, lasers, infrared sensors, and supporting subsystems. The availability of the frames and fabric from our principal provider, Allied ES&A, has been increased as they have moved into a much larger facility directly located in a large employee base community and we have entered into negotiations with a second supplier in order to provide alternative sourcing if needed. A third supplier, Impact Signs, has also been used in the past and TruGolf Nevada believes that it could purchase turf, and screen supplies from them as well if needed. Both turf (Controlled Products), and screen suppliers (Allied), are so specialized that we have come to rely on one vendor for each, respectively. Turf particularly experienced some delivery delays in 2022 that have been rectified, additional inventory has been secured locally, and our highest volume portable simulators have been redesigned to use less raw materials from that vendor, while adding an improved hitting surface from a second vendor, Real Feel, to mitigate risk. Negotiations with a second supplier of screen materials is in progress. Projectors (TV Specialists), PCs, lasers, IR sensors and other systems come from multiple suppliers with no historical delay in supply. We have 2 primary suppliers of cameras, IDS and Basler, and have integrated products from both in the new Apogee unit to ensure the greatest availability possible.

The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, has elected to comply with certain reduced public company reporting requirements.

Note 2. BUSINESS COMBINATION AND PURCHASE PRICE ALLOCATION

On January 31, 2024, the Company issued a press release announcing that on January 31, 2024, it consummated the business combination (the “Closing”) contemplated by the previously announced Amended and Restated Agreement and Plan of Merger, dated as of July 21, 2023 (as amended, the “Merger Agreement”), by and among the Company, DMAC Merger Sub Inc., a Nevada corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), Bright Vision Sponsor LLC, a Delaware limited liability company, in the capacity as the Purchaser Representative thereunder, Christopher Jones, in the capacity as the Seller Representative thereunder, and TruGolf, Inc., a Nevada corporation (“TruGolf”). As a result of the Closing and the transactions contemplated by the Merger Agreement, (i) Merger Sub merged with and into TruGolf (the “Merger”), with TruGolf surviving the Merger as a wholly-owned subsidiary of the Company, and (ii) the Company’s name was changed from Deep Medicine Acquisition Corp. to TruGolf Holdings, Inc. The Company’s Class A common stock commenced trading on the Nasdaq Global Market LLC under the ticker symbol “TRUG” on February 1, 2024.

Accounting for the Business Combination

The Merger is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, DMAQ was treated as the acquired company for accounting purposes, whereas TruGolf Nevada was treated as the accounting acquirer. In accordance with this method of accounting, the Business Combination has been treated as the equivalent of TruGolf Nevada issuing shares for the net assets of DMAQ, accompanied by a recapitalization. The net assets of TruGolf Nevada and DMAQ were stated at historical cost, with no goodwill or other intangible assets recorded, and operations prior to the Business Combination will be those of TruGolf Nevada. TruGolf Nevada has been determined to be the accounting acquirer for purposes of the Business Combination based on an evaluation of the following facts and circumstances:

	●	Legacy TruGolf Nevada stockholders expecting to have a majority of the voting power of New TruGolf,
	●	TruGolf Nevada comprising the ongoing operations of New TruGolf,
	●	TruGolf Nevada contributing a majority of the governing body members of New TruGolf, and
	●	TruGolf Nevada’s senior management comprising the senior management of New TruGolf.

Exchange of TruGolf Nevada Shares for Shares of New TruGolf

Based on 13,098 TruGolf Nevada ordinary shares outstanding immediately prior to the closing of the Business Combination, the Exchange Ratio determined in accordance with the terms of the Merger Agreement is approximately 570.10. New TruGolf issued 7,467,134 shares of New TruGolf common stock to legacy TruGolf Nevada shareholders in the Business Combination, determined as follows:

	TruGolf Nevada shares outstanding as of immediately prior to the Closing
Ordinary shares, par value $0.01 per share		13,098
Exchange Ratio		570.10
Estimated shares of New TruGolf common stock issued to TruGolf Nevada shareholders upon Closing		7,467,134

The shares issued to legacy TruGolf Nevada shareholders consists of 5,750,274 shares of New TruGolf Class A common stock and 1,716,860 shares of New TruGolf Class B common stock.

The purchase price for the Merger was allocated to the net assets acquired on the basis of relative fair values. The fair values of the current assets acquired and current liabilities assumed in the Merger were determined to approximate carrying value due to their short-term nature. The following summarizes the allocation of the purchase price to net assets acquired in the Merger:


Cash and cash equivalents	$	103,818
Net proceeds from investment fund (PIPE)		2,237,213
Accounts payable and accrued expenses		(310,724	)
Loans payable		(1,565,000	)

Net assets	$	465,307

PIPE Convertible Notes payable assumed in Merger	$	4,800,000
Less: Original Issue Discount of 10%		(480,000	)
PIPE Convertible Notes payable, net		4,320,000
Payment of closing costs and other expenses		(2,082,787	)
Net proceeds from PIPE Convertible Notes payable assume in Merger	$	2,237,213

On November 2, 2023 and December 7, 2023, Deep Medicine Acquisition Corp. (“DMAQ”) executed loan agreements with certain accredited investors (together, the “Prior Loan Agreements”) pursuant to which such investors agreed to loan DMAQ up to an aggregate $11,000,000 in exchange for the issuance of convertible notes and warrants. On February 2, 2024, TruGolf Holdings, Inc. (“TruGolf Holdings”) executed a securities purchase agreement (the “Purchase Agreement”) with each of the investors that executed the Prior Loan Agreements, which replaced, in their entirety, the Prior Loan Agreements, and with additional investors (together, the “PIPE Investors”). Pursuant to the terms and conditions of the Purchase Agreement, the PIPE Investors agreed to purchase from the TruGolf Holdings (i) senior convertible notes in the aggregate principal amount of up to $15,500,000 (the “PIPE Convertible Notes”), (ii) Series A warrants to initially purchase 1,409,091 shares of the Company’s Class A common stock (the “Series A Warrants”); and (iii) Series B warrants to initially purchase 1,550,000 shares of the TruGolf Holdings’ Class A common stock (the “Series B Warrants,” and collectively with the Series A Warrants, the “PIPE Warrants”) (the “PIPE Financing”).

The Purchase Agreement contemplates funding of the investment (the “Investment”) across multiple tranches. At the first closing (the “Initial Closing”) an aggregate principal amount of $4,650,000 of PIPE Convertible Notes will be issued upon the satisfaction of certain customary closing conditions in exchange for aggregate gross proceeds of $4,185,000, representing an original issue discount of 10%. On such date (the “Initial Closing Date”), TruGolf Holdings will also issue the PIPE Investors the Series A Warrants and the Series B Warrants.

As of March 31, 2024, the Company recorded PIPE Convertible Notes payable of $4,800,000 and an original issue discount of $480,000 resulting in the net balance of $4,320,000. The Company recorded interest expense on the PIPE Convertible Notes of $9,468, and interest expense relating to the OID of $947. As of May 14, 2024, the Company did not timely file the quarterly report on Form 10-Q for the period ended March 31, 2024. The scheduled second tranche of the PIPE Convertible Notes payable has not been received by the Company.

Subject to satisfying the conditions discussed below, TruGolf Holdings, Inc. has the right under the Purchase Agreement, but not the obligation, to require that the PIPE Investors purchase additional Notes at up to two additional closings. Upon notice at any time after the 2nd trading day following the Initial Closing Date, TruGolf Holdings may require that the PIPE Investors purchase an additional aggregate principal amount of $4,650,000 of PIPE Convertible Notes, in exchange for aggregate gross proceeds of $4,185,000, if (i) the Registration Statement (as described below) has been filed; and (ii) certain customary closing conditions are satisfied (the “First Mandatory Additional Closing”). Upon notice at any time after the 2nd trading day following the date that the First Mandatory Additional Closing is consummated, TruGolf Holdings may require that the PIPE Investors purchase an additional aggregate principal amount of $6,200,000 of PIPE Convertible Notes, in exchange for aggregate gross proceeds of $5,580,000, if (i) the shareholder approval is obtained (as described below); (ii) the Registration Statement has been declared effective by the SEC; and (iii) certain customary closing conditions are satisfied (the “Second Mandatory Additional Closing”).

In addition, pursuant to the Purchase Agreement, each PIPE Investor has the right, but not the obligation, to require that, upon notice, TruGolf Holdings sell to such PIPE Investor at one or more additional closings such PIPE Investor’s pro rata share of up to a maximum aggregate principal amount of $10,850,000 in additional PIPE Convertible Notes (each such additional closing, an “Additional Optional Closing”); provided that, the principal amount of the additional PIPE Convertible Notes issued at each Additional Optional Closing must equal at least $250,000. If a PIPE Investor has not elected to effect an Additional Optional Closing on or prior to August 2, 2024, such PIPE Investor shall have no further right to effect an Additional Optional Closing under the Purchase Agreement.

Note 3 – Summary of Significant Accounting Policies

Basis of Presentation - Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Registration Statement on Form S-1 and its amendments as filed with the SEC on February 14, 2024 and in Form 8-K/A as filed with the SEC on April 17, 2024.

Basis of Presentation – Accounting for the Business Combination

The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, DMAQ was treated as the acquired company for accounting purposes, whereas TruGolf Nevada was treated as the accounting acquirer. In accordance with this method of accounting, the Business Combination has been treated as the equivalent of TruGolf Nevada issuing shares for the net assets of DMAQ, accompanied by a recapitalization. The net assets of TruGolf Nevada and DMAQ were stated at historical cost, with no goodwill or other intangible assets recorded, and operations prior to the Business Combination were those of TruGolf Nevada. TruGolf Nevada has been determined to be the accounting acquirer for purposes of the Business Combination based on an evaluation of the following facts and circumstances:

	●	Legacy TruGolf Nevada stockholders expecting to have a majority of the voting power of New TruGolf,
	●	TruGolf Nevada comprising the ongoing operations of New TruGolf,
	●	TruGolf Nevada contributing a majority of the governing body members of New TruGolf, and
	●	TruGolf Nevada’s senior management comprising the senior management of New TruGolf.

Basis of Presentation – Principles of consolidation

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.

Use of Estimates

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of expenses during the reported period. These assumptions and estimates could have a material effect on the financial statements. Actual results may differ materially from those estimates. The Company’s management periodically reviews estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause the Company to revise these estimates. Significant estimates include estimates used in the valuation allowance related to deferred tax assets and capitalized software costs. Actual results may differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash on hand, demand deposits and short-term investments with original maturities of three months or less when purchased.

As of March 31, 2024 and December 31, 2023, the Company’s cash and cash equivalents consisted of $7,825,967 and $5,394,564, respectively. The Company maintains its cash in banks insured by the Federal Deposit Insurance Corporation in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2024 and December 31, 2023, the uninsured balances amounted to $6,742,396 and $4,251,124 respectively.

Marketable Investment Securities

The Company’s marketable investment securities are comprised of investments in corporate fixed income securities and U.S. Treasury securities. The Company designates investments in debt securities as available-for-sale. Available-for-sale debt securities with original maturities of three months or less from the date of purchase are classified within cash and cash equivalents. Available-for-sale debt securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Realized gains and losses on the sale of marketable securities are determined using the average cost method on a first-in, first-out basis and recorded in total other income (expense), net in the statements of operations and comprehensive loss. The Company sold and liquidated its marketable securities during the three months ended March 31, 2024 resulting in a $0 balance as of that date.

Accounts Receivable, net

We manage credit risk associated with our accounts receivables at the customer level. Because the same customers typically generate the revenues that are accounted for under both Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606) and Accounting Standards Codification Topic 326, Credit Losses (Topic 326)., the discussions below on credit risk and our allowances for doubtful accounts address our total revenues from Topic 606 and Topic 326.

We believe the concentration of credit risk, with respect to our receivables, is limited because our customer base is comprised of a number of geographically diverse customers. We manage credit risk through credit approvals and other monitoring procedures.

Pursuant to Topic 326 for our accounts receivables, we maintain an allowance for doubtful accounts that reflects our estimate of our expected credit losses. Our allowance is estimated using a loss rate model based on delinquency. The estimated loss rate is based on our historical experience with specific customers, our understanding of our current economic circumstances, reasonable and supportable forecasts, and our own judgment as to the likelihood of ultimate payment based upon available data. We believe our credit risk is somewhat mitigated by our geographically diverse customer base and our credit evaluation procedures. The actual rate of future credit losses, however, may not be similar to past experience. Our estimate of doubtful accounts could change based on changing circumstances, including changes in the economy or in the particular circumstances of individual customers. Accordingly, we may be required to increase or decrease our allowance for doubtful accounts. Based on management’s evaluation, there is a balance in the allowance for doubtful accounts of $1,395,688 and $1,227,135 as of March 31, 2024 and December 31, 2023, respectively

Inventory, net

All of our inventory consists of raw materials and are valued at the lower of historic cost or net realizable value; where net realizable value is considered to be the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation. Historic inventory costs are calculated on an average or specific cost basis. The Company records inventory write-downs for excess or obsolete inventories based upon assumptions on current and future demand forecasts. As of March 31, 2024 and December 31, 2023, the Company had $448,360 and $429,050, respectively, reserved for obsolete inventory.

Fair Value of Financial Instruments

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Financial Accounting Standards Board (“FASB”) fair value measurement guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. The three broad levels of the fair value hierarchy are as follows:

	Level 1 –	Quoted prices (unadjusted) in active markets for identical assets or liabilities,
	Level 2 –	Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly,

SEC Form 10-Q filed by TruGolf Holdings Inc.