Filed Pursuant
to Rule 424(b)(3)
Registration
No. 333- 277068
TRUGOLF
HOLDINGS, INC.
4,596,435
Shares of Class A Common Stock
29,245,684
Shares of Class A Common Stock Underlying
Series A Warrants and Series B Warrants
40,185,185 Shares
of Class A Common Stock Underlying Notes
632,500
Shares of Class A Common Stock Underlying Representative Warrants
This
prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling
Securityholders”) of an aggregate of: (a) up to 4,596,435 shares of our Class A common stock, par value $0.0001 per share
(“Class A Common Stock”); (b) up to 40,185,185 shares of Class A Common Stock (the “Note Shares”) issuable upon
the conversion of the convertible promissory note (the “Notes”); (c) up to 9,870,684 shares of Class A Common Stock (the
“Series A Warrant Shares”) issuable upon the exercise of Series A Warrants to purchase Class A Common Stock (the “Series
A Warrant”) with an exercise price of $13 per share; (d) up to 19,375,000 shares of Class A Common Stock (the “Series
B Warrant Shares”) issuable upon the exercise of Series B Warrants to purchase Class A Common Stock (the “Series B Warrant”)
with an exercise price of $10 per share; and (e) up to 632,500 shares of Class A Common Stock the “Representative Warrant
Shares,” together with the Series A Warrant Shares and the Series B Warrant Shares as the “Warrant Shares”) issuable
upon the exercise of Representative Warrants to purchase Class A Common Stock (the “Representative Warrant,” together with
the Series A Warrant and the Series B Warrant as the “Warrant”) with an exercise price of $12 per share.
The
Common Stock being registered for resale was issued to, purchased by or will be purchased by the Selling Securityholders for the following
consideration: (i) an aggregate of 3,162,500 shares of Class A Common Stock held by the founders of the Company, which were issued
to them prior to the Business Combination, for a $0.02 per share cost; (ii) an aggregate of 280,000 shares of Class A Common
Stock issued to the directors and officers of the Company at no cost and as consideration for their services to the Company; (iii)
40,185,185 shares of Class A Common Stock issuable upon the conversion of the Notes, issued to the holders under a securities purchase
agreement dated February 2, 2024 (the “Purchase Agreement”) pursuant to which the Notes were issued for an aggregate purchase
price of $15,500,000 which equates to a price of $0.3857 per share; (iv) 9,870,684 shares of Class A Common Stock issuable upon the
exercise of the Series A Warrants, issued to the holders under the Purchase Agreement for aggregate proceeds of $39,482,736 assuming
an exercise price of $4.00, for which the Company shall issue the Series A Warrant Shares; (v) 19,375,000 shares of Class A Common
Stock issuable upon the exercise of the Series B Warrants, issued to the holders under the Purchase Agreement for aggregate proceeds
of $77,500,000 assuming an exercise price of $4.00, pursuant which the Company shall issue the Series B Warrant Shares; and (vi)
632,500 shares of Class A Common Stock issuable upon the exercise of the Representative Warrants, issued to I-Bankers (the “Representative”),
at no cost, in connection with the initial public offering of the Company which Representative Warrants are exercisable at $12
per share; (v) up to 519,500 shares of Class A Common Stock issuable under the private placement units (the “Private Units”)
with each unit comprised of one share of Class A Common Stock and one right to receive one-tenth of one share of Class
A Common Stock, which were purchased for a purchase price of $10.00 per unit; (vi) up to 51,950 shares of Class A Common Stock
issuable upon the conversion of rights issued under the Private Units; (vii) up to 20,000 shares of Class A Common Stock issued to Ellenoff
Grossman & Schole LLP as fees for their services; (viii) up to 212,752 shares of Class A Common Stock issued to the Representative
at no cost and as marketing fees in relation to the Business Combination; and (ix) 349,733 shares of Class A Common Stock issued
to the certain Selling Securityholders pursuant to a waiver of the certain terms and conditions of the Purchase Agreement and the Note,
entered into by the Company and the Selling Shareholders on August 13, 2024. Please see the sections entitled “Private
Placement of Notes and Warrants” on page 74 and the “Selling Securityholders” of prospectus for more information.
We may receive up to an aggregate of $39,482,736 from the exercise of the Series A Warrants issued and outstanding, assuming the exercise
in full of all the warrants for cash. If the warrants are exercised pursuant to a cashless exercise feature, we will not receive any
cash from these exercises. We may receive up to an aggregate of $77,500,000 from the exercise of the Series B Warrants issued and outstanding,
assuming the exercise in full of all the warrants for cash. If the warrants are exercised pursuant to a cashless exercise feature, we
will not receive any cash from these exercises.
As of August 20, 2024, the closing
price of our Common Stock was $1.45 per share. We believe that the likelihood that the Warrant holders determine to
exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the market price of our
Common Stock. If the market price for our Common Stock is less than the exercise price of the Warrants (on a per share basis), we
believe that Warrant holders will be very unlikely to exercise any of their Warrants, and accordingly, we will not receive any such
proceeds. There is no assurance that the Warrants will be “in the money” prior to their expiration or that the Warrant
holders will exercise their Warrants. To the extent that any Warrants are exercised on a cashless basis, the amount of cash we would
receive from the exercise of Warrants will decrease To the extent that the Warrants are not exercised it will have a negative
effect on the Company’s liquidity. See “Management’s Discussion and Analysis-Liquidity and Capital Resources.
On
January 31, 2024, we completed the business combination and transactions contemplated thereby (the “Business Combination”)
as set forth in that certain Amended and Restated Agreement and Plan of Merger (as amended), dated July 21, 2023, as amended (the “Merger
Agreement”), by and among Deep Medicine Acquisition Corp. , a Delaware corporation (“DMA”), DMAC Merger Sub Inc., a
Nevada corporation and wholly-owned subsidiary of Deep Medicine our predecessor company (“Merger Sub”), Bright Vision Sponsor
LLC, a Delaware limited liability company, in the capacity as the representative for the stockholders of Deep Medicine in accordance
with the terms and conditions of the Merger Agreement (the “Purchaser Representative”), Christopher Jones, an individual,
in the capacity as the representative from and after the Effective Time for the TruGolf Stockholders as of immediately prior to the Effective
Time in accordance with the terms and conditions of the Merger Agreement (the “Seller Representative”), and TruGolf, Inc.,
a Nevada corporation (“TruGolf Nevada”). As contemplated by the Merger Agreement, DMA changed its name to TruGolf Holdings,
Inc. Prior to and in connection with the completion of the Business Combination and the extension of DMA’s existence, existing
DMA stockholders elected to redeem approximately 379,687, or approximately 8.71% of the then-outstanding shares of 4,357,964.
We
are registering the offer and sale of these securities to satisfy certain registration rights we have granted. The Selling Securityholders
may offer, sell, or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing
market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of our Class A Common Stock,
except with respect to amounts received by us upon the exercise of the Warrants for cash. We will bear all costs, expenses, and fees
in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky”
laws. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of shares of our Class
A Common Stock or Warrants. See the section entitled “Plan of Distribution” of this prospectus for additional information.
Our
Class A Common Stock are listed on The Nasdaq Global Market, of The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “TRUG”.
On August 20, 2024, the last quoted sale price for our Class A Common Stock as reported on Nasdaq was $1.45 per share.
Any cash proceeds associated with the exercise of the Warrants are dependent on the stock price. Whether any holders of Warrants determine
to exercise such Warrants, which would result in cash proceeds to the Company, will likely depend upon the market price of our Class
A Common Stock at the time of any such holder’s determination.
Given
the current market price of the Company’s Common Stock, certain of the Selling Securityholders who paid less for their shares than
such current market price will receive a higher rate of return on any such sales than the public securityholders who purchased Common
Stock in the SPAC IPO or any Selling Securityholder who paid more for their shares than the current market price.
We
are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain
reduced public company reporting requirements for future filings.
Investing
in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks
of investing in our securities in the section entitled “Risk Factors” beginning on page 7 of this prospectus.
You
should rely only on the information contained in this prospectus or any prospectus supplement or amendment hereto. We have not authorized
anyone to provide you with different information.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is October 2, 2024
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is
different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not
assume that the information contained in this prospectus is accurate as of any date other than that date.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-1 that we filed with the U.S. Securities Exchange Commission (the “SEC”),
under which the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We
will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus.
This prospectus also relates to the issuance by us of shares of Class A Common Stock issuable upon the conversion of the Notes and
the exercise of the Warrants. We will receive proceeds to the extent there are any cash exercises of the Warrants.
Neither
we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than
those contained in this prospectus, any applicable prospectus supplement, or any free writing prospectuses prepared by or on behalf of
us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance
as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer
to sell these securities in any jurisdiction where such offer or sale is not permitted. No dealer, salesperson, or other person is authorized
to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related
free writing prospectus. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate
as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus
supplement, or any sale of a security. Our business, financial condition, results of operations, and prospects may have changed since
those dates.
The
Selling Securityholders and their permitted transferees may use this registration statement to sell securities from time to time through
any means described in the section entitled “Plan of Distribution.” More specific terms of any securities that the
Selling Securityholders and their permitted transferees offer and sell may be provided in a prospectus supplement that describes, among
other things, the specific amounts and prices of the securities being offered and the terms of the offering.
We
may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or
change information contained in, this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies
or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and
any statement so superseded will be deemed not to constitute a part of this prospectus. You should read both this prospectus and any
applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to
which we refer you in the section of this prospectus entitled “Where You Can Find More Information.”
This
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the
actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some
of the documents referred to herein have been filed, will be filed, or will be incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You
Can Find More Information.”
Unless
expressly indicated or the context otherwise requires, references in this prospectus to the “Company,” the “Registrant,”
“we,” “us,” and “our” refer to the Company (and the business of TruGolf Nevada which became the
business of the Company after giving effect to the Business Combination).
TRADEMARKS
This
document contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade
names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate,
in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks
and trade names. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship
with, or endorsement or sponsorship of it by, any other companies.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the information incorporated herein by reference contain forward-looking. Forward-looking statements are neither historical
facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding
the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions.
This includes, without limitation, statements regarding the financial position and the plans and objectives of management for our future
operations. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used
in this prospectus, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “strive,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking
statements in this prospectus and in any document incorporated by reference in this prospectus may include, for example, statements about:
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the occurrence of any event,
change or other circumstances, including the outcome of any legal proceedings that may be instituted against us; |
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the ability to maintain
the listing of our securities on Nasdaq, and the potential liquidity and trading of our securities; |
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the risk of disruption
to our current plans and operations; |
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the ability to recognize
the anticipated benefits of our business and the Business Combination, which may be affected by, among other things, competition
and the ability to grow, manage growth profitably, and retain key employees; |
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costs related to our business; |
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changes in applicable laws
or regulations; |
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our ability to meet its
future capital requirements to fund our operations, which may involve debt and/or equity financing, and to obtain such debt and/or
equity financing on favorable terms, and our sources and uses of cash; |
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our ability to execute
on our plans to develop and commercialize our current clinical assets, as well as any future clinical assets that we license, and
the timing of any such commercialization; |
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our ability to maintain
existing license agreements; |
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our estimates regarding
expenses, future revenue, capital requirements, and needs for additional financing; |
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our ability to achieve
and maintain profitability in the future; |
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our financial performance;
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other factors disclosed
under the section entitled “Risk Factors” in this prospectus. |
These
forward-looking statements are based on information available as of the date of this prospectus and current expectations, forecasts,
and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied
upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements
to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise,
except as may be required under applicable securities laws.
PROSPECTUS
SUMMARY
This
summary highlights selected information contained in other parts of this prospectus or incorporated by reference into this prospectus
from our filings with the SEC listed in the section of the prospectus entitled “Incorporation of Certain Information by Reference.”
Because it is only a summary, it does not contain all of the information that should be considered before purchasing our securities in
this offering and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing
elsewhere or incorporated by reference into this prospectus. You should read the entire prospectus, the registration statement of which
this prospectus is a part, and the information incorporated by reference herein in their entirety, including the “Risk Factors”
section and our financial statements and the related notes incorporated by reference into this prospectus, before purchasing any of our
securities. Unless expressly indicated or the context requires otherwise, the terms the “Company,” the “Registrant,”
“we,” “us” and “our” in this prospectus refer to the Company (and the business of TrueGolf Nevada,
which became the business of the Company after giving effect to the Business Combination).
Corporate
History
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.
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, TruGolf
Nevada’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 3rd 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.
Market
For Indoor Golf
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. According to the National Golf Foundation (the “NGF”),
golf is the largest participation sport in America, with 41 million active golfers over six years old, and has had a growth rate of adding
3 million net new golfers in each of the 2021 and 2022. However, according to the NGF, in 2022, there were over 15.5 million golfers
that participated exclusively in off-course golf activities, such as driving ranges, indoor golf simulators, or golf entertainment venues,
and only 13 million people who played exclusively on a golf course. According to the NGF, a total of 17.8 million people who did not
play golf in 2021 said they are “very interested” in playing golf on a golf course. According to a January 26, 2023 article
from the NGF, the off-course golfers have increased more significantly, with a 13% year-over-year jump, compared with a 2% rise in on-course
participation. As reported, the total off-course market in 2022 of approximately $27.9 million has for the first time eclipsed on-course
play.
The
total addressable market for golf products in 2022 was an estimated $1.4 USD Billion, and with a CAGR of 11.05% is forecast to reach
$3.8 USD Billion by 2031. Econ Market Research estimates that North America represents 36%, Europe 28%, Asia Pacific 22%, and Middle
East and Africa 7% of total Capital Market share in 2022. In this same report they have found that TruGolf Nevada currently maintains
a 4.28% market share. They also noted that 69% of the total market is from Indoor Golf Simulators, while 31% is from Outdoor Golf Simulators
in 2022 with a slight shift of 1% towards Outdoor Golf Simulators by 2031. In additional the report found that only 21% of sales were
for Residential application, and 78% sold for Commercial applications, with a small increase in Residential to 22% by 2031. While it
is not directly stated in the Econ Market Research study, we consider revenue from both SaaS software and Data Analytics to be included
in the overall total addressable market for golf products. 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 there are many reasons for the decline in outdoor rounds of golf being played and the simultaneous increase of indoor rounds
of golf, including (i) the major costs of running a golf course (and consequently the costs of playing outdoor golf), including environmental
factors making outdoor golf increasingly costly and requiring more and more water for vegetation, as temperatures across the United States
increase, even as available water has generally decreased, (ii) the closing of over 100 golf courses every year (NGF) and (iii) the challenge
in finding available daylight hours with so many golfers and so few golf courses , especially in light of the lengthy time period required
to play a full outdoor course. 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.
Current
Operations
We
currently leverage a bifurcated branding strategy by both (1) selling indoor golf simulator hardware under our TruGolf Nevada brand,
which hardware includes our E6 Connect software; and (2) selling our E6 Connect software separately for use on other companies’
hardware. In the future, we also intend to franchise indoor golf simulation facilities, create a “Virtual Golf Association”
of online players, and leverage our access to swing data, each as discussed in greater detail below.
Summary
Risk Factors
Our
business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors,”
which illuminate challenges that we face in connection with the successful implementation of our strategy and the growth of our business.
The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy,
which could cause a decline in the price of shares of our securities and result in a loss of all or a portion of your investment:
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The COVID-19 pandemic or
similar outbreaks could have an adverse impact on our business and operations, and the markets and communities in which we, our partners
and customers operate, and the impact of the pandemic is difficult to assess or predict. |
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We may not be able to accurately
predict our future capital needs, and we may not be able to obtain additional financing to fund our operations on the terms and in
the manner previously obtained. |
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If the Business Combination’s
benefits do not meet the expectations of financial analysts, the market price of TruGolf Common Stock may decline. |
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TruGolf may be required
to take actions that could have a significant negative effect on TruGolf’s financial condition, results of operations and the
price of TruGolf’s securities, which could cause you to lose some or all of your investment. |
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Changes in laws or regulations,
or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete
our initial business combination and results of operations. |
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The unaudited pro forma
condensed combined financial information included in this prospectus is preliminary and the actual financial condition and results
of operations after the Business Combination may differ materially. |
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TruGolf Nevada has a limited
operating history and has been growing rapidly over the last several years, which makes it difficult to forecast our future results
of operations and increases the risk of your investment. |
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We may be unable to successfully
close potential acquisitions, or successfully integrate the operations of such target businesses, if acquired, which could have an
adverse impact on our business. |
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TruGolf Nevada relies heavily
on the services of our senior management team, and if we are not successful in attracting or retaining senior management personnel,
we may not be able to successfully implement our business strategy. |
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Adverse or weakened general
economic and market conditions may reduce spending on technology and information, which could harm our revenue, results of operations,
and cash flows. |
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TruGolf Nevada relies heavily
on the services of our senior management team, and if we are not successful in attracting or retaining senior management personnel,
we may not be able to successfully implement our business strategy. |
Corporate
Information
On
January 31, 2024, we completed the previously announced Business Combination pursuant to the terms of that Amended and Restated Agreement
and Plan of Merger (as amended), dated July 21, 2023, as amended (the “Merger Agreement”) by and among DMA, TrueGolf Nevada,
Purchaser Representative, Seller Representative and Merger Sub. Pursuant to the terms of the Merger Agreement (and upon all other conditions
pursuant to the Merger Agreement being satisfied or waived), (i) Merger Sub merged with and into TrueGolf Nevada, with TrueGolf Nevada
surviving the merger as a wholly-owned subsidiary of DMA, and (ii) DMA changed its name to TruGolf Holdings, Inc.
Our
principal executive offices are located at 60 North 1400 West Centerville, Utah 84014, and our telephone number is (801) 298-1997. Our
website address is https://TruGolf.com. The information contained on or otherwise accessible through our website is not part of this
prospectus.
The
Offering
| Issuer –
Issuance of Common Stock |
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TruGolf
Holdings, Inc. |
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| Shares of Class A
Common Stock to be Issued by Us |
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Up
to (a) 4,596,435 shares of Class A Common Stock, (b) 29,245,684 shares of Class A Common Stock issuable upon exercise of the
Warrants, consisting of (i) up to 9,870,684 Series A Warrant Shares, (ii) up to 19,375,000 Series B Warrant Shares, and (iii) up
to 632,500 Representative Warrant Shares; and (c) up to 40,185,185 Note Shares. |
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| Shares of Class A
Common Stock Outstanding as of the Date of this Prospectus |
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11,610,084
shares. |
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| Shares of Class A Common Stock Outstanding after
this Offering |
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86,269,888 |
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| Exercise Price of
Warrants |
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$13.00
per
share for Series A Warrants, $10.00 for Series B Warrants, and $12.00 for Representative
Warrants. Please see “Private Placement of Warrants and Notes” on page 74 for
further details.
On
August 20, 2024, the last quoted sale price for our Class A Common Stock as reported on Nasdaq was $1.45 per share. |
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| Resale of Common Stock |
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| Shares of Class A
Common Stock Offered by the Selling Securityholders |
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An
aggregate of: (a) up to 4,596,435 shares of Class A Common Stock; (b) up to 40,185,185 Note Shares; and (c) up to
10,568,182 Warrant Shares. |
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| Terms of the Offering |
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The Selling Securityholders
will determine when and how they will dispose of the shares of Class A Common Stock registered under this prospectus for resale. |
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| Use of Proceeds |
|
We will not receive any
proceeds from the sale of shares of Class A Common Stock by the Selling Securityholders. In the event any Warrants are exercised
for cash, we would receive the proceeds from any such cash exercise, provided, however, we will not receive any proceeds from the
sale of the shares of Class A Common Stock issuable upon such exercise. The exercise of the Warrants, and any proceeds we may receive
from their exercise, are highly dependent on the price of our shares of our Class A Common Stock and the spread between the exercise
price of such securities and the market price of our Class A Common Stock at the time of exercise. It is possible that we may never
generate any cash proceeds from the exercise of such Warrants. |
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| Lock-up Restrictions |
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Certain of our stockholders,
as well as an officer and a director, are subject to certain restrictions on transfer until the termination of applicable lock-up
periods. See the section entitled “Securities Act Restrictions on Resale of our Securities — Lock-up Agreements.” |
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| Risk Factors |
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See the section entitled
“Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider
carefully before deciding to invest in our securities. |
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| Nasdaq Symbols |
|
Our
Class A Common Stock is listed on The Nasdaq Global Market under the symbol “TRUG”. |
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an
investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well
as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline
due to any of these risks, and, as a result, you may lose all or part of your investment. Certain statements in “Risk Factors”
are forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”
Risks
Related to TruGolf’s Business and Industry
Our
growth initiatives require significant capital investments and there can be no assurance that we will realize a positive return on these
investments.
Initiatives
to upgrade our business processes and invest in technological improvements to our manufacturing facility, and our plans to expand into
franchising, involve many risks which could result in, among other things, business interruptions and increased costs, any of which may
result in our inability to realize returns on our capital investments. If we have insufficient sales or are unable to realize the full
potential of our capital investments, we may not realize a positive return on our investment, which could impact our margins and have
a significant adverse effect on our results of operations, financial condition and cash flows.
If
we are not able to keep pace with technological and competitive developments or fail to integrate our products with a variety of technologies
that are developed by others, our products may become less marketable, less competitive, or obsolete, and our results of operations may
be adversely affected.
The
success of our new product introductions depends on a number of factors including, but not limited to, timely and successful product
development, market acceptance, our ability to manage the risks associated with new product releases, the effective management of development
and other spending in connection with anticipated demand for new products, and the availability of newly developed products. We have
in the past experienced bugs, errors, or other defects or deficiencies in new products and product updates and delays in releasing new
products, deployment options, and product enhancements and may have similar experiences in the future. As a result, some of our customers
may either defer purchasing our products until the next upgrade is released or switch to a competitor.
To
keep pace with technological and competitive developments we have in the past invested, and may continue to invest, in technologies,
services, products and other assets that expand the products that we can offer our customers. We may make these investments without being
certain that they will result in products or enhancements that will be accepted by existing or prospective customers or that will achieve
market acceptance. If we are unable to successfully enhance our existing products to meet evolving customer requirements, increase adoption
and use cases of our products, develop new products, quickly resolve security vulnerabilities, or if our efforts to increase the use
cases of our products are more expensive than we expect, then our business, results of operations and financial condition would be adversely
affected.
In
addition, our success depends on our ability to integrate our products with a variety of third-party technologies. Our technology partnership
ecosystem powers significant extensibility of our products and offers our customers the ability to use external tools of their choice
with our products and to deploy our products in their preferred environments and successfully support new technologies as they arise.
Changes in our relationship with any provider, the instability or vulnerability of any third-party technology, or the inability of our
products to successfully integrate with third-party technology may adversely affect our business and results of operations. Any losses
or shifts in the market position of these providers in general, in relation to one another or to new competitors or new technologies,
could lead to losses in our relationships or customers, or to our need to identify and develop integrations with new third-party technologies.
Such changes could consume substantial resources and may not be effective. Further, any expansion into new geographies may require us
to integrate our products with new third-party technology and invest in developing new relationships with providers. If we are unable
to respond to changes in a cost-effective manner, our products may become less marketable, less competitive, or obsolete and our results
of operations may be negatively impacted.
Our
indoor golf simulators and the software E6 Connect are at the core of our business and any decline in demand for our E6 Connect, our
simulators due to malfunction, inferior performance, increased competition or otherwise, will impact our business, results of operations,
and financial condition.
Our
products are adapted to rely on our software E6 Connect, which is at the core of our business and all of our subscriptions and products,
including our indoor golf simulators. Accordingly, market acceptance and performance of E6 Connect is critical to our success, as well
as acceptance and sale of our indoor golf simulators. If demand for E6 Connect declines, the demand for our golf simulators may also
decline. Demand for E6 Connect may be affected by a number of factors, many of which are beyond our control, such as continued market
acceptance of E6 Connect and products by customers, the timing of development and release of new features, functionality, and lower cost
alternatives introduced by our competitors, technological changes and developments within the markets we serve, and growth or contraction
in our addressable markets. If we are unable to continue to meet customer demand, if our products fail to compete with the products of
our competitors, if we fail to achieve more widespread market acceptance of E6 Connect and our golf simulators or if our products fail
to meet statutory, regulatory, contractual, or other applicable requirements, then our business, results of operations, and financial
condition would be harmed.
The
market for our products is rapidly growing and we expect to face intense competition, and we may not be able to compete successfully
against current and future competitors, some of whom have greater financial, technical, and other resources than we do.
The
simulator industry is highly competitive and is also rapidly growing and changing. The industry continues to expand and evolve as an
increasing number of competitors and potential competitors enter the market. Many of these competitors and potential competitors may
have substantially greater financial, technological and managerial resources and experience than we have. In addition, our products compete
with product offerings from large and well-established companies that have greater marketing and sales experience and capabilities than
we or the parties with which we contract have. If we are unable to compete successfully, we may be unable to grow and sustain our revenue.
We
believe that our ability to compete depends upon many factors both within and beyond our control, including:
| ● |
the flexibility and variety
of our product offerings relative to our competitors, and our ability to timely launch new product initiatives; |
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the quality and price of
products offered by us and our competitors; |
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our reputation and brand
strength relative to our competitors; |
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customer satisfaction; |
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the size and composition
of our customer base; |
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our ability to comply with,
and manage the costs of complying with, laws and regulations applicable to our business; and |
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our ability to cost-effectively
source and distribute the products we offer and to manage our operation. |
Many
competitors also have longer operating histories, and have greater technical capabilities, greater financial, marketing, institutional
and other resources and larger consumer bases than we do. These factors may also allow our competitors to derive greater revenue and
profits from their existing consumer bases, acquire consumers at lower costs or respond more quickly than we will be able to, to new
or emerging technologies and changes in product trends and consumer shopping behavior. These competitors may engage in more extensive
research and development efforts, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies, which
may allow them to build larger consumer bases or generate revenue from their existing consumer bases more effectively than we will be
able to. As a result, these competitors may be able to offer comparable or substitute products to consumers at similar or lower costs.
This could put pressure on us to lower our prices, resulting in lower revenue and margins or cause us to lose market share even if we
lower prices.
Furthermore,
companies with greater resources or more well-known brand names may attempt to compete with us, and as a result, we may lose current
or potential customers and may be unable to generate sufficient revenues to support our operations, any one of which could have a material
adverse effect on our ability to grow and our results of operations.
We
cannot be certain that we will successfully compete with larger competitors that have greater financial, sales, technical and other resources.
Companies with greater resources may acquire our competitors or launch new products, and they may be able to use their resources and
scale to respond to competitive pressures and changes in consumer preferences by reducing prices or increasing promotional activities,
among other things.
We
may be subject to product warranty claims that require the replacement or repair of products sold. Such warranty claims could adversely
affect our results of operations and relationships with customers.
We
offer 2-year limited warranties on all of our golf simulator products. From time to time, such products may contain manufacturing defects
or design flaws that are not detected prior to sale, particularly in the case of new product introductions or upon design changes to
existing products. The failure to identify and correct manufacturing defects and product design issues prior to the sale of those products
could result in product warranty claims that result in costs to replace or repair any such defective products. There could be significant
costs associated with such product warranty claims, including the potential for customer dissatisfaction that may adversely affect our
reputation and relationships with customers, which may result in lost or reduced sales.
Product
quality issues and a higher-than-expected number of warranty claims or returns could harm our business and operating results.
The
products that we sell could contain defects in design or manufacture. Defects could also occur in the products or components that are
supplied to us. There can be no assurance we will be able to detect and remedy all defects in the hardware and software we sell, which
could result in product recalls, product redesign efforts, loss of revenue, reputational damage and significant warranty and other remediation
expenses. Similar to other electronics, our products have a risk of overheating and fire in the course of usage or upon malfunction.
Any such defect could result in harm to property or in personal injury. If we determine that a product does not meet product quality
standards or may contain a defect, the launch of such product could be delayed until we remedy the quality issue or defect. The costs
associated with any protracted delay necessary to remedy a quality issue or defect in a new product could be substantial.
The
occurrence of any material defects in our products could expose us to liability for warranty claims in excess of our current reserves,
and we could incur significant costs to correct any defects, warranty claims or other problems. In addition, our failure to comply with
past, present and future laws regulating extended warranties and accidental damage coverage could result in reduced sales of our products,
reputational damage, penalties and other sanctions, which could harm our business and financial condition.
If
we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage, if any.
Our
products are subject to risks for product liability claims. A product liability claim in excess of, or excluded from, our insurance coverage
would have to be paid out of cash reserves and could have a material adverse effect upon our business, financial condition and results
of operations. Product liability insurance is expensive even with large self-insured retentions or deductibles, difficult to maintain,
and current or increased coverage may not continue to be available on acceptable terms, if at all.
If
we cannot successfully defend ourselves against a product liability claim, we may incur substantial liabilities. Regardless of merit
or eventual outcome, liability claims may result in:
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injury to our reputation; |
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costs of defending the claim and/or related litigation; |
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cost of any potential adverse verdict; |
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substantial monetary awards to patients or other claimants. |
Damages
awarded in a product liability action could be substantial and could have a negative impact on our financial condition. Whether or not
we were ultimately successful in product liability litigation, such litigation would consume substantial amounts of our financial and
managerial resources, and might result in adverse publicity, all of which would impair our business.
We
may be unable to scale our operations fast enough to reduce our cost of sales and generate revenues sufficient to support our operations.
We
believe that in general, the faster we are able to scale up our operations, the lower our cost of sales, as a percentage of revenue,
will be, as we believe that certain economics of scale exist with our operations. If we are unable to grow our business fast enough to
take advantage of these economies of scale, our operations may suffer, and we may not be profitable.
We
plan to continue expanding our international operations, which could subject us to additional costs and risks, and our continued expansion
internationally may not be successful.
We
plan to further expand our operations internationally in the future. We have entered into or are in the process of entering into distribution
agreements with parties outside of the United States. There are significant costs and risks inherent in conducting business in international
markets, including:
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establishing and maintaining
effective controls at foreign locations and the associated increased costs; |
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adapting our technologies,
products, and services to non-U.S. consumers’ preferences and customs; |
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increased competition from
local providers; |
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compliance with foreign
laws and regulations; |
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adapting to doing business
in other languages and/or cultures; |
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compliance with the laws
of numerous taxing jurisdictions where we conduct business, potential double taxation of our international earnings, and potentially
adverse tax consequences due to U.S. and foreign tax laws as they relate to our international operations; |
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compliance with anti-bribery
laws, by us, our team members, our service providers, and our business partners; |
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difficulties in staffing
and managing global operations and the increased travel, infrastructure, and compliance costs associated with multiple international
locations; |
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complexity and other risks
associated with current and future foreign legal requirements, including legal requirements related to data privacy frameworks, such
as the E.U. GDPR; |
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currency exchange rate
fluctuations and related effects on our operating results; |
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economic and political
instability in some countries, including the potential effects of the current COVID-19 pandemic; |
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the uncertainty of protection
for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and |
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other costs of doing business
internationally. |
These
factors and other factors could harm our international operations and, consequently, materially impact our business, operating results,
and financial condition. Further, we may incur significant operating expenses as a result of our international expansion, and it may
not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able
to penetrate or successfully operate in new markets. If we are unable to continue to expand internationally and manage the complexity
of our global operations successfully, our financial condition and operating results could be adversely affected.
Our
growth initiatives require significant capital investments and there can be no assurance that we will realize a positive return on these
investments.
Initiatives
to upgrade our business processes and invest in technological improvements to our manufacturing facility involve many risks which could
result in, among other things, business interruptions and increased costs, any of which may result in our inability to realize returns
on its capital investment. Expansion of business processes or facilities, requires significant capital investment. If we have insufficient
sales or are unable to realize the full potential of our capital investments, we may not realize a positive return on investments, which
could impact our margins and have a significant adverse effect on our results of operations, financial condition and cash flows.
We
may need financing in the future, and any additional financing may result in restrictions on our operations or substantial dilution to
our stockholders.
We
may need to raise funds in the future, for example, to develop new technologies, expand our business, respond to competitive pressures,
acquire complementary businesses or respond to unanticipated situations. We may try to raise additional funds through public or private
financings, strategic relationships or other arrangements. Our ability to obtain debt or equity funding will depend on a number of factors,
including market conditions, our operating performance and investor interest. Additional funding may not be available to us on acceptable
terms or at all. If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies,
reducing our product-development efforts or foregoing acquisitions. If we succeed in raising additional funds through the issuance of
equity or convertible securities, it could result in substantial dilution to existing stockholders. If we raise additional funds through
the issuance of debt securities or preferred stock, these new securities would have rights, preferences, and privileges senior to those
of the holders of our Class A Common Stock. The terms of these securities, as well as any borrowings under our current loan and security
agreement, could impose restrictions on our operations.
To
remain competitive and stimulate customer demand, we must successfully manage frequent introductions and transitions of products and
services.
Due
to the highly volatile and competitive nature of the markets and industries in which we compete, we must continually introduce new products,
services and technologies, enhance existing products and services, effectively stimulate customer demand for new and upgraded products
and services, and successfully manage the transition to these new and upgraded products and services. The success of new product and
service introductions depends on a number of factors, including timely and successful development, market acceptance, our ability to
manage the risks associated with production ramp-up issues, the availability of application software for our products, the effective
management of purchase commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate
quantities and at expected costs to meet anticipated demand, and the risk that new products and services may have quality or other defects
or deficiencies. There can be no assurance we will successfully manage future introductions and transitions of products and services.
We
have and may in the future discontinue support for older versions of our products and software, resulting in customer dissatisfaction
that could negatively affect our business and operating results.
We
have historically maintained, and we believe our customers may expect, extensive backward compatibility for our older products and the
software that supports them and software, allowing older products to continue to benefit from new software updates. We expect that as
we continue to improve and enhance our software platform, this backward compatibility will no longer be practical or cost-effective,
and we may decrease or discontinue service for our older products. For example, certain of our legacy products continue to work but no
longer receive software updates. To the extent we no longer provide extensive backward capability for our products, we may damage our
relationship with our existing customers, as well as our reputation, brand loyalty and ability to attract new customers.
For
these reasons, any decision to decrease or discontinue backward capability may decrease sales, generate legal claims and adversely affect
our business, operating results and financial condition.
We
may not be able to continue to shift our revenue towards subscriptions and away from annual software licensing.
Currently,
our revenue is largely dependent on the sales of our indoor golf simulators and the annual software licenses. We plan to strategically
introduce annual subscription plans for use of our software. This shift in revenue towards subscriptions may or may not result in an
increase in revenues and our profits. Our strategic focus will be to grow subscriptions revenue more than the current annual licensing
model to perpetuate this trend.
Notwithstanding,
there can be no guarantee that our revenue will shift towards subscriptions, and away from annual licensing model. Our customers may
demand more annual licenses from us, or demand for our subscriptions may grow slower than we anticipate. Should we fail to make expected
revenues from subscriptions, our earnings may suffer and our stock price may decline.
We
rely upon independent third-party transportation providers for substantially all of our product shipments and are subject to potential
increased shipping costs as well as the potential inability of our third-party transportation providers to deliver on a timely basis.
We
currently rely upon independent third-party transportation providers for substantially all of our product shipments, including shipments
to and from customers. Our utilization of these delivery services for shipments is subject to risks which may impact a shipping company’s
ability to provide delivery services that adequately meet our shipping needs, including risks related to employee strikes, labor and
capacity constraints, port security considerations, trade policy changes or restrictions, military conflicts, acts of terrorism, accidents,
natural disasters and inclement weather. Any interruption in service provided by these transportation companies could cause temporary
disruptions in our business, a loss of sales and profits, and other material adverse effects. In addition, we are subject to increased
shipping costs due to inflation, increases in fuel prices, as we use expedited means of transportation such as air freight and various
other inputs. If we change the shipping company we use, we could face logistical difficulties that could adversely affect deliveries,
and we would incur costs and expend resources in connection with such transition. Moreover, we may not be able to obtain terms as favorable
as those received from our current independent third-party transportation provider which, in turn, would increase our costs.
Our
business depends on our brand, and any failure to maintain, protect or enhance our brand, including as a result of events outside our
control, could materially adversely affect our business.
We
believe our future success depends on our ability to maintain and grow the value of the “TruGolf” brand. Maintaining, promoting
and positioning our brand and reputation will depend on, among other factors, the success of our marketing efforts and our ability to
provide a consistent, high-quality customer experience. Any negative publicity, regardless of its accuracy, could materially adversely
affect our business. Brand value is based in large part on perceptions of subjective qualities, and any incident that erodes the loyalty
of our customers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of
our brand and significantly damage our business.
The
value of our brand also depends on effective customer support to provide a high-quality customer experience, which requires significant
personnel expense. If not managed properly, this expense could impact our profitability. Failure to manage or train our own or outsourced
customer support representatives properly, or our inability to hire sufficient customer support representatives could result in lower-quality
customer support and/or increased customer response times, compromising our ability to handle customer complaints effectively.
We
may be subject to claims challenging the inventorship of our intellectual property.
We
may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with
respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For
example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing
our inventions. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to
compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse
effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and
be a distraction to management and other employees and/or reputational harm to us. Such litigation or proceedings could increase our
operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
Some of our competitors may be able to devote significantly more resources to intellectual property proceedings, and may have significantly
broader intellectual property portfolios to assert against us if we assert our rights against them. Further, because of the substantial
discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could
be disclosed or otherwise compromised leading to others making, using, importing or selling products that are the same or substantially
the same as ours, which could adversely affect our ability to compete in the market.
We
could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.
In
recent years, there has been significant litigation involving patents and other intellectual property rights in the software industry.
Companies providing software are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly
patent rights, and to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property
infringement claims. We do not have a significant patent portfolio, which could prevent us from deterring patent infringement claims
through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature
patent portfolios than we have. The risk of patent litigation has been amplified by the increase in the number of patent holders of a
certain type, whose sole business is to assert such claims and against whom our own intellectual property portfolio may provide little
deterrent value. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce
our rights or are sued by a third party that claims that our solutions infringe its rights, the resulting litigation could be expensive
and could divert our management resources.
In
addition, in most instances, we have agreed to indemnify our customers against claims that our solutions infringe the intellectual property
rights of third parties. Our business could be adversely affected by any significant disputes between us and our customers as to the
applicability or scope of our indemnification obligations to them. Any intellectual property litigation to which we might become a party,
or for which we are required to provide indemnification, may require us to do one or more of the following:
| ● |
cease selling or using
solutions that incorporate the intellectual property that we allegedly infringe; |
| ● |
make substantial payments
for legal fees, settlement payments or other costs or damages; |
| ● |
obtain a license, which
may not be available on reasonable terms or at all, to sell or use the relevant technology; or |
| ● |
redesign the allegedly
infringing solutions to avoid infringement, which could be costly, time-consuming or impossible. |
If
we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property
infringement claims against us or any obligation to indemnify our customers for such claims, such payments or actions could materially
harm our business.
We
could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual
property could impair our business.
We
seek to protect the source code for our proprietary software and other proprietary technology and information under a combination of
copyright, trade secrets and patent law, and we seek to protect our brand through trademark law. Our policy is to enter into confidentiality
agreements, or agreements with confidentiality provisions, with our employees, consultants, vendors and customers and to control access
to our software, documentation and other proprietary information. Despite these precautions, it may be possible for unauthorized parties
to copy our software or other proprietary technology or information, or to develop similar software independently.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our solutions or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our solutions, especially the on-premise, installed version of
our solutions, is difficult, and we are unable to determine the extent to which piracy of our software exists or will occur in the future.
Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets, determine the validity
and scope of the proprietary rights of others or defend against claims of infringement or invalidity. Such litigation could be costly,
time-consuming and distracting to management, result in a diversion of resources, the narrowing or invalidation of portions of our intellectual
property and have a material adverse effect on our business, operating results and financial condition. Furthermore, our efforts to enforce
our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of
our intellectual property rights or alleging that we infringe the counterclaimant’s own intellectual property. These steps may
be inadequate to protect our intellectual property. Third parties may challenge the validity or ownership of our intellectual property,
and these challenges could cause us to lose our rights, in whole or in part, to such intellectual property or narrow its scope such that
it no longer provides meaningful protection. We will not be able to protect our intellectual property if we are unable to enforce our
rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized
third parties to copy our products and use information that we regard as proprietary to create products and services that compete with
ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our solutions may be unenforceable
under the laws of certain jurisdictions and foreign countries. Further, the laws of some countries do not protect proprietary rights
to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized
copying, transfer and use of our solutions and proprietary technology or information may increase.
There
can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently
develop similar technology. If we fail to meaningfully protect our intellectual property, our business, brand, operating results and
financial condition could be materially harmed.
Failure
to adequately enforce and protect our intellectual property rights could materially adversely affect our business, financial condition
and results of operations.
We
own certain patents, trademarks, copyrights, trade secrets, and other intellectual property and hold licenses to intellectual property
owned by others, which in the aggregate are important to our business. We rely on a combination of patent, trademark, copyright and trade
secret laws in our core geographic markets and other jurisdictions, to protect the innovations, brands, proprietary trade secrets and
know how related to certain aspects of our business. Certain of our intellectual property rights, such as patents, are time limited,
and the technology underlying our patents can be used by any third party, including competitors, once the applicable patent terms expire.
In
order to protect our confidential proprietary information, in part, we seek to enter into confidentiality and invention assignment agreements
with our employees, consultants, contractors, suppliers and others. While these agreements are designed to protect our proprietary information,
we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets
and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade
secrets or independently develop substantially equivalent information and techniques. We also seek to preserve the integrity and confidentiality
of our proprietary information by maintaining physical security of our premises and physical and electronic security of our information
technology systems, but it is possible that these security measures could be breached. If we are unable to prevent disclosure to third
parties of our material proprietary and confidential know-how and trade secrets, our ability to establish or maintain a competitive advantage
in our markets may be adversely affected.
We
selectively and strategically pursue patent and trademark protection in our core geographic markets, but our strategy has been to not
perfect certain patent and trademark rights in some countries. Accordingly, we may not be able to prevent others, including competitors,
from practicing our patented inventions, including by manufacturing and selling competing products, in those countries where we have
not obtained patent protection. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in
the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting, enforcing and defending
our intellectual property outside of the United States. In some foreign countries, where intellectual property laws or law enforcement
practices do not protect our intellectual property rights as fully as in the United States, third party manufacturers may be able to
manufacture and sell imitation products and diminish the value of our brands as well as infringe our rights, despite our efforts to prevent
such activity.
If
we fail to obtain enforceable patents, trademarks and trade secrets, fail to maintain our existing patent, trademark and trade secret
rights, or fail to prevent substantial unauthorized use of our patents, trademarks and trade secrets, we risk the loss of our intellectual
property rights and competitive advantages we have developed, which may result in lost sales. Accordingly, we devote substantial resources
to the establishment and protection of our trademarks, patents and trade secrets or know how, and we continuously evaluate the utility
of our existing intellectual property rights and the new registration of additional trademarks and patents, as appropriate. However,
we cannot guarantee that we will have adequate resources to continue to effectively establish, maintain and enforce our intellectual
property rights. We also cannot guarantee that any of our pending applications will be approved by the applicable governmental authorities.
Moreover, even if the applications will be registered during the registration process, third parties may seek to oppose, limit, or otherwise
challenge these applications or registrations.
Patent
policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of any issued patents.
Changes
in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any
patents that may issue from our patent applications or narrow the scope of our patent protection. The laws of foreign countries may not
protect our rights to the same extent as the laws of the United States. Under the Leahy-Smith America Invents Act (the “Leahy-Smith
Act”), enacted on September 16, 2011, the United States has moved to a first to file system. The Leahy-Smith Act also includes
a number of significant changes that affect the way patent applications are prosecuted, redefine prior art and provide more efficient
and cost-effective avenues for competitors to challenge the validity of the patents. In addition, the U.S. Supreme Court has ruled on
several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening
the rights of patent owners in certain situations. Depending on future actions by the U.S. Congress, the U.S. courts, the U.S. Patent
and Trademark Office and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in
unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain
in the future.
If
the Company’s information systems fail to perform adequately or if the Company experiences an interruption in operation, including
a breach in cyber security, its business and results of operations could suffer.
All
of the Company’s major operations, including manufacturing, distribution, sales and accounting, are dependent upon the Company’s
complex information systems. The Company’s information systems are vulnerable to damage or interruption from:
| ● |
Earthquake, fire, flood, hurricane and other natural
disasters; |
| ● |
Power loss, computer systems failure, Internet and
telecommunications or data network failure; and |
| ● |
Hackers, computer viruses, software bugs or glitches. |
Any
damage or significant disruption in the operation of such systems, the failure of the Company’s or the Company’s IT vendors’
information systems to perform as expected or any security breach to the information systems (including financial or credit/payment frauds)
would disrupt the Company’s business, which may result in decreased sales, increased overhead costs, excess inventory and product
shortages and otherwise adversely affect the Company’s reputation, operations, financial performance and condition.
Cyber-attacks,
unauthorized access to, or accidental disclosure of, consumer personally-identifiable information including payment card information,
that the Company or the Company’s vendors collects through its websites or stores on its servers may result in significant expense
and negatively impact the Company’s reputation and business.
There
is heightened concern and awareness over the security of personal information transmitted over the Internet, consumer identity theft
and user privacy. In the ordinary course of our business, we collect, store, use and disclose sensitive data. We also process and store,
and use additional third parties to process and store, confidential and proprietary information such as intellectual property and other
proprietary business information, including that of our customers, providers and contracting parties.
While
the Company has implemented security measures, the Company’s computer systems and those of its third party vendors of IT and data
security systems and services, may nevertheless be susceptible to electronic or physical computer break-ins, viruses, fraud, and other
disruptions and security compromises involving the loss or unauthorized access of confidential information because technologies used
to obtain unauthorized access to or sabotage systems are constantly evolving, change frequently, and generally are not recognized until
they are launched against a target. Any perceived or actual unauthorized or inadvertent disclosure of personally-identifiable information,
whether through a compromise of the Company’s or its third party vendors’ networks by an unauthorized party, employee theft,
misuse or error or otherwise, could harm the Company’s reputation, impair the Company’s ability to attract website visitors,
require us to notify payment brands if payment card information is accessed or compromised, compel us to comply with federal and/or state
breach notification laws and foreign equivalents, subject the Company to costly mandatory corrective action, or subject the Company to
claims or litigation arising from damages suffered by consumers, all of which could adversely affect the Company’s operations,
financial performance and condition.
Additionally,
any actual or suspected security breach or other compromise of the Company’s security measures or those of the Company’s
third-party vendors, whether as a result of hacking efforts, denial-of-service attacks, viruses, malicious software, break-ins, phishing
attacks, social engineering or otherwise, could harm the Company’s reputation and business, damage our brand and make it harder
to retain existing customers or acquire new ones, require the Company to expend significant capital and other resources to address the
breach, and result in a violation of applicable laws, regulations or other legal obligations. the Company’s insurance policies
may not cover, or may not be adequate to reimburse us for, losses caused by any such security breach.
The
Company relies on email and other messaging services to connect with the Company’s existing and potential customers. the Company’s
customers may be targeted by parties using fraudulent spoofing and phishing emails to misappropriate passwords, payment information or
other personal information or to introduce viruses through Trojan horse programs or otherwise through such customers’ computers,
smartphones, tablets or other devices, including due to the possibility that the ongoing conflict between Russia and Ukraine and the
escalating tensions between China and Taiwan could result in increased cyber-attacks or cybersecurity incidents by state actors or others.
Cyberattacks, including, but not limited to, ransomware events, computer viruses or other malware, phishing attacks, denial of service
attacks, illegal hacking and credential stuffing, or other malicious attempts to compromise and/or interrupt the operation of information
technology systems continue to increase in frequency, magnitude and sophistication. These increasing threats are being driven by a variety
of sources, including nation-state sponsored espionage and hacking activities, industrial espionage, organized crime, sophisticated organizations
and hacking by groups and individuals. These sources can also implement social engineering techniques to induce our third-party partners,
users, employees or customers to disclose passwords or other sensitive information or take other actions to gain access to our or our
third-party partners’ data or our users’ data. Techniques used to obtain unauthorized access to, or to sabotage, systems
or networks are constantly evolving and may not be recognized until launched against a target. Therefore, we may be unable to anticipate
these techniques, react in a timely manner, or implement adequate preventive measures, and we may face delays in our detection or remediation
of, or other responses to, such cyberattacks, security breaches and other similar incidents. Geopolitical instability, such as the war
between Russia and Ukraine, may increase the likelihood that we or our third-party partners and customers could experience direct or
collateral consequences from cyber conflicts between nation-states or other politically motivated actors targeting critical technology
infrastructure. As we increase our customer base and our brand becomes more widely known and recognized, and as our products are used
in more heavily regulated industries where there may be a greater concentration of sensitive and protected data, we and our third-party
partners may become more of a target for these malicious third parties. Despite the Company’s efforts to mitigate the effectiveness
of such malicious email campaigns through product improvements, spoofing and phishing may damage the Company’s brand and increase
our costs. Any of these events or circumstances could materially adversely affect the Company’s business, financial condition and
operating results.
Our
business could be disrupted by catastrophic events and man-made problems, such as power disruptions, data security breaches, and terrorism.
Our
systems will be vulnerable to damage or interruption from the occurrence of any catastrophic event, including earthquake, fire, flood,
or other weather event, power loss, telecommunications failure, software or hardware malfunction, cyber-attack, war, terrorist attack,
or incident of mass violence, which could result in lengthy interruptions in access to our systems. In addition, acts of terrorism, including
malicious internet-based activity, could cause disruptions to the internet or the economy as a whole. If our systems were to fail or
be negatively impacted as a result of a natural disaster or other event, our ability to provide future products to customers would be
impaired or we could lose critical data. We do not carry business interruption insurance sufficient to compensate us for the potentially
significant losses, including the potential harm to our business, financial condition and results of operations that may result from
interruptions in access to our platform as a result of system failures.
The
Company relies on its IT systems and any material disruption to such IT systems could have a material and adverse effect on the Company.
The
availability and effectiveness of TruGolf’s services depend on the continued operation of its information technology and communications
systems. The Company relies on its IT systems, and such systems are vulnerable to damage or interruption from, among other adverse effects,
fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks
or other attempts to harm its systems. TruGolf’s products and services are also highly technical and complex and may contain errors
or vulnerabilities that could result in interruptions in its services or the failure of its systems or the systems on which it relies.
Our
business is subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing and which could subject us
to claims or otherwise harm our business.
We
are subject to a variety of laws in the United States and abroad that are continuously evolving and developing and are costly to comply
with, can require significant management time and effort and can subject us to claims or other remedies. These laws may conflict with
each other and if we comply with the laws of one jurisdiction, we may find that we are violating the rules of another jurisdiction. Additionally,
our ability to provide a specific target audience to advertisers is a significant competitive advantage. Any legislation reducing this
ability would have a negative impact on our business and operating results.
If
we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be directly
harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial
resources or to discontinue certain solutions, which could negatively affect our business, financial condition and results of operations.
In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation
or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business and
operating results.
Failure
to comply with federal, state and foreign laws and regulations relating to privacy, data protection and consumer protection, or the expansion
of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely
affect our business and our financial condition.
A
variety of federal, state and foreign laws and regulations govern the collection, use, retention, sharing and security of consumer data.
Laws and regulations relating to privacy, data protection and consumer protection are evolving and subject to potentially differing interpretations.
These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with
other rules or our practices. As a result, our practices may not comply with all such laws, regulations, requirements and obligations.
Any failure, or perceived failure, by us to comply with any federal, state or foreign privacy or consumer protection-related laws, regulations,
industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or
other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may
result in claims, investigations, proceedings or actions against us by governmental entities or others or other liabilities or require
us to change our operations.
We
will collect, store, process, and use personal information and other customer data, and will rely on third parties that are not directly
under our control to manage certain of these operations and to collect, store, process and use payment information. Our customers’
personal information may include names, addresses, phone numbers, email addresses, payment card data, and payment account information,
as well as other information. Due to the volume and sensitivity of the personal information and data we and these third parties will
manage, the security features of our information systems are critical. If our security measures, some of which will be managed by third
parties, are breached or fail, unauthorized persons may be able to access sensitive customer data, including payment card data. If we
or our independent service providers or business partners experience a breach of systems that collect, store or process our members’
and customers’ sensitive data, our brand could be harmed, sales of our products could decrease, and we could be exposed to claims,
losses, administrative fines, litigation or regulatory and governmental investigations and proceedings. Any such claim, investigation,
proceeding or action could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings,
distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition
of monetary penalties and administrative fines. Depending on the nature of the information compromised, we may also have obligations
to notify users, law enforcement, or payment companies about the incident and may need to provide some form of remedy, such as refunds,
for the individuals affected by the incident.
Privacy
laws, rules, and regulations are constantly evolving in the United States and abroad and may be inconsistent from one jurisdiction to
another. We expect that new industry standards, laws and regulations will continue to be proposed regarding privacy, data protection
and information security in many jurisdictions, including the California Consumer Privacy Act of 2018, which went effective January 1,
2020, the California Consumer Privacy Rights Act, which went into effect on January 1, 2023, The states of Colorado, Connecticut, Utah
and Virginia each enacted comprehensive privacy laws that will become effective at various times throughout 2023.
We
are also subject to non-U.S. privacy rules and regulations, such as the European Union’s (“E.U.”) General Data
Protection Regulation (“GDPR”), the European e-Privacy Regulation and national laws supplementing GDPR, the Data Protection
Act of 2018 (“DPA 18”) in the United Kingdom, and the E.U. Privacy and Electronic Communications Regulation. GDPR
and DPA 18 require companies to meet stringent requirements regarding the processing of personal data of individuals located in the European
Economic Area (“EEA”). GDPR and DPA 18 also include significant penalties for noncompliance, which may result in monetary
penalties of up to the higher of €20.0 million or 4% of a group’s worldwide revenue for the preceding financial year for the
most serious violations. The GDPR, DPA 18, and other similar regulations require companies to give specific types of notice and informed
consent is required for certain actions, and the GDPR also imposes additional conditions in order to satisfy such consent, such as bundled
consents.
We
cannot yet determine the impact such future laws, regulations and standards may have on our business. Complying with these evolving obligations
is costly. For instance, expanding definitions and interpretations of what constitutes “personal data” (or the equivalent)
within the United States, the EEA and elsewhere may increase our compliance costs and other liability. Any failure to comply could give
rise to unwanted media attention and other negative publicity, damage our customer and consumer relationships and reputation, and result
in lost sales, claims, administrative fines, lawsuits or regulatory and governmental investigations and proceedings and may harm our
business and results of operations.
Public
scrutiny of Internet privacy issues may result in increased regulation and different industry standards, which could deter or prevent
us from providing our current products and solutions to our members and customers, thereby harming our business.
The
regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices
regarding the collection, use, storage, transmission and security of personal information by companies operating over the Internet have
recently come under increased public scrutiny. The U.S. government, including the Federal Trade Commission and the Department of Commerce,
has announced that it is reviewing the need for greater regulation for the collection of information concerning consumer behavior on
the Internet, including regulation aimed at restricting certain targeted advertising practices. In addition, the European Union is in
the process of proposing reforms to its existing data protection legal framework, which may result in a greater compliance burden for
companies with users in Europe. Various government and consumer agencies have also called for new regulations and changes in industry
practices.
Our
business could be adversely affected if legislation or regulations are adopted, interpreted, or implemented in a manner that is inconsistent
with our current business practices and that require changes to these practices, the design of our products, software, features or our
privacy policy. Such changes may require us to modify our products and features, possibly in a material manner, and may limit our ability
to develop new products and features that make use of our user data.
Evolving
government regulations and enforcement activities may require increased costs or adversely affect our results of operations.
Our
operations may be subject to direct and indirect adoption, expansion or reinterpretation of various laws and regulations. Compliance
with these evolving laws, regulations and interpretations may require us to change our practices at an undeterminable and possibly significant
initial and continued expense. These additional expenditures may increase future overhead, which could have a material adverse effect
on our results of operations. There could also be laws and regulations applicable to our business that we have not identified or that,
if changed, may be costly to us, and we cannot predict all the ways in which implementation of such laws and regulations may affect us.
Additionally,
the introduction of new products may require us to comply with additional, yet undetermined, laws and regulations. The failure to adequately
comply with these future laws and regulations may delay or possibly prevent our products from being offered to customers, which could
have a material adverse effect on our business, financial condition, and results of operations.
We
may become party to litigation, mediation and/or arbitration from time to time.
We
may become party to regulatory proceedings, litigation, mediation and/or arbitration from time to time in the ordinary course of business,
which could adversely affect our business. Monitoring and defending against legal actions, whether or not meritorious, can be time-consuming,
divert management’s attention and resources and cause us to incur significant expenses. In addition, legal fees and costs incurred
in connection with such activities may be significant and we could, in the future, be subject to judgments or enter into settlements
of claims for significant monetary damages. Substantial litigation costs or an adverse result in any litigation may adversely impact
our business, operating results or financial condition.
A
reduction in the number of rounds of golf played or in the number of golf participants could materially adversely affect our business,
financial condition and results of operations.
We
generate substantially all of our sales from the sale of golf-related products—namely, our in-home golfing simulators and related
software. The demand for golf-related products in general, and golfing simulators in particular, is directly related to the number of
golf participants and the number of rounds of golf being played by these participants. If golf participation or the number of rounds
of golf played declines, sales of our products may be adversely impacted, which could materially adversely affect our business, financial
condition and results of operations.
In
addition, the demand for golf products and golfing simulators is directly related to the popularity of magazines, cable channels and
other media dedicated to golf, television coverage of golf tournaments and attendance at golf events. The Company depends on the exposure
of its products through advertising. Any significant reduction in television coverage of, or attendance at, golf tournaments and events
(whether as a result of COVID-19-related restrictions or otherwise) or any significant reduction in the popularity of golf magazines
or golf television channels, could reduce the demand for golf products and the Company’s sales.
Consumer
spending habits and macroeconomic factors may affect the number of rounds of golf played and related spending on golf products.
Our
products are recreational in nature, and are therefore discretionary purchases for consumers. Consumers are generally more willing to
spend their time and money to play golf and make discretionary purchases of golf products when economic conditions are favorable and
when consumers feel confident and prosperous. Discretionary spending on golf and the golf products we sell is affected by consumer spending
habits as well as by many macroeconomic factors, including general business conditions, stock market prices and volatility, corporate
spending, housing prices, interest rates, inflation, the availability of consumer credit, taxes and consumer confidence in future economic
conditions. Consumers may reduce or postpone purchases of our products as a result of shifts in consumer spending habits as well as during
periods when economic uncertainty increases, disposable income is lower, or during periods of actual or perceived unfavorable economic
conditions. Consumers have started to, and may continue to, reduce or postpone purchases of our products as a result of shifts in consumer
spending habits as well as during periods when economic uncertainty increases, disposable income is lower, or during periods of actual
or perceived unfavorable economic conditions. Economic slowing and general fear of our economic future has already started to impact
our sales including operating results for Q4 2022, and Q1 2023. A future significant or prolonged decline in general economic conditions
or uncertainties regarding future economic prospects that adversely affects consumer discretionary spending, whether in the United States
or in our international markets, could result in reduced sales of our products, which could materially adversely affect our business,
financial condition and results of operations.
Demographic
and socioeconomic factors may affect the number of golf participants and related spending on our products.
Golf
is a recreational activity that requires time and money, and different generations and socioeconomic and ethnic groups use their leisure
time and discretionary funds in different ways. Golf participation among younger generations and certain socioeconomic and ethnic groups
may not prove to be as popular as it is among the “gen x” and “baby boomer” generations. If golf participation
or the number of rounds of golf played declines due to factors such as demographic changes in the United States and our international
markets or lack of interest in the sport among young people or certain socioeconomic and ethnic groups, sales of our products could be
negatively impacted, which could materially adversely affect our business, financial condition and results of operations.
We
depend heavily on our senior management, including our Chief Executive Officer. The ability of certain key employees to devote adequate
time to us are critical to the success of our business, and failure to do so may adversely affect our revenues and as a result could
materially adversely affect our business, financial condition and results of operations.
We
must retain the services of our key employees and strategically recruit and hire new talented employees. Our future business and results
of operations depend in significant part upon the continued contributions of our senior management personnel, particularly our Chief
Executive Officer and Chairman, Christopher Jones. If we lose Mr. Jones’ services or if Mr. Jones fails to perform in his current
position, or if we are not able to attract and retain skilled personnel as needed, our business could suffer. Significant turnover in
our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend
on the skills and abilities of these key personnel in managing our operations, product development, marketing and sales aspects of our
business, any part of which could be harmed by turnover in the future. Additionally, moving forward, should the services of such personnel,
and in particular Mr. Jones, be lost for any reason, the Company will incur costs associated with recruiting replacements and any potential
delays in operations which this may cause. We do not maintain “key person” insurance policies on the lives of our senior
management or the lives of any of our other employees. If we are unable to replace such individual with a suitably trained alternative
individual(s), we may be forced to scale back or curtail our business plan.
We
do not currently have any key person life insurance policies on our executive officers. If our executive officers do not devote sufficient
time towards our business, we may never be able to effectuate our business plan. Potential competition from our existing executive officers,
after they leave their employment with us, could negatively impact our profitability.
Other
than Christopher Jones, TruGolf’s CEO, Mr. Brenner Adams, TruGolf’s Chief Growth Officer, and Mr. Nathan E. Larsen, TruGolf’s
Chief Experience Officer, none of our other executive officers are currently party to employment agreements with us and as a result,
none are contractually prohibited from competing with us after their employment with us ends. Accordingly, any of these individuals could
be in a position to use industry experience gained while working with us to compete with us. Such competition could distract or confuse
customers, reduce the value of our intellectual property and trade secrets, or reduce our future revenues, earnings or growth prospects.
If
our estimates or judgments relating to our critical accounting estimates prove to be incorrect, our financial condition and results of
operations could be adversely affected.
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and
on various other assumptions that we believe to be reasonable under the circumstances, in the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations of TruGolf.” The results of these estimates form the
basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are
not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements
include those related to impairment of goodwill, pension and other post-retirement benefits, provisions for income taxes and valuation
allowances for deferred tax assets. Our financial condition and results of operations may be adversely affected if our assumptions change
or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations
of securities analysts and investors, resulting in a decline in the price of our stock.
Economic
downturns and adverse political and market conditions beyond the Company’s control could adversely negatively affect its business,
financial condition and results of operations.
The
Company’s financial performance is subject to global and U.S. economic conditions and their impact on levels of spending by consumers
and customers, particularly discretionary spending for entertainment, gaming and leisure activities. Economic recessions have had, and
may continue to have, far-reaching adverse consequences across industries, including the global entertainment and gaming industries,
which may adversely affect the Company’s business and financial condition. As a result of the ongoing COVID-19 pandemic, there
is substantial uncertainty about the strength of the global economies, which may currently or in the near term be in a recession and
have experienced rapid increases in uncertainty about the pace of potential recovery. A continued economic downturn or recession, or
slowing or stalled recovery therefrom, may have a material adverse effect on the Company’s business, financial condition, results
of operations or prospects.
In
addition, changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including
fluctuation in stock markets resulting from, among other things, trends in the economy and inflation, as are being currently experienced,
may reduce customers’ disposable income. Any one of these changes could have a material adverse effect on the Company’s business,
financial condition, results of operations or prospects.
Additionally,
our business depends on the overall demand for golfing simulators and other technology offerings, as well as the economic health of customers
that benefit from our products. Economic downturns or unstable market conditions may cause customers to cease spending money on our products
which would adversely affect our business, financial condition and results of operations. Similarly, economic downturns could also decrease
the amount of disposable income end-users have available for our products.
Our
insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our
insurance.
We
maintain insurance of the type and in amounts that we believe is commercially reasonable and that is available to businesses in our industry.
We carry various types of insurance, including general liability, auto liability, workers’ compensation, cyber and excess umbrella,
from highly rated insurance carriers on all of our properties. We believe that the policy specifications and insured limits are adequate
for foreseeable losses with terms and conditions that are reasonable and customary for similar businesses and are within industry standards.
Nevertheless, market forces beyond our control could limit the scope of the insurance coverage that we can obtain in the future or restrict
our ability to buy insurance coverage at reasonable rates. We cannot predict the level of the premiums that we may be required to pay
for subsequent insurance coverage, the level of any deductible and/or self-insurance retention applicable thereto, the level of aggregate
coverage available or the availability of coverage for specific risks.
In
the event of a substantial loss, the insurance coverage that we carry may not be sufficient to compensate us for the losses we incur
or any costs for which we are responsible. In addition, there are types of losses we may incur that cannot be insured against or that
we believe are not commercially reasonable to insure. For example, we maintain business interruption insurance, but there can be no assurance
that the coverage for a severe or prolonged business interruption would be adequate and the deductibles for such insurance may be high.
These losses, if they occur, could materially adversely affect our business, financial condition and results of operations.
A
reduction in discretionary consumer spending, from an economic downturn or disruption of financial markets or other factors, could negatively
impact our financial performance.
Gaming
and other leisure activities that our customers experience, often represent discretionary expenditures and an individual’s participation
in those activities may decline if discretionary consumer spending declines, including during economic downturns, when consumers generally
earn less disposable income. Changes in discretionary consumer spending or consumer preferences are driven by factors beyond our control,
such as:
| ● |
perceived or actual general economic conditions; |
| ● |
fears of recession and changes in consumer confidence
in the economy; |
| ● |
high energy, fuel and other commodity costs; |
| ● |
the potential for bank failures or other financial
crises; |
| ● |
a soft job market; |
| ● |
an actual or perceived decrease in disposable consumer
income and wealth; |
| ● |
increases in taxes, including gaming taxes or fees;
and |
| ● |
terrorist attacks or other global events. |
During
periods of economic contraction, our revenues may decrease while most of our costs remain fixed and some costs even increase, resulting
in decreased earnings.
We
are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict
our operations in the future.
Our
properties and operations are subject to a number of environmental, health and safety laws and regulations in each of the jurisdictions
in which we operate. These laws and regulations govern, among other things, air emissions, water discharges, handling and disposal of
solid and hazardous substances and wastes, soil and groundwater contamination, product safety, advertising and employee health and safety.
Our failure to comply with such environmental, health and safety laws and regulations could result in substantial civil or criminal fines
or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring remedial
or corrective measures, installation of pollution control equipment or other actions.
We
may also be subject to liability for environmental investigations and cleanups, including at properties that we currently or previously
owned or operated, even if such contamination was not caused by us, and we may face claims alleging harm to health or property or natural
resource damages arising out of contamination or exposure to hazardous substances. We may also be subject to similar liabilities and
claims in connection with locations at which hazardous substances or wastes we have generated have been stored, treated, otherwise managed,
or disposed.
Environmental
conditions at or related to our current or former properties or operations, and/or the costs of complying with current or future environmental,
health and safety requirements (which have become more stringent and complex over time) could materially adversely affect our business,
financial condition and results of operations.
Our
failure to comply with certain environmental regulations could adversely affect our business, financial condition and results of operations.
The
storage, distribution, transportation and disposal of some of the products that we sell are subject to a variety of federal and state
environmental regulations. Our failure to comply with these regulations could have an adverse impact on our business, financial condition
and results of operations.
International
political instability and terrorist activities may decrease demand for the Company’s products and disrupt its business.
Terrorist
activities and armed conflicts, including any escalation of hostility arising out of the conflict between Russia and the Ukraine, could
have an adverse effect on the United States or worldwide economy and could cause decreased demand for the Company’s products as
consumers’ attention and interests may be diverted from golf and become focused on issues relating to these events. If such events
disrupt domestic or international air, ground or sea shipments, or the operation of the Company’s third party manufacturing facilities
and suppliers, the Company’s ability to obtain the materials and components necessary to manufacture its products and to deliver
customer orders would be harmed, which would have a significant adverse effect on the Company’s results of operations, financial
condition and cash flows. In particular, escalating tensions between Russia and Ukraine and any military incursion by Russia into Ukraine
could adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic sanctions from the
U.S. and the international community in a manner that adversely affects our business.
Our
industry and the broader U.S. economy have experienced higher than expected inflationary pressures in 2022 related to continued supply
chain disruptions, labor shortages and geopolitical instability, and if these conditions persist, our business, results of operations
and cash flows could be materially and adversely affected.
The
year 2022 saw significant increases in the costs of labor and certain materials and equipment, and longer lead times for such materials
and equipment, as a result of availability constraints, supply chain disruption, increased demand, labor shortages associated with a
fully employed U.S. labor force, high inflation and other factors. Supply and demand fundamentals have been further aggravated by disruptions
in global energy supply caused by multiple geopolitical events, including the ongoing conflict between Russia and the Ukraine. Recent
supply chain constraints and inflationary pressures may in the future adversely impact our operating costs, as a result, our business,
financial condition, results of operations and cash flows could be materially and adversely affected.
We
may be adversely affected during periods of high inflation, primarily because of higher shipping and product manufacturing costs. While
we will attempt to pass on increases in our costs through increased sales prices to our customers, market forces may limit our ability
to do so. If we are unable to raise sales prices enough to compensate for higher costs, our future revenues, our profit margin and revenues
could be adversely affected.
Economic
uncertainty may affect our access to capital and/or increase the costs of such capital.
Global
economic conditions continue to be volatile and uncertain due to, among other things, consumer confidence in future economic conditions,
fears of recession and trade wars, the price of energy, fluctuating interest rates, the availability and cost of consumer credit, the
availability and timing of government stimulus programs, levels of unemployment, increased inflation, tax rates, and the war between
Ukraine and Russia, which began in February 2022. These conditions remain unpredictable and create uncertainties about our ability to
raise capital in the future. In the event required capital becomes unavailable in the future, or more costly, it could have a material
adverse effect on
We
may experience fluctuations in our tax obligations and effective tax rate, which could adversely affect our business, results of operations,
and financial condition.
We
are subject to taxes in every jurisdiction in which we operate. We record tax expense based on current tax liabilities and our estimates
of future tax liabilities, which may include reserves for estimates of probable settlements of tax audits. At any given time, multiple
tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities
may affect the ultimate settlement of these issues. Further, our effective tax rate in a given financial statement period may be materially
impacted by changes in tax laws, changes in the mix and level of earnings by taxing jurisdictions, or changes to existing accounting
rules or regulations. Fluctuations in our tax obligations and effective tax rate could adversely affect our business, results of operations,
and financial condition.
Changes
in tax laws and unanticipated tax liabilities could adversely affect the Company’s effective income tax rate and profitability.
The
Company is subject to income taxes in the United States and various foreign jurisdictions. The Company’s effective future income
tax rates could be adversely affected by a number of factors, including: changes in the mix of earnings in countries with differing statutory
tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in
various jurisdictions around the world, and any repatriation of non-U.S. earnings for which the Company has not previously provided for
U.S. taxes. The Company regularly assesses all of these matters to determine the adequacy of its tax provision.
In
addition, new income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, or interpreted,
changed, modified or applied adversely to the Company, any of which could adversely affect the Company’s business operations and
financial performance. In particular, the U.S. government may enact significant changes to the taxation of business entities including,
among others, a permanent increase in the corporate income tax rate, an increase in the tax rate applicable to the global intangible
low-taxed income and elimination of certain exemptions, and the imposition of minimum taxes or surtaxes on certain types of income. The
Company is currently unable to predict whether such changes will occur and, if so, the ultimate impact on its business. To the extent
that such changes have a negative impact on the Company, or its suppliers or customers, including as a result of related uncertainty,
these changes may materially and adversely impact the Company’s business, financial condition, results of operations and cash flows.
We
could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would
have to pay for our offering and adversely affect our operating results.
An
increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state retailers.
A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect additional
taxes in a jurisdiction in which we currently do collect taxes, could result in substantial tax liabilities, including taxes on past
sales, as well as penalties and interest. The imposition by state governments of sales tax collection obligations on out-of-state retailers
could also create additional administrative burdens for us, put us at a competitive disadvantage and decrease our future sales, which
could have a material adverse impact on our business and operating results.
Our
business, financial position, results of operations and cash flows have been, and could continue to be, negatively impacted by the COVID-19
pandemic.
The
COVID-19 pandemic, and the various governmental, industry and consumer actions taken in response thereto, have impacted and could continue
to impact our business. These impacts have included significant volatility in demand for our products; significant disruptions in or
closures of our manufacturing operations or those of our suppliers; disruptions within our supply chain restricting our ability to import
products or obtain the necessary raw materials or components to make products; limitations on our employees’ and consumers’
ability to work and travel; restrictions on public gatherings; potential financial difficulties of customers and suppliers; significant
changes in economic or political conditions; and related volatility in financial and market conditions.
Given
the uncertainty and evolving nature of the COVID-19 pandemic, we cannot predict the full extent of the impact of the pandemic and actions
taken worldwide to address it on the economy, trade, our business and the businesses of our customers and suppliers. While it is impossible
to quantify the impact of the COVID-19 pandemic, business disruptions as a result of the COVID-19 pandemic could continue to have a material
impact on our business, results of operations, financial position and cash flows. The degree to which the COVID-19 pandemic and related
actions ultimately impact our business, financial position, results of operations and cash flows will depend on factors beyond our control,
including the spread, severity and duration of the pandemic; the actions taken to contain the spread of COVID-19, including any additional
government ordered shutdowns; the pandemic’s impact on the global economy and demand for our products; and to what extent and how
quickly normal economic and operating conditions resume, if at all. A prolonged decline in general economic conditions or uncertainties
regarding future economic prospects as a result of the pandemic could adversely affect consumer confidence and discretionary spending,
which in turn could result in further reduced sales of our products and could materially adversely affect our business, financial position,
results of operations and cash flows.
Our
business may be materially and adversely disrupted by epidemics or pandemics in the future, including COVID-19.
An
epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could
significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along
with any associated economic and/or social instability or distress, have a material adverse impact on our financial statements.
On
March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment
and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and several states
and municipalities have declared public health emergencies. Although COVID-19 has to date not had a material impact on our planned operations,
should the COVID-19 public health effort re-intensify to such an extent that we cannot operate, if there are new government restrictions
on our business and our customers, and/or an extended economic recession or significant inflation, we could be unable to produce revenues
and cash flows sufficient to conduct our planned business. Such a circumstance could, among other things, exhaust our available liquidity
(and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding
debt obligations, which we may be unable to do.
Taking
advantage of the reduced disclosure requirements applicable to “emerging growth companies” may make our Class A Common Stock
less attractive to investors.
We
qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of certain
reduced reporting and other requirements that are otherwise applicable generally to public companies. Pursuant to these reduced disclosure
requirements, emerging growth companies are not required to, among other things, comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, provide certain disclosures regarding executive compensation, holding stockholder advisory votes
on executive compensation or obtain stockholder approval of any golden parachute payments not previously approved. In addition, emerging
growth companies have longer phase-in periods for the adoption of new or revised financial accounting. We will cease to be an emerging
growth company upon the earliest of (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenues; (ii)
the date on which we become a “large accelerated filer” (the fiscal year-end on which the total market value of our common
equity securities held by non-affiliates is $700 million or more as of June 30); (iii) the date on which we issue more than $1.0 billion
of non-convertible debt securities over a three-year period; or (iv) the last day of the fiscal year following the fifth anniversary
of this offering.
We
intend to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption
of new or revised financial accounting standards under Section 107 of the JOBS Act, until we are no longer an emerging growth company.
If we were to subsequently elect instead to comply with these public company effective dates, such election would be irrevocable pursuant
to Section 107 of the JOBS Act.
Our
election to use the phase-in periods permitted by this election may make it difficult to compare our financial statements to those of
non-emerging growth companies and other emerging growth companies that have opted out of the longer phase-in periods under Section 107
of the JOBS Act and who will comply with new or revised financial accounting standards. We cannot predict if investors will find our
Class A Common Stock less attractive because we will rely on these exemptions. If some investors find our Class A Common Stock less attractive
as a result, there may be a less active trading market for our Class A Common Stock and our Class A Common Stock price may be more volatile.
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards
apply to private companies.
TruGolf
has identified material weaknesses in its internal control over financial reporting. If TruGolf is unable to remediate these material
weaknesses, or if TruGolf identifies additional material weaknesses in the future or otherwise fails to maintain an effective system
of internal controls, TruGolf may not be able to accurately or timely report its financial condition or results of operations, which
may adversely affect its business and stock price. In addition, because of our status as a smaller reporting company, you will not be
able to depend on any attestation report from our independent registered public accounting firm as to our internal control over financial
reporting for the foreseeable future.
Prior
to the Closing of the Business Combination, TruGolf had been a private company with limited accounting personnel to adequately execute
its accounting processes and limited supervisory resources with which to address its internal control over financial reporting. In connection
with the audit of TruGolf’s financial statements as of and for the year ended December 31, 2023, TruGolf identified material
weaknesses in its internal control over financial reporting. A material weakness is a deficiency or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of TruGolf’s
annual or interim financial statements will not be prevented or detected on a timely basis.
TruGolf
did not design and has not maintained an effective control environment as required under the rules and regulations of the SEC. Specifically,
(i) management does not have appropriate IT general control in place over change management, user access, cybersecurity, and reviews
of service organizations, (ii) management does not have suitable COSO entity level controls in place, including reviews of the financial
statements, and certain entity level controls were not performed by management, and (iii) pervasive transactional and account level reconciliations
and analyses are not performed, or not performed with sufficient detail to prevent or detect a material weakness. These issues related
to managements controls over the review of complex significant transactions, complex debt and equity issuance transactions, income and
sales taxes, & revenue recognition.
TruGolf
has taken certain steps, such as recruiting additional personnel, in addition to utilizing third-party consultants and specialists, to
supplement its internal resources, to enhance its internal control environment and plans to take additional steps to remediate the material
weaknesses. Although TruGolf plans to complete this remediation process as quickly as possible, it cannot at this time estimate how long
it will take. TruGolf cannot assure you that the measures it has taken to date and may take in the future, will be sufficient to remediate
the control deficiencies that led to its material weaknesses in internal control over financial reporting or that it will prevent or
avoid potential future material weaknesses.
TruGolf
cannot assure you that the measures it has taken to date, and are continuing to implement, will be sufficient to remediate the material
weaknesses TruGolf has identified or avoid potential future material weaknesses. If the steps TruGolf takes do not correct the material
weaknesses in a timely manner, TruGolf will be unable to conclude that it maintains effective internal control over financial reporting.
Accordingly, there could continue to be a reasonable possibility that a material misstatement of TruGolf’s financial statements
would not be prevented or detected on a timely basis.
Any
failure to remediate existing material weaknesses, or to develop or maintain effective controls or any difficulties encountered in their
implementation or improvement could harm TruGolf’s results of operations or cause it to fail to meet its reporting obligations
and may result in a restatement of its financial statements for prior periods included in this registration statement. Any failure to
implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management
evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of TruGolf’s
internal control over financial reporting that it will eventually be required to include in its periodic reports that will be filed with
the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose
confidence in TruGolf’s reported financial and other information, which would likely have a negative effect on the trading price
of TruGolf Class A Shares. In addition, if TruGolf is unable to continue to meet these requirements, it may not be able to remain listed
on Nasdaq. TruGolf will not be required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and will therefore
not be required to make a formal assessment of the effectiveness of control over financial reporting for that purpose. As a public company,
TruGolf will be required to provide an annual management report on the effectiveness of its internal control over financial reporting.
TruGolf’s independent registered public accounting firm will not be required to formally attest to the effectiveness of its internal
control over financial reporting until the later of (1) the year following our first annual report required to be filed with the SEC
or (2) the date we are no longer an “emerging growth company” as defined in the JOBS Act. Accordingly, you will not be able
to depend on any attestation concerning our internal control over financial reporting from our independent registered public accounting
firm for the foreseeable future. At such time, TruGolf’s independent registered public accounting firm may issue a report on our
internal controls over financial reporting that is adverse in the event it is not satisfied with the level at which TruGolf’s internal
control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal
control over financial reporting could have an adverse effect on TruGolf’s business and results of operations, leads to a higher
risk of financial statement restatements and could cause a decline in the price of TruGolf Class A Shares.
Risks
Related to TruGolf’s Dual Class Structure
The
dual class structure of the TruGolf Common Stock will have the effect of concentrating voting power with TruGolf’s founders, which
will limit an investor’s ability to influence the outcome of important transactions, including a change in control.
TruGolf
Class B Shares have 25 votes per share, while TruGolf Class A Shares have one vote per share. The TruGolf Founders, Christopher Jones,
Steven R. Johnson and David Ashby, hold all shares of TruGolf Class B Common Stock granting them each approximately 39.4%, 19.1% and
20.20%, respectively, of voting power and together approximately 78.7% of the voting power of TruGolf. As a result, if
they act together, they will be able to control matters submitted to TruGolf’s shareholders for approval, including the election
of directors, amendments of its organizational documents and any merger, consolidation, sale of all or substantially all of its assets
or other major corporate transactions (although neither Founder will individually have a majority of the voting power). As long as the
TruGolf Founders continue to hold greater than 5% of the TruGolf Class B Common Stock they may be able to control the outcome of matters
submitted to stockholders for approval. TruGolf’s Founders may have interests that differ from yours and may vote in a way with
which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing
or deterring a change in control of TruGolf, could deprive its stockholders of an opportunity to receive a premium for their shares as
part of a sale of TruGolf, and might ultimately affect the market price of shares of TruGolf Class A Common Stock. The Proposed Charter
provides that each share of Class B common stock may be converted, at any time, into one share of Class A common stock at the option
of the holder of Class B common stock, which, if issued in the future, could result in dilution to holders of Class A Shares. For information
about its dual class structure, see the section titled “Description of TruGolf’s Securities.”
TruGolf
cannot predict the impact TruGolf’s dual class structure may have on the stock price of TruGolf Common Stock.
TruGolf
cannot predict whether TruGolf’s dual class structure will result in a lower or more volatile market price of the TruGolf Common
Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including
companies with multiple-class share structures in certain of their indexes. In July 2017, FTSE Russell and S&P Dow Jones announced
that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices.
Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the
S&P Composite 1500. Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote
and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI
announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index
that specifically includes voting rights in its eligibility criteria. Under the announced policies, TruGolf’s dual class capital
structure would make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment
vehicles that attempt to passively track those indices will not be investing in its shares. These policies are still fairly new and it
is as of yet unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but
it is possible that they may depress these valuations compared to those of other similar companies that are included. Because of TruGolf’s
dual class structure, TruGolf will likely be excluded from certain of these indexes and TruGolf cannot assure you that other stock indexes
will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes,
exclusion from stock indexes would likely preclude investment by many of these funds and could make TruGolf Class A Common Stock less
attractive to other investors. As a result, the market price of the TruGolf Class A common stock could be adversely affected.
TruGolf
is a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for and rely on exemptions from
certain corporate governance requirements. As a result, TruGolf stockholders do not have the same protections afforded to stockholders
of companies that cannot rely on such exemptions and are subject to such requirements.
TruGolf’s
Chief Executive Officer together with two other TruGolf Founders, beneficially own and control a majority of the combined voting power
of TruGolf’s common stock. As a result, TruGolf is a “controlled company” within the meaning of the Nasdaq listing
rules. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is
a “controlled company” and may elect not to comply with certain corporate governance requirements of Nasdaq, including, but
not limited to, the requirement that:
| ● |
a majority of the board
of directors consist of directors who qualify as “independent” as defined under the Nasdaq listing rules; |
| ● |
its board of directors
have a nominating and corporate governance committee composed entirely of independent directors with a written charter addressing
the committee’s purpose and responsibilities |
| ● |
its board of directors
have a compensation committee composed entirely of independent directors with a written charter addressing the committee’s
purpose and responsibilities; and |
| ● |
its board of directors
conduct an annual performance evaluation of its compensation committee and the nominating and corporate governance committee |
We
intend to rely on some or all of these exemptions so long as we remain a “controlled company.” As a result, TruGolf may not
have (i) a majority of independent directors, (ii) a nominating and governance committee composed entirely of independent directors,
and (iii) a compensation committee composed entirely of independent directors. Accordingly, TruGolf stockholders may not have the same
protections afforded to stockholders of companies subject to all of the corporate governance requirements of Nasdaq.
Risks
Related to Ownership of TruGolf’s Securities
TruGolf’s
stock may be volatile, and you may not be able to sell its securities at or above the price you paid..
The
trading price of the TruGolf Common Stock is likely to be volatile. The stock market recently has experienced extreme volatility. This
volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to
resell your shares at an attractive price due to a number of factors such as those listed in “— Risks Related to TruGolf’s
Business” and the following:
| ● |
results of operations that
vary from the expectations of securities analysts and investors; |
| |
|
| ● |
results of operations that
vary from those of TruGolf’s competitors; |
| |
|
| ● |
the impact of the COVID-19
pandemic and its effect on TruGolf’s business and financial conditions; |
| |
|
| ● |
changes in expectations
as to TruGolf’s future financial performance, including financial estimates and investment recommendations by securities analysts
and investors; |
| |
|
| ● |
declines in the market
prices of stocks generally; |
| |
|
| ● |
strategic actions by TruGolf
or its competitors; |
| |
|
| ● |
announcements by TruGolf
or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; |
| |
|
| ● |
any significant change
in TruGolf’s management; |
| |
|
| ● |
changes in general economic
or market conditions or trends in TruGolf’s industry or markets, such as recessions, interest rates, local and national elections,
international currency fluctuations, corruption, political instability and acts of war or terrorism; |
| |
|
| ● |
changes in business or
regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to TruGolf’s
business; |
| |
|
| ● |
future sales of TruGolf
Common Stock or other securities; |
| |
|
| ● |
investor perceptions or
the investment opportunity associated with TruGolf Common Stock relative to other investment alternatives; |
| ● |
the public’s response
to press releases or other public announcements by TruGolf or third parties, including TruGolf’s filings with the SEC; |
| |
|
| ● |
litigation involving TruGolf,
TruGolf’s industry, or both, or investigations by regulators into TruGolf’s operations or those of TruGolf’s competitors; |
| |
|
| ● |
guidance, if any, that
TruGolf provides to the public, any changes in this guidance or TruGolf’s failure to meet this guidance; |
| |
|
| ● |
the development and sustainability
of an active trading market for TruGolf’s securities; |
| |
|
| ● |
actions by institutional
or activist stockholders; |
| |
|
| ● |
changes in accounting standards,
policies, guidelines, interpretations or principles; and |
| |
|
| ● |
other events or factors,
including those resulting from natural disasters, war, acts of terrorism or responses to these events. |
These
broad market and industry fluctuations may adversely affect the market price of TruGolf Class A Common Stock, regardless of TruGolf’s
actual operating performance. In addition, price volatility may be greater if the public float and trading volume of TruGolf Class A
Common Stock is low.
In
the past, following periods of market volatility, stockholders have instituted securities class action litigation. If TruGolf was involved
in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from TruGolf’s
business regardless of the outcome of such litigation.
Because
there are no current plans to pay cash dividends on TruGolf Common Stock for the foreseeable future, you may not receive any return on
investment unless you sell your TruGolf Common Stock for a price greater than that which you paid for it.
TruGolf
intends to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay
any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of TruGolf Common
Stock will be at the sole discretion of the TruGolf Board. The TruGolf Board may take into account general and economic conditions, TruGolf’s
financial condition and results of operations, TruGolf’s available cash and current and anticipated cash needs, capital requirements,
contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by TruGolf to its stockholders or by its
subsidiaries to it and such other factors as the TruGolf Board may deem relevant. In addition, TruGolf’s ability to pay dividends
is limited by covenants of TruGolf’s existing and outstanding indebtedness and may be limited by covenants of any future indebtedness
TruGolf incurs. As a result, you may not receive any return on an investment in TruGolf Common Stock unless you sell your TruGolf Common
Stock for a price greater than that which you paid for it.
If
securities analysts do not publish research or reports about TruGolf’s business or if they downgrade TruGolf’s securities
or TruGolf’s sector, TruGolf’s stock price and trading volume could decline.
The
trading market for TruGolf Common Stock will rely in part on the research and reports that industry or financial analysts publish about
TruGolf or its business. TruGolf will not control these analysts. In addition, some financial analysts may have limited expertise with
TruGolf’s model and operations. Furthermore, if one or more of the analysts who do cover TruGolf downgrade its stock or industry,
or the stock of any of its competitors, or publish inaccurate or unfavorable research about its business, TruGolf’s stock price
could decline. If one or more of these analysts ceases coverage of TruGolf or fails to publish reports on it regularly, TruGolf could
lose visibility in the market, which in turn could cause its stock price or trading volume to decline.
Anti-takeover
provisions in TruGolf’s governing documents could delay or prevent a change of control.
Certain
provisions of the Proposed Charter and the Proposed Bylaws may have an anti-takeover effect and may delay, defer or prevent a merger,
acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price for the shares held by TruGolf’s stockholders.
These
provisions provide for, among other things:
| ● |
a dual class common stock
structure, which provides the TruGolf Founders with the ability to control the outcome of matters requiring stockholder approver,
even if they own significantly less than a majority of the share of TruGolf Common Stock; |
| |
|
| ● |
the ability of the TruGolf
Board to issue one or more series of preferred stock; |
| |
|
| ● |
advance notice for nominations
of directors by stockholders and for stockholders to include matters to be considered at TruGolf’s annual meetings; |
| |
|
| ● |
only the Chairman of the
TruGolf Board, the Chief Executive Officer of TruGolf, or a majority of the TruGolf Board is authorized to call a special meeting
of stockholders; and |
| |
|
| ● |
limiting the ability of
stockholders to act by written consent; |
These
anti-takeover provisions could make it more difficult for a third party to acquire TruGolf, even if the third party’s offer may
be considered beneficial by many of TruGolf’s stockholders. As a result, TruGolf’s stockholders may be limited in their ability
to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors of your choosing and to cause TruGolf to take other corporate actions you desire. See “Description
of our Securities.”
Sales
of a substantial number of our securities in the public market by the Selling Securityholders and/or by our existing securityholders
could cause the price of our Common Stock and Warrants to decrease significantly.
The
Selling Securityholders can resell, under this prospectus, up to 74,310,070 Class A Common Stock representing approximately 86% of
our share capital on a fully diluted basis. The securities being offered in this prospectus represent a substantial percentage of
our issued and outstanding Class A Common Stock, and the sale of such securities in the public market by the Selling
Securityholders, or the perception that those sales might occur, could depress the market price of our Class A Common Stock, and could impair our ability to raise capital through the sale of
additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our
Class A Common Stock.
In
addition, the Selling Securityholders acquired the Common Stock covered by this prospectus at prices ranging from $0.02 per share to
$12 per share. By comparison, the offering price to public shareholders in the SPAC’s initial public offering was $10.00 per
unit, which consisted of one share of Class A Common Stock and one right to receive one-tenth of one share of Class A Common Stock.
Accordingly, certain Selling Securityholders may realize a positive rate of return on the sale of their shares covered by this
prospectus even if the market price of Class A Common Stock is below $10.00 per share.
For example, based on
the closing price of our Class A Common Stock on August 15, 2024, (i) SandTrap Opportunities LLC may experience weighted average
profit of $0.78 per share, or approximately $ 14,155,555 in the aggregate for selling the 18,148,148 shares Class A Common Stock it
received, (ii) Greentree Financial Group, Inc. may experience profit of $0.78 per share, or approximately $ 11,122,222 in the
aggregate for selling the 14,259,259 Class A Common Stock it received, (iii) the Sponsor, Bright Vision Sponsor LLC may experience
weighted average profit of $0.25 per share, or approximately $724,436 in the aggregate for selling the 2,897,744 Class A Common
Stock it received, and iv) I-Bankers may experience weighted
average loss of $ 2.19 per share, or approximately $738,144 in the aggregate for selling the 337,052 Class A Common Stock it received.
USE
OF PROCEEDS
All
of the securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for
their respective accounts. We will not receive any of the proceeds from the sale of the securities registered hereunder.
In
the event any Warrants are exercised for cash, we would receive the proceeds from any such cash exercise, provided, however, we will
not receive any proceeds from the sale of the shares of Class A Common Stock issuable upon such exercise. The exercise of the Warrants,
and any proceeds we may receive from their exercise, are highly dependent on the price of our shares of our Class A Common Stock and
the spread between the exercise price of such securities and the market price of our Class A Common Stock at the time of exercise. The
current exercise price of the Series A Warrants is $13.00 per share of Class A Common Stock, Series B Warrant exercise price is $10.00
per share of Class A Common Stock, and Representative Warrants exercise price is $12.00 per share of Class A Common Stock. The market
price of our Class A Common Stock as of August 21, 2024 was $1.45 per share. If the market price of our Common Stock is
less than the exercise price of a holder’s warrants, it is unlikely that holders will exercise their warrants. There can be no
assurance that all of the Warrants will be in the money prior to their expiration.
We
expect to use the net proceeds from the exercise of the Warrants, if any, for general corporate purposes. We will have broad discretion
over the use of any proceeds from such exercise. There is no assurance that the holders of the Warrants will elect to exercise for cash
any or all of such Warrants. To the extent that any Warrants are exercised on a “cashless basis,” the amount of cash we would
receive from the exercise of the Warrants will decrease.
The
Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by the Selling Securityholders for
brokerage, accounting, tax, legal services, or any other expenses incurred by the Selling Securityholders in disposing of the securities.
We will bear the costs, fees, and expenses incurred in effecting the registration of the securities covered by this prospectus, including
all registration and filing fees, Nasdaq listing fees, and fees and expenses of our counsel and our independent registered public accounting
firm.
MARKET
PRICE OF OUR CLASS A COMMON STOCK AND DIVIDEND INFORMATION
Market
Price of Our Class A Common Stock
Our
Class A Common Stock are currently listed on The Nasdaq Global Market, of The Nasdaq Stock Market LLC (“Nasdaq”) under the
symbol “TRUG”. Prior to the completion of the Business Combination, the securities of DMA were listed on The Nasdaq Capital
Market under the symbols “DMAQ,” and “DMAQR”, all of which are no longer listed on The Nasdaq Capital Market.
On
August 21, 2024, the closing sale price of our Class A Common Stock was $1.45 per share.
As
of August 21, 2024, there were approximately 26 holders of record of our Class A Common Stock. Such numbers do not include beneficial
owners holding our securities through nominee names.
Dividend
Policy
We
have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends for the
foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination
to pay dividends on our Class A Common Stock will be at the discretion of our board of directors and will depend upon, among other factors,
our financial condition, operating results, current and anticipated cash needs, plans for expansion, and other factors that our board
of directors may deem relevant.
BUSINESS
Corporate
History
TruGolf
Holdings, Inc. (the “Company” or “TruGolf”, “we”, “us”) was formed 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.
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, TruGolf
Nevada’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 3rd 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 principle 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.
Market
For Indoor Golf
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. According to the National Golf Foundation (the “NGF”),
golf is the largest participation sport in America, with 41 million active golfers over six years old, and has had a growth rate of adding
3 million net new golfers in each of the 2021 and 2022. However, according to the NGF, in 2022, there were over 15.5 million golfers
that participated exclusively in off-course golf activities, such as driving ranges, indoor golf simulators, or golf entertainment venues,
and only 13 million people who played exclusively on a golf course. According to the NGF, a total of 17.8 million people who did not
play golf in 2021 said they are “very interested” in playing golf on a golf course. According to a January 26, 2023 article
from the NGF, the off-course golfers have increased more significantly, with a 13% year-over-year jump, compared with a 2% rise in on-course
participation. As reported, the total off-course market in 2022 of approximately $27.9 million has for the first time eclipsed on-course
play.
The
total addressable market for golf products in 2022 was an estimated $1.4 USD Billion, and with a CAGR of 11.05% is forecast to reach
$3.8 USD Billion by 2031. Econ Market Research estimates that North America represents 36%, Europe 28%, Asia Pacific 22%, and Middle
East and Africa 7% of total global market share in 2022. In this same report they have found that TruGolf Nevada currently maintains
a 4.28% market share. They also noted that 69% of the total market is from Indoor Golf Simulators, while 31% is from Outdoor Golf Simulators
in 2022 with a slight shift of 1% towards Outdoor Golf Simulators by 2031. In additional the report found that only 21% of sales were
for Residential application, and 78% sold for Commercial applications, with a small increase in Residential to 22% by 2031. While it
is not directly stated in the Econ Market Research study, we consider revenue from both SaaS software and Data Analytics to be included
in the overall total addressable market for golf products. 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 there are many reasons for the decline in outdoor rounds of golf being played and the simultaneous increase of indoor rounds
of golf, including (i) the major costs of running a golf course (and consequently the costs of playing outdoor golf), including environmental
factors making outdoor golf increasingly costly and requiring more and more water for vegetation, as temperatures across the United States
increase, even as available water has generally decreased, (ii) the closing of over 100 golf courses every year (NGF) and (iii) the challenge
in finding available daylight hours with so many golfers and so few golf courses , especially in light of the lengthy time period required
to play a full outdoor course. 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.
Current
Operations
We
currently leverage a bifurcated branding strategy by both (1) selling indoor golf simulator hardware under our TruGolf Nevada brand,
which hardware includes our E6 Connect software; and (2) selling our E6 Connect software separately for use on other companies’
hardware. In the future, we also intend to franchise indoor golf simulation facilities, create a “Virtual Golf Association”
of online players, and leverage our access to swing data, each as discussed in greater detail below.
Our
Products
Hardware
Portable
– Our Vista Series, which are portable indoor golf simulators, immerse players in realistic gameplay and are designed to be
easily assembled and disassembled. These portable lightweight aluminum frame indoor golf simulators use a matte-box design that blocks
ambient light and gives the Vista Series the same image quality as high-end golf simulation units, but for a much lower price. Our Vista
Series currently includes a High-Definition, 720p projector (upgradable to a 1080p version), as well as the option for a touch screen
and a turf surface. All of our Vista Series products come with a two-year limited warranty This product has been discounted throughout
2023 in efforts to sell down inventory as we plan on launching a new portable series with a code name of MAX. Our Vista 12 model is
shown below.
Professional
– Our Signature and Premium indoor golf simulators include complete, permanent enclosures, including three high-speed cameras
to capture ball flight with high accuracy. Our professional golf simulators include high-end projectors with high visual quality (1080
p) providing better visuals, built-in computers and touchscreen, premium turf and audio. These simulators use our TruFlight 2 ceiling
mounted Launch Monitor that captures club and ball data for both right-handed and left-handed golfers. Utilizing three cameras, the TruFlight
2 system captures club and ball data simultaneously, for considerable accuracy, allowing users to shape their shots akin to how they
would outdoors. Below are images of our Signature (left) and Premium (right) indoor golf simulators.
Commercial
– We offer commercial software and hardware solutions, working with our commercial customers to help design their facilities
and find the right audio/video solutions for their customers. Hardware solutions can include multiple simulators of varying sizes, as
well as arcade-style games. Software solutions include a Product Launcher that prevents a user from accessing the PC interface, while
making game selection and launching easier, a Clubhouse solution that allows clients to host and manage tournaments, and even commercial
administration tools to manage multiple simulators from one networked PC.
Custom
– We also offer custom indoor golf simulation products which can be designed for everything from luxury-residential applications
to high volume commercial usage facilities. The customized products, with installation, may cost anywhere between $10,000 and $100,000,
depending on the size, design, nature and volume of usage. We consult with clients on a design we can build from spec and then work with
the customers’ contractors, through an installation supervisor, to install, calibrate and train customers on the use of their custom
simulators. Historically we have completed most installations ourselves but have recently outsourced 30% of such installations to 3rd
party installers. Below is an example of a custom installation.
Leading
our hardware offering, is our new Apogee Launch Monitor (“Apogee”). Many competitors use mobile launch monitors that
must be set on the floor behind, or to the side of a golfer, leaving them prone to being kicked or bumped, often requiring a re-calibration
and creating a generally unstable and unpredictable solution. Our launch monitor was designed from its inception to provide not only
a highly accurate swing analysis and realistic golfing experience, but also an easy solution to install, play, and maintain, for indoor
golf. The accuracy of Apogee is created through features like our patent pending club path measurement, stereoscopic resolution optimized
camera system, and instant impact ball launch (“Instant Impact”) to digital display response. This Instant Impact
allows golfers to see their virtual ball flight in less than 300 milliseconds, nearly 10 times faster than our competition. An equally
vital ingredient to an accurate golf experience comes from our “Instant Impact Replay,” an in-game scrubbable video replay
allowing users of any skill level to see exactly what their club did, including positive aspects and flaws, in order to achieve the ball
path and spin portrayed on screen creating the ability to give instructions to users.
Another
component of our hardware which we believe provides us a competitive advantage is based on ease-of-use, which begins with auto-calibration,
and includes everyday usability, along with general troubleshooting and maintenance. Our hardware’s installation is simple, beginning
with a proprietary mounting bracket that a layperson can drill in their ceiling or on a standard projector mount, then the Apogee device,
which weighs less than 30 pounds and can easily be inserted onto rails securely holding the device to the bracket is attached. Once the
hardware is in place, the user places a piece of paper on the ground under the device and pushes a button to begin the auto-calibration.
What historically took approximately 20 to 30 minutes on our TruFlight 2 system (which is still used in our portable systems), and up
to three days on competitors’ systems, can now be accomplished in less than five minutes. This auto-calibration function continues
throughout the play on the system, as every time a player places a golf ball in the impact zone, there is a rapid calibration verification,
again ensuring easy and accurate maintenance.
In
the game of golf there is a concept known as Pace of Play, or “POP”. A normal 18-hole outdoor game of golf usually takes
approximately three hours; such POP can be reduced to one hour indoors. We help our users reduce this time even more by use of our proprietary
“Laser Launchpad,” which has a faster setup, and not only indicates exactly where a user should place the ball to ensure
successful swing capture but also turns off as soon as the ball is placed in the right place and the software is ready to go, preventing
a player from taking their eye off the ball to look at the screen to verify preparedness. This increases POP, and also increases the
authenticity of the player experience by avoiding doubts as to whether or not the system is ready, and instead allowing a player to focus
on their swing. The second innovative element in our product affecting POP is our Instant Impact ball flight processing system (as discussed
above). Additionally, our proprietary on-board Apogee Voice Accelerator reduces POP by enabling players to avoid using a mouse or touchscreen,
and allowing them to simply use their voice to execute the most common functions including taking a Mulligan, making club changes, effecting
lateral pin adjustments, observing swing analysis, and even making environmental adjustments, such as time of day and cloud cover.
By
providing our own Apogee launch monitor, we expect to be able to unlock exclusive features in the forthcoming version of our E6 Connect
software, including dynamic course visuals, robust club path, ball reaction analysis, and visual enhancements, leveraging augmented reality
and artificial intelligence breakthroughs.
Multi-Sport
– We also offer a separate hardware device which allows users to play multiple games known as “Multi-Sport”.
This allows users to play soccer, football, hockey, frisbee and Frisbee golf, zombie dodgeball and light gun target games through our
hardware. These games are arcade-style mini games with fun simple challenges designed for any age or ability level. This also allows
users of our hardware to purchase this additional hardware that goes with our golf simulators and offer different games for their customers.
Software
We
pair our hardware with our internally developed E6 software, which may also be purchased separately. We believe that E6 Connect is the
highest-quality, most lifelike and customizable golf simulator software ever created. It can be used with launch monitors to teach or
train users on the driving range, to compete in leagues and online events at a commercial facility, or to just play fun indoor golf games
at home with friends and family.
E6
Connect offers traditional modes of play like: Stroke, Scramble, Best Ball, Stableford, and Match Play. In addition, we offer exciting
mini games like Closest to the Pin, Demolition Driving Range, Long Drive, Blackout, Horse, and 301. We also have a Clubhouse Module designed
to help run leagues and indoor facilities. The remote web-application lets users create leagues or events– while checking on the
usage statistics of that simulator. Another powerful solution provided by E6 Connect is a web-enabled second screen data analytics performance
portal enabling individual players to make the most of their longitudinal data.
Additionally,
we have recognized that since golf is not the only sport of interest, and 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, cowboy target practice,
and more. We have found that not only does this drive family friendly value for residential installs, but dramatically expands the target
audiences for commercial facilities.
The
next iteration of our E6 software, which we have given the code named “APEX”, with the use of a powerful new graphics engine,
allows us to recreate photo-realistic, and accurate recreations of actual world-class golf courses. The dramatic elements that bring
these courses to life include: animated wildlife, trees, flowers and bushes that move in the wind and change with the seasons, dynamic
time of day changes, including sun position, procedural shadows, cloud interaction with 3-D panoramic landscapes, and the resulting array
of stunning lighting effects on some of the most beautiful golf courses in the world. We strive to provide pixel accurate versions of
the golf courses we offer, including accuracy of within 2 inches on the fairways, and 2 centimeters on the greens. We have found that
this level of accuracy enables golfers to become familiar with every hole and hazard on the course, and also unlocks our true handicapping
system that can bridge the gap between indoor and outdoor play. This is something that lower quality, lower price point, fantasy simulator
software solutions do not provide. In the future, we plan to also introduce with APEX a virtual simultaneous multiplayer driving range,
an insightful new virtual club fitting suite and virtual course builder capabilities.
Our
proprietary physics and gaming engine, which combines 40 years of innovation and experimentation, with countless hours of golfer collaboration
and observation, may be even more impressive than our virtual courses and visual effects. Our painstakingly accurate ball flight, bounce,
roll and object collision can be modified by customizable external factors including elevation, humidity, and wind. All of these variables
come to life in the context of every swing of the club, which becomes relevant with our swing analyzer. We not only provide users critical
statistics, but we also provide new video on demand replay options, thanks to Apogee. This allows any golfer to see exactly how their
club generated each outcome, and unlike any competitor, is available with any and every single swing throughout the entirety of E6 Connect.
In
addition to building our E6 Connect software into each of our hardware offerings, we also sell our E6 Software directly to customers
and provide our competitors with authorized resale options of our E6 Software. E6 Connect is available for PC and iOS Users. E6 Connect
offers more than 100 world-class golf courses, four driving ranges, and numerous mini-games (as discussed above).
Plans
for Future Operations
Expansion
into Franchises
Moving
forward, we plan to franchise the right to build and create indoor golf entertainment venues, including customized indoor golf hardware
and software (i.e., golfing bays and golf range bays), and the option to purchase food and beverage. We currently plan to sell branded
and non-branded merchandise at these future locations, and allow for large group events, coaching, data driven club sales, and “gamified”
tournaments. We have also already built a proprietary bay booking and food and beverage ordering app for use from our future commercial
and franchise operators.
We
believe that one of the benefits of our indoor golf franchises will be the reduced space and infrastructure required to create such facilities,
which we anticipate being as small as 5,000 square feet and as large as 32,000 square feet, and requiring fairly minimal infrastructure
and buildouts other than our custom indoor golf hardware. This is as compared to stand-alone driving ranges or golf courses which cost
significantly more to build and implement and require a substantial amount of infrastructure and land.
We
also anticipate that these future franchises will act as resellers with showrooms, where we will provide a commission to such resellers
on all hardware and software sales that we hope will naturally develop as users are able to experience our hardware and software at such
franchise. We believe that one of the elements of our planned franchise program that will have the most financial impact on the fitness
of our franchises, is the concept of pre-sales, which require a facility to be profitable before even opening their doors. This program
will require franchisees to sign up enough monthly recurring subscriber revenue to cover the monthly operating costs of the planned facilities
for an agreed upon period of time. We believe that this program will allow a location to be profitable from its opening and help reduce
failed franchises.
Virtual
Golf Association
Our
Virtual Golf Association, or VGA, is expected to leverage our many years of network power and online play in order to develop our plans
to utilize the ‘metaverse’. Our VGA concept will enable people around the world to play golf with each other, against each
other, and even against real pros’ historical scoring data on real golf courses. The VGA is intended to be the governing body for
digital golf events hosted on the E6 Connect network. These events are planned to eventually include: VGA tour events, professional video
game tournaments, intercollegiate simulator competitions, and American Junior Golf Association tournaments. We plan to use a model similar
to the PGA Tour’s FedEx Cup for the VGA, with players accruing points for participation, as well as finishing “in the money”
in each event. Top players would compete in a VGA tour championship at the end of each season. The basic structure to host VGA events
is currently in place, with a variety of stroke play, long drive and closest-to-the-pin games available to the 350,000+ E6 Connect users.
The next phase of development will be to implement the structure of a VGA “season” to track accrued points over multiple
events and to add a comparative data dashboard for all users.
Data
Analysis
Lastly,
we hope to leverage our access to swing data, which we have been collecting through our E6 software since 2017, relating to personal
baseline, improvement, and even longitudinal analysis. We believe that this wealth of information provides tremendous value for users,
equipment manufacturers, and other industries by uncovering patterns, purchase intent and geographical insights, for some of the wealthiest
most active populations around the world. We are currently in preliminary discussions with a third party to monetize this data; however
no definitive agreements have been entered into to date.
Sales
Overview
Our
sales team operates out of our corporate headquarters in Centerville, Utah. Our internal team manages both individual clients, along
with consulting with commercial facility endeavors through predefined territories. These territories divide the United States into segments,
enabling each sales representative to develop a center of influence in each state in their territory. In addition, each sales representative
has 1 or 2 national channel partners that they work with to cultivate relationships in order to drive their own leads and augment those
leads coming from the marketing team. These partnerships represent key industries and markets that align cohesively with our product
offerings. We hope to leverage these relationships to eventually help us achieve our future growth goals from international sales. These
markets include: home construction, golf courses (pro shops and private courses), audio/video integrators, commercial real estate (offices
and malls), government, schools and municipalities, major accounts (chain and warehouse stores) and national fun centers.
Additionally,
we have a historical network of resellers spanning several regions including Europe, Australia, and Africa. We have recently signed a
joint venture in Asia. We also have an established domestic network of resellers in both the United States and Canada, as well as a limited
presence in Latin America. Our global network of resellers has been built over the past decade, and we consistently work to strengthen
that network. We plan to use a portion of the funding received in the Business Combination to open a TruGolf Nevada office in Europe
to service Europe, the Middle East, and Africa as we transition from simple resellers to exclusive distributor partners.
Growth
Strategy
TruGolf
Nevada expects to use the transaction proceeds to fund the development and production of its software and hardware businesses, with sales
expected to increase as its new generation software and hardware are launched. TruGolf Nevada also plans to use a portion of the proceeds
to expand its manufacturing capabilities in Salt Lake City, Utah. Currently we focus approximately 80% of our marketing and sales efforts
to generating leads through online Search Engine Optimization, Pay per Click advertising, Social media organic posts and paid ads, and
Public Relations with earned media and celebrity endorsements. The funding will be utilized to augment all of these activities to increase
our social media presence. This plan will be customized to each product and service within our product portfolio as business/team resources
and growth continues.
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 E6 Connect’s market penetration, while also launching our planned franchise offering, the VGA
and working to monetize our swing and other data.
Our
secondary marketing objective will be to increase overall awareness and reputation of our collective products and brand in each vertical
to drive consumer preference and adoption.
Our
primary market is males over age 34, with females, young adults and new golfers also representing growing segments of our target market.
We
plan to use blogs and social media to bolster our brand image, create more domain authority, and drive more organic traffic through our
websites. We also hope that blogs and social media posts will funnel new users into our digital retargeting campaigns and will be used
as a source to supply new newsletter subscriptions.
We
may also offer promotional giveaways to drive subscribers to our blog and social media offerings, grow and replenish email lists, increase
website traffic, and drive brand awareness.
Plan
of Operations
Our
immediate plan consists of heavily promoting the launch of our new hardware device, Apogee, and aligning marketing, sales, manufacturing,
installation and service to be ready to address customer demand and issues typical with a new product adoption and demand, especially
during the holiday season. We also plan on optimizing our service and installation teams with some re-alignment and additional resources
to manage the seasonal spike in workload. Additionally, we are also planning some heavy new marketing initiatives, including an all new
website, introduction of new paid social media, and advance existing PR projects, and engaging new ambassadors, including Ezekiel Elliot
and Brice Butler, both former Dallas Cowboys football players. We also plan to commence the rollout of a new Professional Employment
Organization, Insperity, to help improve all of our HR and Benefits programs company-wide, including the critical role of recruiting,
hiring and onboarding. Finally, we are preparing for a move to a larger building as we are aggressively looking for more space.
In
addition, the capital raised from the Business Combination will kick off a transition to NetSuite, and some enhancements to SalesForce,
Jira and Zoho to ensure operational efficiency and transparency for our new quarterly reporting process. While we continue to push the
roll out of Apogee with expanded marketing budgets and sales channels, including internationally, we will also debut our newest software
offering code named Apex. Initially this would include the opening of our EMEA offices, and the formalizing two more international distributors,
and also opening our joint venture office in Asia. We plan to kick off a few new VGA online tournaments along with some new partners,
onboarding of whom is in progress. We also plan to launch E6 Apex as another revolution in software, and announce the launch dates of
the next version of Apogee, the Mini Trainer, and portable frames to support Apogee, as we sunset other older launch monitors, such as
TruTrack and TruFlight.
Historically,
the last quarter of the year is our biggest quarter of the year with holiday sales, and winter preparation for golfers winding down their
outdoor season. As such, our marketing and sales efforts kick into high gear, as do our infrastructure costs in manufacturing, logistics,
installation and customer service. Generally, the first quarter of each year continues to be a critical part of our busy season, as we
continue to ramp up installations to meet previously sold demand and wrap up training of our distributors to enable more sales and collections.
TruGolf
Nevada plans to leverage seasonality and take advantage of its busy seasons to commence planning and executing for future growth, including
ramping up hiring efforts in product development or R&D. Our target is to hire additional new employees in marketing, project management,
development, engineering and customer experience.
The
capital raised in the Business Combination will provide critical growth funding that should span at very least 18 months, given that
we are currently profitable and plan to continue to reinvest. We do not anticipate needing to raise any more funds during these 18 months.
However, if our growth exceeds our forecasts, we may need more capital to support Apogee, Apex, and possibly even a new mobile launch
monitor already on our road map.
Competition
We
have many competitors, including those that sell competitive hardware, and also in many cases resell, our E6 software. These include
Trackman, FullSwing, Foresight, GolfZon, Uneekor, Garmin, FlightScope, SkyTrack, and Voice Caddie. These competitors are split into two
categories; the first is indoor or fixed launch monitors, including Uneekor, FullSwing, FlightScope and Foresight, which are typically
sold by resellers with turf, frames, screens and technology that are required for the launch monitor to even function. These complete
solutions range from $10,000 to $50,000. The second category consists of indoor/outdoor or portable launch monitors that can be placed
on the ground behind, or to the side of the golfer whether they are indoors or out on the driving range or course and are provided Trackman,
FullSwing, FlightScope, Foresight, Garmin, and Voice Caddie. These devices on their own range from $600 to $20,000.
Of
these competitors, Trackman, GolfZon, Uneekor and FullSwing have started to sell their own software as well. All of these providers charge
an additional fee for various levels of software from $300 to $5,000 and most are annually recurring. There are also software-only competitors,
such as GSPro, The Golf Club, and World Golf Tour that tend to sell subscriptions to software on an annual basis from $200 to $1,000.
Our
Competitive Strengths
Compared
with its competitors, TruGolf Nevada believes it has superior advantages in its technology. Its executive team has extensive experience
in the software industry, including Microsoft and Access Software. E6 Connect has become the de facto golf simulator operating system
and can be purchased to run on or with nearly every other launch monitor in the industry. As we have been creating and selling golf simulation
software for nearly 40 years, this has been, and continues to be our greatest competitive advantage. This adaptability of E6 also means
that our VGA has a significantly more powerful reach that any of our hardware competition. As we have been designing, building and selling
our own hardware for over 20 years, we have developed an advantage in this space as well, especially when bundled with our software.
The upgrade of our manufacturing facilities and new corporate offices will strengthen and optimize TruGolf Nevada’s production
capacity of its golf simulator products. In addition, TruGolf Nevada has established strong relationships with top institutions and suppliers
from all over the world.
Seasonality
Our
operations are subject to some inherent seasonality, as our products enable golfers to golf indoors, when they can’t go outdoors
due to inclement or unfavorable weather (e.g., in the winter in mid-west, northeast and northwest of the United States). As a result,
we have historically seen higher usage and resulting increases in sales in the first quarter and fourth quarter of each year. Consequently,
we have historically increased our marketing, sales and service in the third and fourth quarter, while increasing our production, logistics
and installations in the first quarter. We expect these seasonal trends to continue going forward despite any previous internal delays
due to the release of Apogee, or non-seasonal economic factors that may change from time to time. The reason we believe Q4 and Q1 seasonality
to continue moving forward is due to the consistent cold or wet weather conditions that apply across North America, most of Europe, and
Asia.
Government
Regulation
We
are subject to various U.S. federal and state and foreign laws and regulations. Many of these laws and regulations are still evolving
and being tested in courts, and could be interpreted in manners that could harm our business. These regulations may involve user privacy,
data protection and personal information, the privacy of consumer information and other laws regarding unfair and deceptive trade practices.
U.S.
federal and state laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are
constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these
laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted
and applied inconsistently from country to country and inconsistently with our current policies and practices.
Our
sales of golfing simulators are subject to regulation, including by the Federal Trade Commission and the Consumer Products Safety Commission
(CPSC), as well as various other federal, state, local and foreign regulatory authorities. These laws and regulations principally relate
to the proper labeling, advertising, marketing, manufacture, safety, shipment and disposal of our products. Because we import certain
of the components that make up our products from abroad, we are also subject to import regulations and regulations relating to trade.
We,
as are many other companies, are also subject to environmental laws, employment regulations, privacy and cybersecurity laws, environmental,
health and human safety laws and regulations, laws and regulations related to licensing operations, the Foreign Corrupt Practices Act
and other similar anti-bribery and anti-kickback laws. New laws and regulations or new interpretations of existing laws and regulations
may also impact the business.
Historically,
the costs of compliance with the rules and regulations described above have not had a material adverse effect on our operations and we
believe that we are is in substantial compliance with all applicable laws. Due to the nature of our operations and the frequently changing
nature of compliance regulation, we cannot predict with certainty that future material capital or operating expenditures will not be
required in order to comply with applicable government regulations.
Intellectual
Property
We
regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, and similar
intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade-secret protection, and confidentiality
and/or license agreements with our employees, customers, partners, and others to protect our proprietary rights. We have registered,
or applied for the registration of, a number of U.S. domain names, trademarks, service marks, and copyrights. Additionally, we have filed
U.S. patent applications covering certain of our proprietary technology.
Effective
trademark, service mark, copyright, patent and trade secret protection may not be available in every country in which our products are
made available. We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as
trademarks or copyrighted material, to third parties. While we attempt to ensure that the quality of our brand is maintained by such
licensees, there can be no assurance that such licensees will not take actions that might materially adversely affect the value of our
proprietary rights or reputation, which could have a material adverse effect on our business, prospects, financial condition and results
of operations. There can be no assurance that the steps taken by us to protect our proprietary rights will be adequate or that third
parties will not infringe or misappropriate our copyrights, trademarks, patents, trade dress and similar proprietary rights. In addition,
there can be no assurance that other parties will not assert infringement claims against us. We have been subject to claims and expect
to be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement
of the trademarks and other intellectual property rights of third parties by us and our licensees. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial resources.
Human
Resources
We
currently employ approximately 78 employees of which 72 are full-time and six are part-time, many of which started working remotely due
to COVID-19 and continue to work remotely. In addition to the marketing and sales outlined above, we complete all product development
of both hardware and software in house, including some light manufacturing and assembly, simulator installations, customer service, and
logistics.
Facilities
We
currently lease two buildings, one with offices for over half of our staff, and room for research & development, manufacturing, assembly,
returns and repairs. We assemble all of our proprietary hardware in this facility in Centerville, Utah, and combine other parts from
local and domestic suppliers that provide the frames and fabric for our bays, turf and foam, and other technology. The other has offices
for the rest of our staff and the majority of our finished good inventory and logistics.
We
lease 19,831 square feet of space from Boulder Properties LLC. Pursuant to a lease entered into in December 2022. The lease is for a
period of one year, and has been extended for an additional two years. The first year rent is $20,343 per month increasing
to $24,615 per month in year three. We are also obligated to pay a proportionate share of the operating costs of the building, which
approximate $3,000 per month. This lease also reflects add-on finish work. We have offices along with research and development and manufacturing
and assembly in this facility.
In
June 2023, we entered into a five-year, triple net lease for approximately 13,000 square feet. The facility is located in North Salt
Lake, Utah. This location has offices for our customer support team and storage for our assembled simulators. The first-year lease payments
are $10,457 per month with a three percent annual escalation in subsequent years.
Legal
Proceedings
From
time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We
are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually
or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.
Insurance
We
have an insurance policy in effect that includes customary coverage and protection for professional liability, general liability, employee
benefits and protection against claims including technology products, services and against cyber security. Our insurance policy also
covers exposure to product liability claims, including both technology product claims related to customer data breaches, copyright infringement
and/or misrepresentation and fraud and any claims made in connection with any physical products and services sold through our website.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of operations with our audited financial statements
for the years ended December 31, 2023 and 2022, and six months ended June 30, 2024 and 2023, together with related notes
thereto. The discussion and the analysis should also be read together with the section entitled “Business” and for the years
ended December 31, 2023 and 2022, and six months ended June 30, 2024 and 2023, included elsewhere in this prospectus. The
following discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including
those set forth under the section titled “Risk factors” or in other parts of this document and our other filings with the
SEC. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. In this
section, unless otherwise specified, the terms “we”, “our”, “us”, the “Company” and “TruGolf”
refer to TrueGolf Nevada. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise
indicated.
Company
Overview
Since
1983, TruGolf Nevada 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.
Our
team has built award-winning video games (including Links, 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 Nevada’s beginning, we have continued to define and redefine what is possible with golf technology.
In
addition to offering a variety of custom, professional, and portable golf simulators, TruGolf Nevada’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.
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 Nevada sales team. Our suite of hardware offerings range 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 Nevada 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).
TruGolf
Nevada creates top golf technology software in the marketplace through its TruGolf E6 Connect Software. Importantly, TruGolf E6 Connect
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 staggering 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 E6 Connect Software records, on average, over 725,000
indoor golf shots per day. TruGolf E6 Connect Software is both PC and iOS compatible and can be used both indoors and outdoors.
TruGolf
Nevada 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:
| ● |
Game Analysis – rewards
TruGolf E6 Connect Software users who track and measure their game. Users can set specific goals (e.g., shots hit per month, speed
and distance gains, dispersion reduction) and earn points for hitting milestones. At the end of each month, users can see how they
compared against all other users utilizing the Game Analysis features. |
| |
|
| ● |
Connected Golf –
rewards users for joining with their friends and playing golf online. Earn points for playing a new course or linking up to play
nine holes with another player utilizing TruGolf E6 Connect Software. |
| |
|
| ● |
Virtual Golf Association
Events – events are worldwide leaderboard format, flighted by handicap, where users play and compete to shoot the lowest score.
These contests include stroke play, closest to the pin, match play, stableford, and more. Users earn points based on how they finish
in their division. |
In
totality, TruGolf Nevada’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 unifying the industry as a whole by serving as the leader of golf technology
software solutions through its TruGolf E6 Connect Software.
Recent
Developments
Business Combination
On November 2, 2023 and
December 7, 2023, Deep Medicine Acquisition Corp. (“DMAC”) executed loan agreements with certain accredited investors (together,
the “Prior Loan Agreements”) pursuant to which such investors agreed to loan DMAC 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 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 were 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 issued the PIPE Investors the Series A Warrants and the Series B Warrants.
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”).
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.
On
August 13, 2024, the Company and the Selling Shareholders entered into to a waiver of the certain terms and conditions of the Purchase
Agreement and the Note, pursuant to which 349,733 shares of Class A Common Stock issued to the certain Selling Securityholders.
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.
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.Convertible
Note Extension
Sales
of a substantial number of our securities in the public market
The
Selling Securityholders can resell, under this prospectus, up to 74,310,070 shares of Class A Common Stock representing approximately
86% of our share capital on a fully diluted basis. The securities being offered in this prospectus represent a substantial percentage
of our issued and outstanding Class A Common Stock, and the sale of such securities in the public market by the Selling Securityholders,
or the perception that those sales might occur, could depress the market price of our Class A Common Stock, and could impair our ability
to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the
prevailing market price of our Class A Common Stock
In
addition, the Selling Securityholders acquired the Common Stock covered by this prospectus at prices ranging from $0.02 per share to
$12 per share. By comparison, the offering price to public shareholders in the SPAC’s initial public offering was $10.00 per unit,
which consisted of one share of Class A Common Stock and one right to receive one-tenth of one share of Class A Common Stock. Accordingly,
certain Selling Securityholders may realize a positive rate of return on the sale of their shares covered by this prospectus even if
the market price of Class A Common Stock is below $10.00 per share.
For
example, Bright Vision Sponsor LLC, who was the original sponsor, is the beneficial owner of 18.8% of the outstanding shares of the Company’s
common stock and will be able to sell all of its shares for so long as the registration statement of which this prospectus forms a part
is available for use.
Ethos Management INC
The Ethos Asset Management
Loan Agreement (“Loan Agreement”) stipulates that fundings should happen approximately every 30 banking days, subject to
Ethos completing periodic internal audits to ensure the Company was in compliance with the terms of loan agreement. Ethos Management
informed the Company in August 2023, that unrelated to TruGolf, Ethos Management is currently undergoing a routine audit of its loan
portfolio, and pending the close of the audit, borrowers may experience delays in drawing on funds when requested. Due to the lack of
additional fundings and in accordance with the terms of the Loan Agreement, in February 2024, we sent Ethos a notice of termination for
materially breaching the Loan Agreement. Based on the termination for default clause in the Loan Agreement, we are entitled to retain
all the funds disbursed by Ethos and Ethos must release the deposit collateral.
Global Franchising Agreement
In March 2023, we announced
a strategic partnership with Franchise Well, a renowned franchising consultancy firm, to accelerate its global expansion through a regional
developer franchise model. This partnership marks a pivotal moment for TruGolf as it harnesses the power of franchising to amplify its
global presence and cater to the burgeoning demand for immersive off-course golf experiences.
The collaboration with Franchise
Well will propel TruGolf’s growth strategy forward through the regional developer franchise model, targeting seasoned franchise
owners to spearhead expansion. Unlike traditional franchising models aimed at individual investors, TruGolf’s approach focuses
on empowering developers to build and scale territories, ensuring rapid strategic market penetration and sustainable growth.
mLSpatial Definitive
Agreement
In March 2024, we entered
into a definitive agreement with mlSpatial, a leading AI and machine learning engineering company, to license the AI engine they co-developed
to increase 9-axis spin accuracy for TruGolf’s acclaimed new APOGEE launch monitor. The agreement gives TruGolf the first right
of refusal to purchase 100% of mlSpatial assets.
Industry
Update
We
note that the simulator/screen golf market is growing according to the National Golf Foundation (www.ngf.org/simulator-golf-sees-real-surge),
“An estimated 6.2 million Americans hit golf balls with a club in a golf simulator within the past year, a total that surged 73%
compared to pre-pandemic levels. Golf’s continued evolution includes many new forms of the game and simulated golf is a part of
it.” Based on the growing golf simulator industry trend, we continue to believe there is a strong demand for our new hardware and
software products. Based on the growing industry golf simulator trend noted above, we continue to believe there is a strong demand for
our new hardware and software products.
According
to recently released data from The National Golf Foundation, 45 million Americans aged 6 and above played golf in 2023. This record-setting
total includes 32.9 million people who played off-course golf, with 18.4 million of them who participated exclusively in off-course golf
activities at places such as driving ranges, indoor golf simulators, or golf entertainment venues. Only 12.1 million played exclusively
on-course, furthering the trend.
Principal
External Factors Affecting Our Operating Results
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”.
| ● |
Market
acceptance. The growth of our business depends on our ability to gain broader acceptance of our current products by continuing
to make users aware of the significant benefits of our products to generate increased demand and frequency of use, and thus increase
our sales. Our ability to grow our business will also depend on our ability to expand our customer base in existing or new target
markets, including international markets. Although we have increased the number of users of TruGolf Nevada hardware and software
product offerings and continue to grow our channels globally through established relationships and focused sales efforts, we cannot
provide assurance that our efforts will continue to increase the use of our products. |
| ● |
Sales
force size and effectiveness. The rate at which we grow our sales force and expansion channels and the speed at which newly hired
salespeople and sales channels become effective can impact our revenue growth and our costs incurred in anticipation of such growth.
We intend to continue to make significant investments in our sales and marketing organization and channels by increasing the number
of sales representatives and expanding our international programs to help facilitate further adoption of our products as well as
broaden awareness of our products to new customers. We are slowly expanding into EMEA through a quickly growing network of distributors
that will each slowly develop their respective territories, sales from EMEA are still below 5% of total sales. We have also signed
a Joint Venture agreement with a partner in China to manage all distribution needs across Asia. We are not required to invest in
any of these markets, and as such take a lower margin on products sold there, therefore we expect slowly growing impacts on top line
revenue from these globalization efforts. |
| |
|
| ● |
Product
and geographic mix; timing. Our financial results, including our gross margins, may fluctuate from period to period based on
the timing of orders, fluctuations in foreign currency exchange rates and the number of available selling days in a particular period,
which can be impacted by a number of factors, such as holidays or days of severe inclement weather in a particular geography, the
mix of products sold and the geographic mix of where products are sold. |
Principal
Components of Revenues, Costs and Expenses
Revenues
Our
revenues come from the sale of TruGolf Nevada software and hardware, which products are sold through a global network of authorized resellers,
retail outlets and direct-to-consumer through a dedicated TruGolf Nevada sales team.
Cost
of Revenues
Cost
of revenues consists primarily of costs that are directly related to the delivery of our TruGolf Nevada 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.
Operating
Expenses
Royalties
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 renewal unless each party gives a thirty-day written notice of the intent to
cancel the contract prior to the renewal date.
Salaries,
Wages and Benefits
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.
Selling,
General and Administrative
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.
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.
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.
Other
Expense
Interest
Expense
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.
Loss
on Investment
During
the year ended December 31, 2022, we wrote off our $100,000 equity investment in a small entity that was intended to help develop and
sell our products.
Gain
on Loan Extinguishment
In
May 2020, we received a $735,000 loan under the Coronavirus Aid, Relief, and Economic Security Act Paycheck Protection Program. During
the year ended December 31, 2021, the loan was forgiven.
Principal
Cash Flows
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.
Critical
Accounting Estimates
We
prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. The application
of many accounting principles requires us to make assumptions, estimates and/or judgments that affect the reported amounts of assets,
liabilities, revenues and expenses in our financial statements. We base our estimates and judgments on historical experience and other
assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often
subjective and they and our actual results may change based on changing circumstances or changes in our analyses. If actual amounts are
ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts
first become known. We believe the following critical accounting estimates could potentially produce materially different results if
we were to change underlying assumptions, estimates and/or judgments. See also Note 2 - Summary of Significant Accounting Policies
to our audited annual financial statements for a summary of our significant accounting policies.
Accounts
Receivable, net
We
manage credit risk associated with our accounts receivables at the customer level.
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.
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. 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.
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.
Warrants
The
fair value of the warrants is estimated on the date of issuance using the Black-Scholes option pricing model, which requires the input
of subjective assumptions, including the expected term of the warrants, expected stock price volatility, and expected dividends. The
actual estimates used can be found in Note 12 - Convertible Notes Payable in the annual audited financial statements. These estimates
involve inherent uncertainties and the application of management’s judgment. Expected volatilities used in the valuation model
are based on the average volatility of the comparable companies publicly traded on recognized stock exchanges. The risk-free rate for
the expected term of the option is based on the United States Treasury yield curve in effect at the time of grant.
Results
of Operations
Comparisons of the Years ended December 31, 2023 and 2022
The
following table sets forth certain condensed statement of operations data for the periods indicated in dollars. In addition, we note
that the period-to-period may not be indicative of future performance.
| | |
Year Ended December,
31 | | |
Variation | |
| | |
2023 | | |
2022 | | |
$ | | |
% | |
| Revenues, net | |
$ | 20,583,851 | | |
$ | 20,227,331 | | |
$ | 356,520 | | |
| 1.76 | % |
| Cost of revenues | |
| 7,825,768 | | |
| 7,018,378 | | |
| 807,390 | | |
| 11.50 | % |
| Gross profit | |
| 12,758,083 | | |
| 13,208,953 | | |
| (450,870 | ) | |
| (3.41 | )% |
| Operating expenses | |
| 21,418,295 | | |
| 12,476,571 | | |
| 8,941,724 | | |
| 71.67 | % |
| (Loss) income from operations | |
| (8,660,212 | ) | |
| 732,382 | | |
| (9,392,594 | ) | |
| (1,282.47 | )% |
| Net loss | |
| (10,283,109 | ) | |
| (956,841 | ) | |
| (9,326,268 | ) | |
| 974.69 | % |
| Net loss income per common share | |
$ | (857.35 | ) | |
$ | (84.62 | ) | |
$ | (772.74 | ) | |
| 913.23 | % |
Revenues
Our
revenues were $20,583,851 for the year ended December 31, 2023, compared to $20,227,331 for the year ended December 31, 2022, an increase
of $356,520 or 1.76%. The increase in revenues was due primarily to a $600,953 increase related to ramping up the new Apogee launch monitor
offset by a $244,433 decrease in software subscription and other sales.
We note that the simulator/screen
golf market is growing according to the National Golf Foundation (www.ngf.org/simulator-golf-sees-real-surge), “An estimated 6.2
million Americans hit golf balls with a club in a golf simulator within the past year, a total that surged 73% compared to pre-pandemic
levels. Golf’s continued evolution includes many new forms of the game and simulated golf is a part of it.” Based on the
growing golf simulator industry trend, we continue to believe there is a strong demand for our new hardware and software products. Based
on the growing industry golf simulator trend noted above, we continue to believe there is a strong demand for our new hardware and software
products.
Cost
of Revenues
Cost
of revenues for the year ended December 31, 2023, increased $807,390 or 11.50% to $7,825,768 from $7,018,378 for the year ended December
31, 2022. The increase was due primarily to a $882,060 increase in the cost of simulator parts and materials and a $116,772 increase
in labor to manufacture our simulators. The cost of shipping our finished simulators increased $168,423 due to price increases from our
national shipping companies UPS, FedEx and Seko. These increased costs in 2023 were offset by an approximate $353,310 decrease in inventory
write downs and adjustments compared to the prior year. Materials and components to manufacture our simulators primarily include fabricated
steel, cut cloth, turf, computers, cameras and other high-end electronics which are subject to inflationary pricing pressures. We are
continuously working with our suppliers for volume pricing discounts and extended contract terms.
Operating
Expenses
Our
operating expenses were $21,418,295 for the year ended December 31, 2023, compared to $12,476,571 for the year ended December 31, 2022,
an increase of $8,941,724 or 71.67%. The increase for the year ended December 31, 2023, compared to December 31, 2022, was due primarily
to:
| |
i. |
An
increase of $158,677 in royalties expenses was due to the addition of new distributors and increases in the royalty percentages for
certain resellers. |
| |
|
|
| |
ii. |
A $2,708,096 increase in salaries, wages and benefits
expenses. The year over year increase is a result of:
|
| |
1. |
The Board of Directors authorizing and granting the
issuance 252 shares of common stock to two executives in October 2023. The Chief Growth Officer and the Chief Customer Experience
Officer each received 126 common shares. The Company recorded stock compensation expense (noncash) of $1,379,196 (estimated fair
value of the stock) at the time of grant and issuance. |
| |
|
|
| |
2. |
The Company hiring and paying more for contract and
in-house developers to work on the new APEX 6 connect software. Beginning in 2022 and continuing into 2023, we undertook the project
of developing new software on a new software platform in order to surpass what was available in the market and offered by competitors.
The software offers better graphics, stroke analysis, more courses to play and a competitive driving range competition. The new software
was demonstrated at the PGA National Convention in January 2024. Additionally, with the release of the Apogee launch monitor, we
hired additional quality assurance and customer support personnel along with increases in employee benefit costs. |
| |
|
|
| |
|
For the year ended December 2023, contract developer
labor was $1,029,412 compared to $896,534 for the year ended December 2022, a $132,878 increase. Salaries, wages and benefits for
in-house employees for the year ended December 2023, was $7,272,305 compared to $6,076,283 for the year ended December 2022, a $1,196,022
increase. In October 2023, we had a reduction in force with anticipated annual savings of approximately $350,000 to $400,000. |
| |
iii. |
A $6,074,951 increase in selling, general and
administrative expenses. The year over year increase is a result of:
|
| |
1. |
In April 2022, we secured the services of two consultants
(also the Note Holders as described in Note 12 – Convertible Notes Payable in our annual audited financial statements)
to assist with services including assisting the Company’s and its counsel in an initial public offering preparation and listing
to NASDAQ or other national exchange, assist the Company and its counsel in preparing a code of conduct and employment agreements,
franchise development, and valuation increase through growth among other services. |
| |
|
|
| |
|
Once
services are performed, the first consultant will be provided a 3% stock grant; while the
second consultant will be provided up to 7% of stock based on performance deliverables including:
1.75% on consummation of an initial bridge loan agreement, 1.75% on engaging an investment
banker, 1.75% upon filing an S-1 including financial statements and footnotes, and 1.75%
upon the closing of an initial public offering. The second consultant will be provided warrants
at a 20% discount to the then current price per share, for up to 2% for achieving a $250
million valuation and 3% more for a $500 million valuation, as well as another 2% for opening
the first franchise location, and 3% more once 100 franchise locations have been sold.
|
| |
|
|
| |
|
In
March 2023, the Board of Directors granting and authorizing the issuance 821 shares of common
stock two consultants (and holders of the convertible notes described in Note 12 –
Convertible Noted Payable in our annual audited financial statements) for consulting
service performed. The Company recorded consulting fee expense (noncash) of $4,493,333 (estimated
fair value of the stock) at the time of grant and issuance.
|
| |
|
|
| |
2. |
Sales and marketing expense increased $852,486 for the
year ended December 31, 2023 compared to the year ended December 31, 2022, due to a $504,202 increase in business development expenses
such as hiring a professional public relations firm or outside marketing consultants. Third party simulator installer expense increased
$383,722 as we shifted from in-house installers to third party installers, which we believe will reduce our installation costs and
improve the quality of the installations over time. |
| |
|
|
| |
3. |
All other selling, general and administrative expenses
(such as facilities professional fees, warehouse, travel, office supplies etc.) increased $729,132 for the year ended December 31,
2023 compared to the year ended December 31, 2022 due primarily to a $681,479 increase in bad debt expense as a result our regular
review, in line with our policy, to estimate the loss rate based on our historical experience with specific customers, our understanding
of our current economic circumstances, reasonable and supportable forecasts, and our own judgment. |
Interest
Income
Our
interest income was $108,011 for the year ended December 31, 2023. There was no interest income for the year ended December 31, 2022.
The interest income is from the short-term investments with Morgan Stanley.
Interest
Expense
Our
interest expense was $1,730,908 for the year ended December 31, 2023, compared to $1,589,223 for the year ended December 31, 2022, an
increase of $141,685 or 8.92%. The increase for the year ended December 31, 2023, compared to December 31, 2022 is a net result of a
$71,075 increase in interest for the Ethos management loan (a new loan), a $105,937 increase in interest for the margin line of credit
account (a new loan), a $83,873 increase in the gross sales royalty perpetual debt, a $556,317 increase in the interest on the dividend
notes payable less a $637,889 decrease in the interest expense for the warrants’ excess fair value over the pro-rata allocation
of loan proceeds and in interest expenses based on an estimated 70% discounted conversion price to fair value of the common stock (all
expensed in 2022 in connection with the issuance of the convertible notes. (See Note 12 – Convertible Notes Payable in the
annual audited financial statements).
Liquidity
and Capital Resources
We primarily obtain cash to
fund our operations through the reinvestment of free cash flows generated from our business operations, issuance of common stock to private
friend and family investors, issuance of term loans, issuance of notes payable and convertible debt instruments, and royalty structures.
As of December 31, 2023, we
had $5,397,564 in cash, cash equivalents and restricted cash and current working capital of $1,988,267 compared to $9,656,266 in cash
and cash equivalents and current working capital of $6,278,408 as of December 31, 2022.
In December 2023, we
entered into a $2,000,000 variable rate line of credit with JP Morgan Chase Bank, N.A. The purpose of the new line of credit was to
consolidate the balances outstanding on both the JP Morgan Chase Bank note payable and the previous line of credit, which had
matured. The new line of credit matures on December 31, 2024. The line of credit has an annual interest rate computed at the
Adjusted SOFR (Secured Overnight Financing Rate) Rate and at a rate of 3.00% above the SOFR Rate. The Adjusted SOFR rate means the
sum of the Applicable margin (3.50% per annum) plus the SOFR rate applicable to the interest period plus the Unsecured to Secured
Rate Adjustment. The line of credit is secured by a pledge of $2,100,000 in the Company’s deposit accounts (restricted cash)
at JP Morgan Chase. As of December 31, 2023 the balance outstanding on the line of credit was $802,738 and there was approximately
$1,197,262 in available borrowings. As of December 31, 2022, the balance outstanding on the earlier line of credit was
$545,625.
Cash Flow from Operating
Activities
For the year ended
December 31, 2023, the net cash used in our operating activities was $6,133,221. Our reported net loss when adjusted for non-cash
income and expense items, such as depreciation and amortization expenses for property and equipment, right-of-use asset, and
original issue discount and fair value of warrants in excess of fair value of debt and loss on equity investment, provided negative
cash flows of $3,181,611. These cash flows from operating activities were positively impacted primarily by a $20,236 increase in
inventory and other current assets, a $596,434 increase in accounts payable, a $615,582 increase in accrue interest payable and a
$374,819 increase in accrued and other liabilities. Partially offsetting these positive cash flows were $1,335,714 increase in
accounts receivable, a $114,385 increase in prepaid expenses, a $1,905,983 increase in other assets, a $1,008,296 decrease in
customer deposits and a $269,848 decrease in lease liability.
The increase in accounts receivable
is due primarily the timing of and collection related to the black Friday and Christmas holiday sales. The increase in accounts payable
is due to the timing of processing and making supplier payments. Prepaid expenses increase due primarily to a $100,000 payment to a supplier
for cameras to arrive in the first quarter of 2024. Other assets increased due to the $1,875,000 deposit paid for the Ethos Management
Inc loan. Accrued interest payable increased due primarily to the accrual
of the Ethos Management Loan interest (which is payment is deferred to 2025) and the interest on the dividend notes payable which is
payable in 2025. Customer deposits represent a 50% deposit collected from customers prior to manufacturing their simulator. The deposit
is applied to the customer’s final invoice. In addition, accrued and other liabilities increased primarily due to higher accrued
payroll, benefits and credit card balances. Lease liability decreased due to the lease payments made.
Cash
Flows from Investing Activities
For
the year ended December 31, 2023, the cash used in our investing activities was $2,620,558. We spent $127,413 for the purchase of computers,
desk, etc. for new employees and $2,493,145 to purchase marketable investment securities.
Cash
Flows from Financing Activities
For
the year ended December 31, 2023, the cash provided by our financing activities was $4,495,077. During the year ended December 31, 2023,
we borrowed $1,980,937 on our Morgan Stanely margin line of credit account. We drew $2,499,999 (or the first three of ten available tranches)
on the Ethos Management Inc loan. Principal and interest payments are deferred until April 2027. We also borrowed an additional $185,500
on the convertible notes and $50,000 on the McKettrick note payable netted against the $37,000 in repayments on the Carver loan. The
proceeds from the Ethos Management loan and convertible note borrowings were used to support our ongoing operations. One shareholder
returned $40,150 in overpaid past dividends.
The
Company has incurred net losses and negative operating cash flows for the year ended December 31, 2023. As the Company continues to incur
losses, successful transition to profitability is dependent on achieving a level of revenues adequate to support the Company’s
cost structure. Unless and until this occurs, the Company may need to raise capital or issue debt to support ongoing operations.
The
Company’s financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of obligations in the normal course of business. Continuation as a going concern is dependent upon continued operations of the Company,
which in turn is dependent upon the Company’s ability to meets its financial requirements, raise additional capital, and the success
of its future operations.
Under
the rules of ASC Subtopic 205-40 “Presentation of Financial Statements-Going Concern” (“ASC 205-40”), the Company
is required to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations
as they become due within one year after the date that these financial statements are issued or available to be issued. This evaluation
takes into account the Company’s current available cash and projected cash needs over the one-year evaluation period but may not
consider things beyond its control.
In
2022 and prior years, the Company has reported operating income and positive operating cash flows. However, for 2023, the Company has
experienced operating losses due primarily to expensing (1) consulting fees and issuing common stock associated with the services provided
by third-party consultants related to the propose DMAC business combination (See Note 20 – Subsequent Events), (2) expensing
employee stock compensation and issuing commons stock for services performed as well as relied on the capital raised from related parties
and institutional financing to continue ongoing operations. We may or may not be able to raise additional capital or obtain additional
institutional financing due to future economic conditions. In particular, the lending criteria are currently tightening in the United
States. These factors, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going
concern within one year of the date these financial statements are issued. In response to these conditions, the Company’s management
has prepared the following financing plan, which we believe mitigates the going concern uncertainty:
We
project that we will be able to meet our debt service and other cash obligations for at least the next 12 months. Our significant projected
cash commitments relate primarily to debt service and operating expenses. We anticipate the cash required to service our debt to be between
$1,100,000 to $3,000,000. The $3,000,000 assumes (1) the convertible notes are retired by cash payment rather than conversion into our
stock at maturity and (2) the note payable – ARJ Trust (See Note 10 – Related Party Notes Payable) are retired at
maturity. These notes are controlled by the Company’s Chief Executive Officer and have historically been extended (13 times) in
one-year increments. The Morgan Stanley margin line of credit account is 100 percent secured with the short-term investments held in
the brokerage account. The Morgan Stanley margin line of credit account would be retired through liquidation of the investments. At December
31, 2023, the Company had an additional $341,544 in availability on the Morgan Stanely margin line of credit account. The Morgan Stanly
was paid off in March 2023 through liquidation of the short-term investments.
Our
significant projected cash requirements related primarily to operating expenses for the next 12 months include $7,000,000 to $8,000,000
for employees’ salaries, wages and benefits, $950,000 to $1,200,000 for installation and customers service, and $1,000,000 to $1,200,000
for development of software and hardware. For the year ending December 31, 2023, we spent an average of five percent of total sales on
our marketing and business development efforts. For the next twelve months (through December 2024), we anticipate spending six to eight
percent of total projected sales, or $1,850,000 to $2,500,000 on marketing and business development. Due to the timing of our sales and
cash receipts, we project to generate sufficient recurring cash flow to cover our selling, general and administrative expenses each period.
No assurances can be given that the results anticipated by our projections will occur. With respect to long-term liquidity requirements,
approximately $12,400,000 of our debt contractually matures in years 2025 to 2033.
As
discussed in other sections of this prospectus, the Selling Securityholders acquired our Common Stock at prices
ranging from $0.02 per share to $12.00 per share. Accordingly, certain Selling Securityholders may realize a positive rate of return
on the sale of their shares despite the market price. The Selling Securityholders can resell, up to 74,310,070 Class A Common Stock
representing approximately 86% of our share capital on a fully diluted basis. The securities being offered in this prospectus represent
a substantial percentage of our issued and outstanding Class A Common Stock.
For
example, based on the closing price of our Class A Common Stock on April 17, 2024, (i ) SandTrap Opportunities LLC may experience weighted
average profit of $1.29 per share, or ap proximately $ 23,358,222 in the aggregate for selling the 18,148,148 shares Class A Common Stock
it received, (ii) Greentree Financial Group, Inc. may experience profit of $1.29 per share, or approximately $ 18,352,889 in the aggregate
for selling the 14,259,259 Class A Common Stock it received, (iii) the Sponsor, Bright Vision Sponsor LLC may experience weighted average
profit of $ 1.65 per share, or approximately $ 4,363,701 in the aggregate for selling the 2,639,875 shares of Class A Common Stock it
received. These individuals may sell their shares even if the stock price continues to decline.
The
sale of such securities in the public market by the Selling Securityholders, or the perception that those sales might occur, could further
depress the market price of our Class A Common Stock, and could, (i) impact our ability to make further draws on the PIPE loans, (ii)
impair our ability to raise capital through the sale of additional equity securities, and (iii) negatively impact the potential exercise
of the associated warrants due to the disparity between the contractual exercise price and the lower market price. We are unable to predict
the effect that such sales may have on the prevailing market price of our Class A Common Stock. A sustained lower market price for our
Class A Common stock, could negatively impact our cash flows (and our ability to raise additional capital), the extent off which is unpredictable
because we cannot project the stock price trend. Since the business combination (January 31, 2024), the Company’s liquidity has
remained consistent, between $6,000,000 and $7,000,000 and the Company believes that it has sufficient capital to fund its operations
for at least the next {12} months.
In
the event the projected results do not occur and we are unable to sell additional securities because of the lower market price, we
may have to significantly delay, scale back or discontinue the development and commercialization of one or more product offerings
and other strategic initiatives. Additionally, we would likely have to reduce the number of new hires planned in 2024, and implement
cost reduction measures such as a reduction in headcount, reducing the planned sales and marketing expense among other cost
reduction measures. We may also issue common stock to potential investors to increase our liquidity.
Management
believes the plan outlined above provides an opportunity for the Company to continue as a going concern.
Results
of Operations
Comparisons
of the Six Months ended June 30, 2024 and 2023
The
following table sets forth certain condensed statement of operations data for the periods indicated in dollars. In addition, we note
that the period-to-period may not be indicative of future performance.
| | |
Six Months Ended June 30, | | |
Variation | | |
| |
| | |
2024 | | |
2023 | | |
$ | | |
% | |
| Revenues, net | |
$ | 8,885,185 | | |
$ | 10,356,965 | | |
$ | (1,471,780 | ) | |
| (14,21 | )% |
| Cost of revenues | |
| 3,259,234 | | |
| 2,997,738 | | |
| 261,496 | | |
| 8.72 | % |
| Gross profit | |
| 5,625,951 | | |
| 7,359,227 | | |
| (1,733,276 | ) | |
| (23.55 | )% |
| Operating expenses | |
| 7,354,677 | | |
| 11,853,172 | | |
| (4,498,495 | ) | |
| (37.95 | )% |
| (Loss) income from operations | |
| (1,728,726 | ) | |
| (4,493,945 | ) | |
| 2,765,219 | | |
| 61.53 | % |
| Net loss | |
| (2,871,192 | ) | |
| (5,351,021 | ) | |
| 2,479,829 | | |
| 46.34 | % |
| Net loss income per common share | |
$ | (0.31 | ) | |
$ | (441.19 | ) | |
$ | 440.88 | | |
| 99.93 | % |
Revenues
Our
revenues were $8,885,185 for the six months ended June 30, 2024, compared to $10,356,965 for the six months ended June 30, 2023, a decrease
of $1,471,780 or (14.21%). The decrease in revenues was due primarily to a decrease in software subscription and other sales.
Cost
of Revenues
Cost
of revenues for the six months ended June 30, 2024, increased $261,496 or 8.72% to $3,259,234 from $2,997,738 for the six months ended
June 30, 2023. The increase was due primarily to an increase in the inventory adjustment of $471,702 from ($232,119) to $239,583 during
the six months ended June 30, 2024 and 2023, respectively. Materials and components to manufacture our simulators primarily include fabricated
steel, cut cloth, turf, computers, cameras and other high-end electronics which are subject to inflationary pricing pressures. The cost
of shipping our finished simulators increased $267,765 due to price increases from our national shipping companies UPS, FedEx and Seko.
These increased costs were offset by an approximate $391,718 decrease in material costs and other non-inventory items. We are continuously
working with our suppliers for volume pricing discounts and extended contract terms.
Operating
Expenses
Our
operating expenses were $7,354,677 for the six months ended June 30, 2024, compared to $11,853,172 for the six months ended June 30,
2023, a decrease of $4,498,495 or (37.95%). The decrease for the six months ended June 30, 2024, compared to the six months ended June
30, 2023, was due primarily to:
| |
i. |
An
increase of $236,282 in royalty expenses was due to the addition of new distributors and increases in the royalty percentages for
certain resellers. |
| |
|
|
| |
ii. |
A
$960,149 decrease in salaries, wages and benefits expenses due primarily to management’s efforts of reducing payroll expenses.
|
| |
|
|
| |
iii. |
A
$3,774,627 decrease in selling, general and administrative expenses. The six months over the prior year’s six months decrease
is a result of: |
| |
|
|
| |
|
1. |
In
March 2023, the Board of Directors granting and authorizing the issuance 821 shares of common stock two consultants (and holders
of the convertible notes described in Note 12 - Convertible Noted Payable in our annual audited financial statements included elsewhere
in this Form 8K) in March 2023 for consulting service performed. The Company recorded consulting fee expense (noncash) of $4,493,333
(estimated fair value of the stock) at the time of grant and issuance. |
| |
|
|
|
| |
|
2. |
All
other selling, general and administrative expenses (such as facilities professional fees, warehouse, travel, office supplies etc.)
increased $435,8770 for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 as a result of amortization
of capitalized software costs of $137,917, an increase in professional fees of $734,079 (of which $158,101 was incurred by Links)
and an increase in insurance expense of $259,500, offset in part by a decrease in sales and marketing of $205,106, a decrease of
$435,855 in general and administrative expenses. |
Interest
Income
Our
interest income was $67,208 and $50,345 for the six months ended June 30, 2024 and 2023, respectively.
Interest
Expense
Our
interest expense was $1,205,762 and $907,421 for the six months ended June 30, 2024 and 2023, respectively, an increase of $298,341 or
(32.88%) primarily due to the interest on the PIPE convertible notes.
Liquidity
and Capital Resources
Business
Combination
The
Company consummated the business combination described in Note 1 and Note 2 on January 31, 2024. The Company received proceeds of approximately
$2,237,213, net of closing costs, expenses and commissions. The Company recorded a PIPE Convertible Note, the source of the proceeds
from the business combination, of $4,650,000 with an original issue discount of $465,000 (or 10%).
The
Company received proceeds of $500,000 from the sale of franchise regions sold by its wholly owned subsidiary, TruGolf Links Franchising,
LLC, which was recorded as deferred revenue. The Company expects to grow this revenue stream in subsequent quarters of 2024.
We
have primarily obtained cash to fund our operations through the reinvestment of free cash flows generated from our business operations,
issuance of common stock to private friend and family investors, issuance of term loans, issuance of notes payable and convertible debt
instruments, and royalty structures.
As
of June 30, 2024 and December 31, 2023, we had $6,651,272 and 5,397,564 in cash, cash equivalents and restricted cash and current working
capital deficit of $66,473 and working capital of $1,988,267, respectively.
In
December 2023, we entered into a $2,000,000 variable rate line of credit with JP Morgan Chase Bank, N.A. The purpose of the new line
of credit was to consolidate the balances outstanding on the note payable and the previous line of credit, which had matured. The line
of credit matures on December 31, 2024. The line of credit has an annual interest rate computed at the Adjusted SOFR (Secured Overnight
Financing Rate) Rate and at a rate of 3.00% above the SOFR Rate. The Adjusted SOFR rate means the sum of the Applicable margin (3.50%
per annum) plus the SOFR rate applicable to the interest period plus the Unsecured to Secured Rate Adjustment. The majority of the variable
rate line of credit was paid during the three months ended June 30, 2024. As of June 30, 2024, the remaining balance was $10,114 and
was included in the cash balance.
Cash
Flow from Operating Activities
For
the six months ended June 30, 2024 the net cash provided by our operating activities was $2,615,975 including the liquidation of the
marketable securities account of $2,478,953. The change in the remaining operating assets and liabilities was $2,642,844, depreciation
and amortization of $173,200, the amortization of the ROU asset of $166,311 and the amortization of original issue discount of $24,197.
For
the six months ended June 30, 2023 the net cash used in our operating activities was $4,969,183. The change in operating assets and liabilities
was a decrease of $4,632,611. Other assets increased due to the $1,875,000 deposit paid for the Ethos Management Inc loan and $116,040
in net Ethos Management Inc deferred loan fees. The net loss of $5,351,021 was partially offset by increases to cash from depreciation
and amortization of $28,091, amortization of convertible notes original issue discount of $139,848, amortization of ROU asset of $137,257,
bad debt expense of $215,920 and stock-based compensation expense of $4,493,333.
Cash
Flows from Investing Activities
For
the six months ended June 30, 2024 and 2023, the cash used by our investing activities was $1,433,513 and $2,481,234, respectively. For
the six months ended June 30, 2024 the Company capitalized software development costs of $1,433,438. For the six months ended June 30,
2023 the Company purchased fixed assets of $65,381 and purchased short-term investments of $2,415,853.
Cash
Flows from Financing Activities
The
Company consummated the business combination described in Note 1 and Note 2 on January 31, 2024. The Company received proceeds of approximately
$2,325,315, net of closing costs, expenses and commissions. The Company recorded a PIPE Convertible Note, the source of the proceeds
from the business combination, of $4,650,000 less an original issue discount of 465,000 (or 10%).
For
the six months ended June 30, 2024 the cash provided by our financing activities was $71,246. The Company received net proceeds from
the Merger of $2,325,315, made debt payments of $273,132, paid $15,716 of assumed liabilities and paid off the line of credit of $1,980,937.
For
the six months ended June 30, 2023 we borrowed $1,911,110 on our Morgan Stanely margin line of credit account, received proceeds of $1,666,666
from loans, received $121,750 from convertible note holders and made debt payments of $80,841. One shareholder returned $35,037 in overpaid
past dividends. The loan proceeds were used for ongoing operations.
The
Company has incurred net losses and negative operating cash flows for the six months ended June 30, 2024 and 2023. As the Company continues
to incur losses, successful transition to profitability is dependent on achieving a level of revenues adequate to support the Company’s
cost structure. Unless and until this occurs, the Company may need to raise capital or issue debt to support ongoing operations.
The
Company’s financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of obligations in the normal course of business. Continuation as a going concern is dependent upon continued operations of the Company,
which in turn is dependent upon the Company’s ability to meet its financial requirements, raise additional capital, and the success
of its future operations.
Under
the rules of ASC Subtopic 205-40 “Presentation of Financial Statements-Going Concern” (“ASC 205-40”), the Company
is required to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations
as they become due within one year after the date that these financial statements are issued or available to be issued. This evaluation
considers a Company’s current available cash and projected cash needs over the one-year evaluation period but may not consider
things beyond its control.
The
Company believes the recent merger, as described in Note 1 and Note 2, may enable us to raise additional capital through equity offerings
and not incur more debt or loans payable.
Our
significant projected cash requirements related primarily to operating expenses for the next 12 months include $7,000,000 to $8,000,000
for employees’ salaries, wages and benefits, $950,000 to $1,200,000 for installation and customers service, and $1,000,000 to $1,200,000
for development of software and hardware. No assurances can be given that the results anticipated by our projections will occur. With
respect to long-term liquidity requirements, approximately $12,400,000 of our debt contractually matures in the years 2025 to 2033.
In
the event the projected results do not occur, we may have to significantly delay, scale back or discontinue the development and commercialization
of one or more product offerings and other strategic initiatives. Additionally, we would reduce the number of new hires planned during
the remaining months of 2024, and implement cost reduction measures such as a reduction in headcount, reducing the planned sales and
marketing expense among other cost reduction measures. We may also issue common stock to potential investors to increase our liquidity.
Management
believes the plan outlined above provides an opportunity for the Company to continue as a going concern.
Business
Updates
Franchise Agreement
In February 2024, we entered
into an agreement with Franchise Well, LLC, a franchising consultancy firm, to accelerate our global expansion through a regional developer
franchise model. This relationship is pivotal for TruGolf as the power of franchising will amplify our global presence and cater to the
growing demand for off-course golf experiences. On May 10, 2024 the Company formed a wholly owned subsidiary in the state of Delaware,
TruGolf Links Franchising, LLC.
New Software Release
On March 28, 2024, we released
our new software and features designed for the TruGolf E6 Apex Software. We demonstrated the new software and features at the PGA National
Convention in January 2024 and received very positive feedback. We believe that this new software and features will substantially improve
the user experience and functionality of the software suite, making a best-in-class offering that much better.
mlSpatial
Definitive Agreement
In March 2024, we entered
into a definitive agreement with mlSpatial, a leading AI and machine learning engineering company, to license the AI engine they co-developed
to increase 9-axis spin accuracy for TruGolf’s acclaimed new APOGEE launch monitor. The agreement gives TruGolf the first right
of refusal to purchase 100% of mlSpatial assets.
Material
Cash Requirements for Known Contractual and Other Obligations
We
have entered into operating leases for our corporate headquarters and a warehouse in Centerville, Utah. The leases have varying terms
expiring between 2023 and 2025. In June 2023, we entered into a sixty-month, triple net lease for additional warehouse space in North
Salt Lake, Utah. The lease payments range between $10,457 and $11,770.
We
enter into agreements in the normal course of business with various vendors, which are generally cancellable upon notice. Payments due
upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of service
providers, up to the date of cancellation.
Recent
Accounting Pronouncements
Management
has evaluated all recent accounting pronouncements issued by the Financial Accounting Standards Board and determined that none of the
pronouncements will have a material impact on our financial statements. We will continue to monitor the issuance of any new accounting
pronouncements and assess their potential impact on the financial statements in future periods.
Emerging
Growth Company
We
are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised
accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period
for complying with new or revised accounting standards that have different effective dates for public and private companies until the
earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended
transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with
new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting
standards whenever such early adoption is permitted for private companies.
Quantitative
and Qualitative Disclosures About Market Risk
Interest Rate Risk
We had cash, cash equivalents
and restricted cash totaling $5,397,564 as of December 31,2023, and $6,651,272 as of June 30, 2024. Cash equivalents were invested
primarily in low interest checking or savings accounts. Our investment policy is focused on the preservation of capital and supporting
our liquidity needs. Under our investment policy, we will only invest in highly rated securities, issued by the U.S. government or liquid
money market funds. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial
instruments. We may utilize external investment managers who adhere to the guidelines of our investment policy. A hypothetical 10% change
in interest rates would not have a material impact on the value of our cash, cash equivalents and restricted cash, net loss or cash flows.
We do not have significant exposure
to interest rate risk as only our lines of credit are variable rate. As of December 31, 2023, the variable rate lines of credit had a
balance outstanding of $2,783,675 compared to the total fixed rate debt outstanding of $10,605,692. As of June 30, 2024, the variable
rate lines of credit had a balance outstanding of $802,738 compared to the total fixed rate debt outstanding of $14,387,701. Thus,
management believes a hypothetical 10% change in interest rates would not have a material impact on annualized interest expenses.
We maintain our cash in bank
deposit accounts which, at times, may exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
As of December 31, 2023, the amount in excess of federally insured limits was $4,251,124. As of June 30, 2024, the amount in excess
of federally insured limits was $5,238,762.
Cybersecurity
Risk
We
have completed an assessment of our a suite of controls including technology hardware and software solutions, regular testing of the
resiliency of our systems including penetration and disaster recovery testing as well as regular training sessions on cybersecurity risks
and mitigation strategies, and have engaged a 3rd party to bring us up to industry best practices. We have established an
incident response plan and team to take steps it determines are appropriate to contain, mitigate and remediate a cybersecurity incident
and to respond to the associated business, legal and reputational risks. There is no assurance that these efforts will fully mitigate
cybersecurity risk and mitigation efforts are not an assurance that no cybersecurity incidents will occur, and have had no such breaches
of security.
Internal
Control Over Financial Reporting
TruGolf
had been a private company with limited accounting personnel to adequately execute its accounting processes and limited supervisory resources
with which to address its internal control over financial reporting. In connection with the audits of our financial statements as of
and for the years ended December 31, 2023 and 2022, we identified material weaknesses (defined as a deficiency or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of TruGolf’s
annual or interim financial statements will not be prevented or detected on a timely basis) in our internal control over financial reporting
that we are currently working to remediate, which relate to: (a) insufficient segregation of duties in the financial statement close
process; (b) a lack of sufficient levels of staff with public company and technical accounting experience to maintain proper control
activities and perform risk assessment and monitoring activities; and (c) insufficient information systems controls, including access
and change management controls. We have concluded that these material weaknesses in our internal control over financial reporting occurred
because we did not have the necessary business processes, personnel and related internal controls to operate in a manner to satisfy the
accounting and financial reporting timeline requirements of a public company.
We
are focused on designing and implementing effective internal control measures to improve our evaluation of disclosure controls and procedures,
including internal control over financial reporting, and remediating the material weaknesses. In order to remediate these material weaknesses,
we have taken and plan to take the following actions:
| |
● |
The hiring and planned
continued hiring of additional accounting staff with public company experience; |
| |
● |
Implementation of new
enterprise resource planning system to replace the prior enterprise resource planning system; |
| |
● |
Implementation of additional
review controls and processes requiring timely account reconciliation and analyses of certain transactions and accounts, and |
| |
● |
The planned hiring of
a national accounting firm to assist in the design and implementation of controls and remediation of control gaps. |
TruGolf
did not design and has not maintained an effective control environment as required under the rules and regulations of the SEC. Specifically,
(i) management does not have appropriate IT general control in place over change management, user access, cybersecurity, and reviews
of service organizations, (ii) management does not have suitable COSO entity level controls in place, including reviews of the financial
statements, and certain entity level controls were not performed by management, and (iii) pervasive transactional and account level reconciliations
and analyses are not performed, or not performed with sufficient detail to prevent or detect a material weakness. These issues related
to managements controls over the review of complex significant transactions, complex debt and equity issuance transactions, income and
sales taxes, & revenue recognition.
TruGolf
has taken certain steps, such as recruiting additional personnel, implementing a new enterprise resource planning system, in addition
to utilizing third-party consultants and specialists, to supplement its internal resources, to enhance its internal control environment
and plans to take additional steps to remediate the material weaknesses. Although TruGolf plans to complete this remediation process
as quickly as possible, it cannot at this time estimate how long it will take. TruGolf cannot assure you that the measures it has taken
to date and may take in the future, will be sufficient to remediate the control deficiencies that led to its material weaknesses in internal
control over financial reporting or that it will prevent or avoid potential future material weaknesses.
We
are focused on designing and implementing effective internal control measures to improve our evaluation of disclosure controls and procedures,
including internal control over financial reporting, and remediating the material weaknesses. In order to remediate these material weaknesses,
we have taken and plan to take the following actions:
| |
● |
The hiring and planned
continued hiring of additional accounting staff with public company experience; |
| |
● |
Implementation of new
enterprise resource planning system to replace the prior enterprise resource planning system; |
| |
● |
Implementation of additional
review controls and processes requiring timely account reconciliation and analyses of certain transactions and accounts, and |
| |
● |
The planned hiring of
a national accounting firm to assist in the design and implementation of controls and remediation of control gaps. |
In
accordance with the provisions of the JOBS Act and the Sarbanes-Oxley Act, we and our independent registered public accounting firm were
not required to, and did not, perform an evaluation of our internal control over financial reporting as of December 31, 2022, and 2021
nor any subsequent period. Material weaknesses may still exist when we report on the effectiveness of our internal control over financial
reporting as required under Section 404(a) of the Sarbanes-Oxley Act after the completion of the Business Combination.
MANAGEMENT
The
following sets forth certain information concerning the persons who serve as directors and executive officers of TruGolf.
| Name |
|
Age |
|
Position |
| Executive
Officers |
|
|
|
|
| Christopher
(Chris) Jones |
|
69 |
|
Chief Executive Officer,
President and Chairman, Director |
| Brenner
Adams |
|
52 |
|
Chief Growth Officer |
| Nathan
E. Larsen |
|
54 |
|
Chief Experience Officer |
| Shaun
B. Limbers |
|
44 |
|
Executive Vice President,
Director |
| Steven
R. Johnson |
|
72 |
|
Chief Hardware Officer |
| Non-Employee
Directors |
|
|
|
|
| Humphrey
P. Polanen |
|
74 |
|
Director |
| Riley
Russell |
|
52 |
|
Independent Director |
| AJ
Redmer |
|
61 |
|
Independent Director |
Executive
Officers
Christopher
(Chris) Jones is the Chief Executive Officer and Director at TruGolf . He founded Access Software, one of the earliest leaders
in gaming and software in 1982. As a founder of Access Software, Mr. Jones helped pioneer 3D simulation. In addition to creating the
LINKSTM golf franchise–a highly awarded PC sports title–Access Software gained critical acclaim for the Tex Murphy adventure
game series, and its early use of 3D engines and high-quality full motion video. After Access Software was acquired by Microsoft Corp.
in 1999, Mr. Jones served as Project Manager for several XBOX titles through July 2004. In 2007, Mr. Jones became Chief Executive Officer
of TruGolf, and has presided over TruGolf’s growth as a leader in the virtual golf industry ever since. Mr. Jones obtained a Bachelor’s
Degree in Marketing and Finance from the University of Utah in Salt Lake City, Utah. The Deep Medicine Board believes that Mr. Jones
is well qualified to serve on the TruGolf Board due to his background in video game development, his numerous years of management experience
and the fact that he has been the driving force behind the Company’s operations since the Company’s formation.
Brenner
Adams is the Chief Growth Officer at TruGolf . He is has served as the Chief Growth Officer of TruGolf since January 2022. Mr.
Adams also provides consulting services from time to time through Octant Consulting of which he is the principal owner. From August 2021
to January 2022, Mr. Adams served as the Chief Information Officer of The Food Truck League. From April 2019 to August 2021, Mr. Adams
served as Chief Innovation Officer for Med USA, a medical billing company. From January 2015 to December 2020, Mr. Adams served as an
Adjunct Professor at the University of Utah. From February 2012 to April 2019, Mr. Adams served as Chief Executive Officer of The LINK
Group, a point-of-sale software company. Mr. Adam’s prior work experience also includes serving as Global Brand Director for Burton
Snowboards (2006-2008) and Director of Business Development for Xbox / Take Two (2001 to 2006). Mr. Adams serves on the Board of Directors
of a number of private companies. Mr. Adams received a Bachelor of Science degree in Economics and a Master of Business Administration
from the University of Utah.
Nathan
E. Larsen is the Chief Experience Officer at TruGolf . He has served as the Chief Experience Officer of TruGolf since October
2021. From January 2019 to October 2021, Mr. Larsen provided freelance brand and marketing consultation services to various companies
in the medical, forestry and construction industries. From 2006 to 2019, Mr. Larsen served as President and Chief Operating Officer of
Equity Building Solutions Inc., a resident development and construction company. From 2004 to 2006, Mr. Larsen served as Creative Director
and Director of Business Development for Take Two Interactive / Indie Built Studio, a software development company which developed games
for Xbox and the PlayStation 2. From 1999 to 2004, Mr. Larsen served as Creative Director for Microsoft Corp., in its Xbox Games development
division. From 1991 to 1999, Mr. Larsen served as an artist, animator and art director for Access Software. Prior to that, he served
as an artist and animator on five PC games published by Sierra On Line. Mr. Larsen is a member of the Salt Lake Home Builders Association,
Utah Valley Home Builders Association and the Park City Area Home Builders Association.
Shaun
B. Limbers is the Executive Vice President and Director at TruGolf . He has served as Clinical Assistant Professor of Entrepreneurship
and Director of the Institute for Family Business at Baylor University in Waco, Texas. Since May 2019, Mr. Limbers has served as an Adjunct
Faculty Member at Baylor University and Associate Director for Baylor University’s entrepreneurship center. Since March 2010, Mr.
Limbers has served as the Chief Executive Officer and founder of McIntyre Investment, LLC (“McIntyre”), an investment banking
firm specializing in middle market transactions including primary and secondary investments, merger and acquisition advisory services
and real estate. Mr. Limbers is a registered representative with McIntyre’s SEC registered broker-dealer entity, McIntyre Capital
Partners, LLC, which is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation
(SIPC). He holds a Series 7 license as well as a Series 63 license with FINRA. Prior to forming McIntyre, Mr. Limbers served as Vice
President of Christina Development corporation, a real estate investment company, from 2003 to 2010. Mr. Limbers obtained a Bachelor
of Science Degree in Business Administration from Pepperdine University and an MBA from the University of Notre Dame. The Deep Medicine
Board believes that Mr. Limbers is well qualified to serve on the TruGolf Board due to his significant experience with private investments,
transaction structuring, joint ventures, investment banking and fund raising.
Steven
Johnson is the Chief Hardware Officer of TruGolf . Mr. Johnson has been an employee in a variety of positions with TruGolf since
May 1999. He began as a Product Development Manager and became the Executive Vice President in 2007. Prior to joining TruGolf, Mr. Johnson
was a Sales Manager of Cassette Productions, LLC, an audio, video and software company. Mr. Johnson attended the University of Utah.
Non-Employee
Directors
Humphrey
P. Polanen serves as an independent director at TruGolf . He is the Chief Executive Officer and managing member of NeoVista Ventures
LLC, a healthcare focused holding company. Mr. Polanen was the director of Heritage Commerce Corp (Nasdaq: HTBK), a bank holding company
offering a wide array of business and personal banking services, from 1994 to April 2016. Since 1999, Mr. Polanen has been actively involved
as an investor and director in various venture capital backed companies in the technology industry, and has served as a director of various
private equity funds. He was the Managing Director of Internet Venture Partners BV, an investment firm, from 2000 to 2004. Prior to joining
Internet Ventures, he served in various executive positions with Sun Microsystems and Tandem Computers. Mr. Polanen was a director (and
former Chairman of the Board) of St. Bernard Software, a publicly traded Internet security company. Mr. Polanen has been a director of
TechFlow Inc., an information technology service company, since June 2016. Mr. Polanen practiced corporate law for over ten years at
the beginning of his career. He has a Bachelor of Arts degree from Hamilton College and a Juris Doctor degree from Harvard University.
The Deep Medicine Board believes that Mr. Polanen is well qualified to serve on the TruGolf Board due to his experience as an executive,
investor, director and business manager with advanced technology companies and private equity firms.
AJ
Redmer serves as an independent director at TruGolf . He is the Chief Executive Officer and Managing Director of Redmer Productions
LLC. Mr. Redmer founded Redmersoft in 1986 which operated within Lucasfilm Ltd.’s Skywalker Ranch. He helped evolve Redmersoft
into Maxis Software Corporation before taking on senior management responsibilities at Lucasfilm Ltd. AJ subsequently went on to senior
leadership positions at Spectrum Holobyte, Nintendo and Microsoft where he played a key role in the development of the original Xbox
and the Xbox 360. He has also served as the chief executive officer of WeMade Entertainment USA, Inc. He has over 25 years of experience
building video game franchises in the entertainment industry. Mr. Redmer has designed and/or overseen the development of some of the
most well-known franchises in the gaming industry including; SimCity, Star Wars, Indiana Jones, Tetris, Ridge Racer, Pokémon,
Flight Simulator, Age of Empires, Project Gotham Racing and Forza Motorsport. The Deep Medicine Board believes that Mr. Redmer is well
qualified to serve on the TruGolf Board due to his executive experience in the franchising side of the gaming and entertainment industries.
Riley
Russell serves as an independent director at TruGolf . Mr. Russell has over 30 years-experience working in the games and interactive
entertainment industry. He is currently the Executive Vice President and Studio head at Kojima Productions US. Prior to joining Kojima,
Mr. Russell has served as an Executive Vice President with Penumbra, Inc. and as the Chief Legal Officer at Sony Interactive Entertainment
LLC until 2021. At Sony, Mr. Russell was responsible for Sony’s interactive division that produces the Sony PlayStation. He has
global experience in the video games, entertainment and technology sector. Mr. Russell is also an active board member of the Video Game
Bar Association and the XR Association. The Deep Medicine Board believes that Mr. Russell is well qualified to serve on the TruGolf Board
due to his experience as an executive in the video game and entertainment and technology sector.
Family
Relationships
There
are no family relationships among any of TruGolf’s directors or executive officers.
Arrangements
for Election of Directors and Members of Management
There
are no arrangements or understandings with major shareholders or others pursuant to which any of our executive officers or directors
are selected.
Controlled
Company
Christopher
Jones, together with Steven R. Johnson and David Ashby, hold approximately 85.9% of the voting power of TruGolf’s
voting securities for the election of directors. As a result, TruGolf expects to be a controlled company within the meaning of the Nasdaq
rules, and, as a result, may qualify for exemptions from certain corporate governance requirements.
Under
Nasdaq rules, a controlled company is exempt from certain corporate governance requirements, including:
| ● |
the requirement that a majority of the board of directors
consist of independent directors; |
| |
|
| ● |
the requirement that a
listed company have a nominating and governance committee that is composed of independent directors with a written charter addressing
the committee’s purpose and responsibilities; |
| |
|
| ● |
the requirement that a
listed company have a compensation committee that is composed entirely of independent directors with a written charter addressing
the committee’s purpose and responsibilities; and |
| |
|
| ● |
the requirement for an
annual performance evaluation of the nominating and governance committee and compensation committee. |
Controlled
companies must comply with the exchange’s other corporate governance standards. These include having and audit committee and the
special meetings of independent or non-management directors.
Agreements
with management of TruGolf
TruGolf
currently maintains an employment agreement with its Chief Executive Officer.
Agreement
with Chief Executive Officer
Employment
Arrangement Documentation Currently in Place with Mr. Christopher Jones
We
hold employment arrangement documentation with Mr. Christopher Jones dated effective as of January 1, 2022, pursuant to which
we employ Mr. Christopher Jones as our Chief Executive Officer on an at-will basis. Pursuant to his employee arrangement documentation,
Mr. Christopher Jones is eligible to receive an annual base salary of $160,000 and performance based annual bonus, along with equity
incentive plans.
Mr.
Christopher Jones is also eligible for certain compensation based on future changes of control (50% or greater) as well as compensation
based upon termination of his employment or resignation.
Memorandum of understanding with Brenner Adams
A
memorandum of understanding was entered into with Brenner Adams dated June 1, 2022, effective December 13, 2022, pursuant to which
we employ Mr. Adams as chief growth officer, with an initial term of 12 months from the effective date. Pursuant to such memorandum of
understanding, Mr. Adams is eligible to receive a monthly salary of $12,000 and a $1,500 a month as quarterly bonus for achieving quarterly
targets. Pursuant to the memorandum of understanding, Mr. Adams is eligible to receive 1% of fully diluted stock (which was formally
granted and issued by the Board of Directors on October 1, 2023), and rights to participate in future employee stock option programs
commensurate with the title.
Corporate
Governance
Director
Independence
TruGolf
will adhere to the rules of Nasdaq in determining whether a director is independent. The board of directors of TruGolf has consulted,
and will consult, with its counsel to ensure that the board’s determinations are consistent with those rules and all relevant securities
and other laws and regulations regarding the independence of directors. The Nasdaq listing standards define an “independent director”
as a person, other than an executive officer of a company or any other individual having a relationship which, in the opinion of the
issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of
a director.
Committees
of the Board of Directors
The
TruGolf Board has established an audit committee, a compensation committee and a nominating and corporate governance committee. The composition
and responsibilities of each of the committees of the board of directors are described below. Members serve on these committees until
their resignation or until otherwise determined by the TruGolf Board. The TruGolf Board may establish other committees as it deems necessary
or appropriate from time to time.
Audit
Committee
TruGolf
has established an audit committee. The audit committee consists of Humphrey Polanen, AJ Redmer and Riley Russell. Mr. Polanen, who is
independent under the applicable Nasdaq listing standards, is the chairman of the audit committee. The audit committee has a written
charter. The purpose of the audit committee is, among other things, to appoint, retain, set compensation of, and supervise TruGolf’s
independent accountants, review the results and scope of the audit and other accounting related services and review TruGolf’s accounting
practices and systems of internal accounting and disclosure controls.
Financial
Experts on Audit Committee
The
audit committee is composed exclusively of “independent directors,” as defined for audit committee members under the Nasdaq
listing standards and the rules and regulations of the SEC, who are “financially literate,” as defined under Nasdaq’s
listing standards. Nasdaq’s listing standards define “financially literate” as being able to read and understand fundamental
financial statements, including a company’s balance sheet, income statement and cash flow statement. In addition, TruGolf has certified
to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting,
requisite professional certification in accounting, or other comparable experience or background that results in the individual’s
financial sophistication.
Mr.
Polanen serves as a financial expert on the audit committee.
Compensation
Committee
The
board of directors of TruGolf has established a compensation committee. The compensation committee consists of Humphrey Polanen, AJ Redmer
and Riley Russell. Mr. Redmer serves as the chair of the compensation committee. The compensation committee has a written charter. The
purpose of the compensation committee is to review and approve compensation paid to TruGolf’s officers and directors and to administer
TruGolf’s incentive compensation plans, including authority to make and modify awards under such plans.
The
compensation committee assists the Board in determining its responsibilities in relation to remuneration, including, amongst other matters,
making recommendations to the Board on the Combined Company’s policy on executive compensation, determining the individual remuneration
and benefits package of each of the executive directors and recommending and monitoring the remuneration of senior management below Board
level.
Nominating
and Corporate Governance Committee
TruGolf’s
nominating committee consists of Humphrey Polanen, AJ Redmer and Riley Russell. Mr. Russell serves as chair of the nominating and corporate
governance committee. The nominating and governance committee is responsible, among other things, for:
| ● |
selecting the director
slate (or recommend the slate to the full board of directors); |
| ● |
overseeing board governance; |
| ● |
developing board meeting
procedures; and |
| ● |
evaluating the effectiveness
of the board. |
Board
and Committee oversight of cybersecurity risks
TruGolf
will propose to mitigate and prevent the various risks, including cybersecurity risks and those other risks described under the section
titled “Risk Factors.” The TruGolf Board will play an active role in monitoring. prevention, timely detection, and
mitigation of cybersecurity risks and the effects of any such incidents on its operations. TruGolf intends to implement policies requiring
each of its board committees to provide regular reports, and for the management to provide reports on material cybersecurity risks and
the degree of TruGolf’s exposure to those risks to the TruGolf Board, including from its chief technology officer. While the TruGolf
Board will oversee the cybersecurity risk management, the management will be responsible for day-to-day risk management processes. The
intent is for the TruGolf management to work with third party service providers to maintain appropriate controls, which the TruGolf leadership
believes would be the most effective approach for addressing the cybersecurity risks.
Code
of Ethics
TruGolf has a code of ethics that applies to all of its executive officers, directors and employees, including its principal executive
officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The code of
ethics is available on TruGolf’s website, https://ir.trugolf.com. In addition, TruGolf posts on its website all disclosures
that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the code.
The reference to the TruGolf website address does not constitute incorporation by reference of the information contained at or available
through TruGolf’s website, and you should not consider it to be a part of this prospectus.
Compensation
Committee Interlocks and Insider Participation
None
of the members of TruGolf’s compensation committee has ever been an executive officer or employee of TruGolf. None of TruGolf’s
executive officers currently serve, or has served during the last completed fiscal year, on the compensation committee or board of directors
of any other entity that has one or more executive officers that serves as a member of the TruGolf Board or compensation committee.
Non-Employee
Director Compensation
TruGolf
Board intends to adopt a non-employee director compensation policy designed to align compensation with TruGolf’s business objectives
and the creation of shareholder value, while enabling TruGolf to attract and retain directors to contribute to TruGolf’s long-term
success.
Cash
Compensation
The
Compensation Committee of TruGolf may develop an executive compensation program that is designed to align compensation with TruGolf’s
business objectives and the creation of stockholder value, while enabling TruGolf to attract, retain, incentivize and reward individuals
who contribute to the long-term success of the company, including through cash compensation.
Equity
Compensation
The
Compensation Committee of TruGolf may develop an executive compensation program that is designed to align compensation with TruGolf’s
business objectives and the creation of stockholder value, while enabling TruGolf to attract, retain, incentivize and reward individuals
who contribute to the long-term success of the company, including through equity compensation.
Limitation
on Liability and Indemnification of Directors and Officers
TruGolf
has purchased directors’ and officers’ liability insurance and has enter into indemnification agreements
with each of its directors and executive officers. The indemnification agreements and TruGolf’s amended and restated certificate
of incorporation and amended and restated bylaws will require it to indemnify the directors and officers to the fullest extent permitted
by Delaware law.
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
Compensation Table
The
following table sets forth information regarding the total compensation awarded to and earned by TruGolf’s named executive officers
for services rendered in all capacities for the years ended December 31, 2022 and 2023.
| Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
Nonequity incentive plan compensation ($) | | |
Nonqualified deferred compensation earnings ($) | | |
All other compensation ($) | | |
Total ($) | |
| Christopher Jones | |
| 2022 | | |
| 160,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 160,000 | |
| Chief Executive Officer | |
| 2023 | | |
| 150,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 153,000 | |
| Brenner Adams | |
| 2022 | | |
| 160,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 160,000 | |
| Chief Growth Officer | |
| 2023 | | |
| 168,000 | | |
| | | |
| 690,000 | | |
| | | |
| | | |
| | | |
| | | |
| 858,000 | |
| Nathan Larson | |
| 2022 | | |
| 160,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 160,000 | |
| Chief Experience Officer | |
| 2023 | | |
| 163,000 | | |
| | | |
| 690,000 | | |
| | | |
| | | |
| | | |
| | | |
| 853,000 | |
| Lindsay Jones | |
| 2022 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | |
Former
Chief Financial
Officer | |
| 2023 | | |
| 24,000 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 24,000 | |
Employment
Agreements
TruGolf
currently maintains an employment agreement with its Chief Executive Officer.
Agreement
with Chief Executive Officer
Employment
Arrangement Documentation Currently in Place with Mr. Christopher Jones
We
hold employment arrangement documentation with Mr. Jones dated effective as of January 1, 2022, pursuant to which we employ Mr. Jones
as our Chief Executive Officer on an at-will basis. Pursuant to his employee arrangement documentation, Mr. Jones is eligible to receive
an annual base salary of $160,000 and performance based annual bonus, along with equity incentive plans.
Mr.
Jones is also eligible for certain compensation based on future changes of control (50% or greater) as well as compensation based upon
termination of his employment or resignation.
Memorandums
of understanding with Brenner Adams
A
memorandum of understanding entered into with Brenner Adams dated June 1, 2022, effective December 13, 2022, pursuant to which we employ
Mr. Adams as chief growth officer, with an initial term of 12 months from the effective date. Pursuant to such memorandum of understanding,
Mr. Adams is eligible to receive a monthly salary of $12,000 and a $1,500 a month as quarterly bonus for achieving quarterly targets.
Pursuant to the memorandum of understanding, Mr. Adams is eligible to receive 1% of fully diluted stock (which was formally granted and
issued by the Board of Directors on October 1, 2023), and rights to participate in future employee stock option programs commensurate
with the title.
Outstanding
Equity Awards at Fiscal Year-End
TruGolf
has no outstanding options to its named executive officers as of December 31, 2023.
2024
Equity Incentive Plan
TruGolf
Board adopted the 2024 Equity Incentive Plan on January 31, 2024 in order to facilitate the grant of equity awards to attract, retain
and incentivize employees (including the named executive officers), independent contractors and directors of the Combined Company and
its affiliates, which is essential to the Combined Company’s long term success.
Director
Compensation
Other
than the names executive officers that received compensation for services rendered in all capacities for the years ended December 31,
2022 and 2023, no other directors on the TruGolf Board were paid any compensation.
BENEFICIAL
OWNERSHIP OF SECURITIES
The
following table sets forth beneficial ownership of the Company’s Common Stock as of August 20, 2024 by:
| |
● |
each person known to be the beneficial owner of more
than 5% of the outstanding Common Stock of the Company; |
| |
|
|
| |
● |
each of the Company’s executive officers and
directors; and |
| |
|
|
| |
● |
all of the Company’s current executive officers
and directors as a group. |
Beneficial
ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security
if he, she or it possesses sole or shared voting or investment power over that security. Under those rules, beneficial ownership includes
securities that the individual or entity has the right to acquire, such as through the exercise of warrants or stock options or the vesting
of restricted stock units, within 60 days of August 20, 2024. Shares subject to warrants or options that are currently exercisable
or exercisable within 60 days of August 20, 2024 or subject to restricted stock units that vest within 60 days of August 20,
2024 are considered outstanding and beneficially owned by the person holding such warrants, options, or restricted stock units for
the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
Except
as noted by footnote, and subject to community property laws where applicable, based on the information provided to the Company, the
persons and entities named in the table below have sole voting and investment power with respect to all shares shown as beneficially
owned by them. Unless otherwise indicated, the business address of each beneficial owner listed in the table below is c/o Trugolf Holdings,
Inc., 60 North 1400 West Centerville, Utah 84014.
The
beneficial ownership of our Class A Common Stock is based on 11,610,084 shares of Class A Common Stock issued and outstanding
as of August 20, 2024, which number excludes the shares of Class A Common Stock issuable upon exercise of the Warrants. Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all of the
shares shown to be beneficially owned by them.
| Name and Address of Beneficial Owner | |
Number of
shares of
Common
Stock | | |
% of
Common
Stock* | | |
% of
Total
Voting
Power* | |
| Directors and executive officers | |
| | | |
| | | |
| | |
| Christopher Jones (2) | |
| 2,792,065 | | |
| 21.1 | % | |
| 43.0 | % |
| Brenner Adams | |
| 141,832 | | |
| 1.1 | % | |
| * | |
| Nathan E. Larson | |
| 206,832 | | |
| 1.6 | % | |
| * | |
| B. Shaun Limbers | |
| 293,443 | | |
| 2.2 | % | |
| * | |
| Steven R. Johnson | |
| 1,353,134 | | |
| 10.2 | % | |
| 20.9 | % |
| Humphrey P. Polanen | |
| 125,000 | | |
| 1.0 | % | |
| * | |
| Riley Russell | |
| 0 | | |
| * | | |
| * | |
| AJ Redmer | |
| 0 | | |
| * | | |
| * | |
| All directors and executive officers as a group (8 individuals) | |
| 4,802,306 | | |
| 36.2 | % | |
| 65.1 | % |
| | |
| | | |
| | | |
| | |
| Other 5% beneficial owners | |
| | | |
| | | |
| | |
| David Ashby (2) | |
| 1,428,205 | | |
| 10.8 | % | |
| 22.0 | % |
| Steven R. Johnson (3) | |
| 1,353,134 | | |
| 10.2 | % | |
| 20.9 | % |
| Christopher Jones (4) | |
| 2,792,065 | | |
| 21.1 | % | |
| 43.0 | % |
| Bright Vision Sponsor LLC (1) | |
| 2,492,566 | | |
| 18.8 | % | |
| 4.6 | % |
| * |
Indicates beneficial ownership
of less than 1%. |
| (1) |
Mr.
Ke Li served as the managing member of the sponsor. Mr. Li disclaims beneficial ownership of these securities. Accounts for
the transfer of a maximum aggregate of 185,179 Deep Medicine Class A Shares pursuant to the Non-Redemption Agreements. |
| (2) |
Includes 439,952 shares of Class B Common Stock, which
are entitled to 25 votes per share and are convertible into shares of Class A Common Stock on a one-for-one basis. |
| (3) |
Includes 416,826 shares of Class B Common Stock, which
are entitled to 25 votes per share and are convertible into shares of Class A Common Stock on a one-for-one basis. |
| (4) |
Includes 860,082 shares of Class B Common Stock, which
are entitled to 25 votes per share and are convertible into shares of Class A Common Stock on a one-for-one basis. |
SELLING
SECURITYHOLDERS
This
prospectus relates to:
| |
● |
the
resale of up to 4,596,435 shares of Class A Common Stock, consisting of: (i) 3,162,500 shares of Class A Common Stock held
by the founders; (ii) 280,000 shares of Class A Common Stock issued to the directors and officers of the Company; (iii) 519,500 shares
of Class A common Stock issued under the Private Units; (iv) 20,000 shares of Class A Common Stock issued to Ellenoff Grossman &
Schole LLP; (v) 212,752 shares of Class A common Stock issued to the Representative; and (v) 51,950 shares of Class A Common Stock
issuable upon the conversion of the rights under the Private Units; and |
| |
|
|
| |
● |
the
issuance and resale of up to 51,385,867 shares of Class A Common Stock, consisting of: (i) up to 40,185,185 Note Shares;
(ii) up to 2,818,182 Series A Warrant Shares; (iii) up to 7,750,000 Series B Warrant Shares; and (iv) up to 632,500
Representative Warrant Shares. |
The
Selling Securityholders may from time to time offer and sell any or all of the shares of Class A Common Stock set forth below pursuant
to this prospectus and any accompanying prospectus supplement. When we refer to the “Selling Securityholders” in this prospectus,
we mean the persons listed in the table below, the holders of shares of Class A Common Stock reserved for issuance upon the exercise
of warrants covered by this prospectus, and the pledgees, donees, transferees, assignees, successors, designees, and others who later
come to hold any Selling Securityholder’s interest in the Common Stock, other than through a public sale.
Given
the current market price of the Company’s Common Stock, certain of the Selling Securityholders who paid less for their shares than
such current market price will receive a higher rate of return on any such sales than the public securityholders who purchased Common
Stock in the SPAC IPO or any Selling Securityholder who paid more for their shares than the current market price.
The table below lists the Selling
Securityholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder) of the shares of Class A Common Stock held by each of the Selling
Securityholders. The second column lists the number of shares of Class A Common Stock beneficially owned by the Selling Securityholders,
based on their respective ownership of shares of Class A Common Stock, notes and warrants, as of August 20, 2024, assuming conversion
of the notes and exercise of the warrants held by each such Selling Securityholders on that date but taking account of any limitations
on conversion and exercise set forth therein.
The third column lists the shares of Class A Common
Stock being offered by this prospectus by the Selling Securityholders and does not take in account any limitations on (i) conversion
of the notes set forth therein or (ii) exercise of the warrants set forth therein.
In accordance with the terms of a registration
rights agreement with the holders of the notes and the warrants, this prospectus generally covers the resale of 200% of the sum of (i)
the maximum number of shares of Class A Common Stock issued or issuable pursuant to the Notes, including payment of interest on the notes
through the fifth anniversary of the date of issuance thereof, and (ii) the maximum number of shares of Class A Common Stock issued or
issuable upon exercise of the Warrants, in each case, determined as if the outstanding Notes and Additional Notes issuable pursuant to
the Purchase Agreement (including interest on the notes through the fifth anniversary of the date of issuance thereof) and Warrants were
converted or exercised (as the case may be) in full (without regard to any limitations on conversion or exercise contained therein solely
for the purpose of such calculation, but including any adjustment for the deemed issuance of additional notes) at an alternate conversion
price or exercise price (as the case may be) calculated as of the trading day immediately preceding the date this registration statement
was initially filed with the SEC. Because the conversion price and alternate conversion price of the Notes and the exercise price of
the Warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered
by this prospectus. The fourth column assumes the sale of all of the shares offered by the Selling Securityholders pursuant to this prospectus.
Under the terms of the notes and the warrants,
a Selling Securityholder may not convert the Notes or exercise the Warrants to the extent (but only to the extent) such selling stockholder
or any of its affiliates would beneficially own a number of shares of our Class A Common Stock which would exceed 4.99% (the “Maximum
Percentage”) of the outstanding shares of the Company. The number of shares in the second column reflects these limitations. The
Selling Securityholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
| |
|
Shares
Beneficially Owned
Prior to Offering(1) |
|
|
Maximum
Number of
Shares to be |
|
|
Shares
Beneficially Owned
After Offering(3) |
|
| Name
of Selling Securityholder |
|
Number |
|
|
% |
|
|
Sold(2) |
|
|
Number |
|
|
% |
|
| SandTrap
Opportunities LLC(4) |
|
|
779,556 |
(5) |
|
|
5.662 |
% |
|
|
31,529,432 |
|
|
|
0 |
|
|
|
* |
|
| Greentree
Financial Group, Inc. (6) |
|
|
946,294 |
|
|
|
6.344 |
% |
|
|
24,977,053 |
|
|
|
216,067 |
|
|
|
* |
|
| Finuvia,
LLC (7) |
|
|
636,936 |
|
|
|
5.080 |
% |
|
|
2,270,642 |
|
|
|
0 |
|
|
|
* |
|
| L&H
Inc.(8) |
|
|
698,808 |
|
|
|
5.332 |
% |
|
|
6,811,925 |
|
|
|
0 |
|
|
|
* |
|
| Li
Holdings Inc.(9) |
|
|
667,872 |
|
|
|
5.206 |
% |
|
|
4,541,283 |
|
|
|
0 |
|
|
|
* |
|
| I-Bankers
(11) |
|
|
1,070,752 |
|
|
|
8.752 |
% |
|
|
969,552 |
|
|
|
101,200 |
|
|
|
* |
|
| Bright
Vision Sponsor LLC(12) |
|
|
2,897,744 |
|
|
|
23.685 |
% |
|
|
2,897,744 |
|
|
|
0 |
|
|
|
* |
|
| Dechomai
Asset Trust(13) |
|
|
150,000 |
|
|
|
1.226 |
% |
|
|
150,000 |
|
|
|
0 |
|
|
|
* |
|
| Join
surplus International Limited(14) |
|
|
251,363 |
|
|
|
2.055 |
% |
|
|
251,363 |
|
|
|
0 |
|
|
|
* |
|
| Polanen
and Nicodimos Family Trust(15) |
|
|
150,000 |
|
|
|
1.226 |
% |
|
|
150,000 |
|
|
|
0 |
|
|
|
* |
|
| R-opus
Management Inc. (7) |
|
|
117,771 |
|
|
|
* |
% |
|
|
117,771 |
|
|
|
0 |
|
|
|
* |
|
| XL
Golden Stone Investment LLC(16) |
|
|
117,771 |
|
|
|
* |
% |
|
|
117,771 |
|
|
|
0 |
|
|
|
* |
|
| Weixuan
Luo(17) |
|
|
45,000 |
|
|
|
* |
|
|
|
45,000 |
|
|
|
0 |
|
|
|
* |
|
| Ronald
M. Razmi, MD(17) |
|
|
80,000 |
|
|
|
* |
|
|
|
80,000 |
|
|
|
0 |
|
|
|
* |
|
| Tina
Spires(17) |
|
|
20,000 |
|
|
|
* |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
* |
|
| HongLiang
Ren(17) |
|
|
20,000 |
|
|
|
* |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
* |
|
| Wanlei
Miao(17) |
|
|
20,000 |
|
|
|
* |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
* |
|
| John
Chiang(17) |
|
|
20,000 |
|
|
|
* |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
* |
|
| Ellenoff
Grossman & Schole LLP(10) |
|
|
- |
|
|
|
- |
|
|
|
20,000 |
|
|
|
0 |
|
|
|
* |
|
| * |
Indicates beneficial ownership
of less than 1%. |
| |
|
| (1) |
Applicable percentage ownership is based on 11,610,084
shares of our Class A Common Stock outstanding as of August 20, 2024, and based on 86,269,888 shares of our Class
A Common Stock outstanding after the offering. |
| |
|
| (2) |
For the purposes of the calculations of our Class A
Common Stock to be sold pursuant to the prospectus we are assuming (i) an event of default under the Notes has not occurred, and
that the Notes are converted in full with interest accrued thereon being paid in shares of our Class A Common Stock at the alternate
conversion price of $1.35 per share without regard to any limitations set forth therein, and (ii) the Warrants are exercised in full
without regard to any limitations set forth therein. |
| |
|
| (3) |
Assumes the sale of all securities being offered pursuant
to this prospectus and no other shares of Class A Common Stock are acquired by the Selling Securityholders. However, the Selling
Securityholders are not obligated to sell all or any portion of the shares of our stock offered pursuant to this prospectus. |
| |
|
| (4) |
SandTrap Opportunities LLC (“SandTrap”) is
a wholly owned special purpose vehicle of ATW Opportunities Master Fund II, L.P. (the “Fund”). ATW Partners Opportunities
Management, LLC serves as the investment manager to the Fund (the “Adviser”). The Fund and the Adviser may be deemed to have
shared voting and dispositive power with respect to the shares of Common Stock held by SandTrap and may be deemed to be the beneficial
owner of these shares. Antonio Ruiz-Gimenez and Kerry Propper serve as the managing members of the Adviser (the “Managing Members”).
The Managing Members, in their capacity as Managing Members of the Adviser, may also be deemed to have investment discretion and voting
power over the shares of Common Stock held by SandTrap. The Fund, the Adviser and the Managing Members each disclaim any beneficial ownership
of such shares of Class A Common Stock. The address of this Selling Securityholder is c/o ATW Partners Opportunities Management LLC,
17 State Street, Suite 2130, New York, New York 10004. |
| |
|
| (5) |
This column lists the number of shares of our Class A Common
Stock beneficially owned by this Selling Securityholder as of August 20, 2024 after giving effect to the Maximum Percentage
(as defined in the paragraph above). Without regard to the Maximum Percentage, as of August 20, 2024, this Selling Securityholder
would beneficially own an aggregate of 31,355,876 shares of our Class A Common Stock, consisting of (i) up to 18,148,148 shares of
Class A common stock underlying the Notes at an aggregate purchase price of $6,300,000, convertible at the alternate conversion
price of $1.35 per share, all of which shares are being registered for resale under this prospectus, (ii) up to 4,457,728 shares
underlying the Series A Warrant held by this Selling Securityholder which were issued for a purchase price of $17,830,912,
currently exercisable at an exercise price of $13.00, all of which are being registered for resale under this prospectus, (iii) up
to 8,750,000 shares underlying the Series B Warrant held by this Selling Securityholder which were issued for a purchase price
of $35,000,000, currently exercisable at an exercise price of $10.00, and (iv) 86,778 shares issued for waiver of note covenants,
all of which are being registered for resale under this prospectus. |
| |
|
| (6) |
Greentree Financial Group Inc. beneficially owns 216,067
shares of our Class A Common Stock which were issued for services rendered prior to the Business Combination and 170,147 shares
of our Class A Common Stock issued for waiver of note covenants. For the purposes of calculating the Maximum Percentage, shares
of Common Stock presently held by Greentree Financial Group Inc. shall be taken into consideration. Robert Christopher Cottone is
the beneficial owner of Greentree Financial Group Inc. Greentree acquired (i) 14,259,259 Notes Shares at an aggregate purchase
price of $5,500,000; and (ii) 10,377,500 Series A Warrants and Series B Warrants, for a purchase price of $14,010,000 and $27,500,000,
respectively. |
| |
|
| (7) |
Weiheng Cai is the manager and president of Finuvia, LLC
and R-Opus Management, Inc., respectively. As such, Mr. Cai may be deemed to have investment discretion and voting power over the
shares of Common Stock held by each entity and is the beneficial owner of each. For the purposes of calculating the Maximum
Percentage, shares of Common Stock held by R-Opus Management Inc. shall be taken into consideration. Finuvia, LLC beneficially owns
117,771 of our Class A Common Stock through its ownership of such shares held R-Opus Management Inc. Finuvia acquired (i)
1,296,296 Notes Shares at an aggregate purchase price of $500,000; and (ii) 943,410 Series A Warrants and Series B Warrants, for a
purchase price of $1,273,640 and $2,500,000, respectively. Finuvia was issued 15,468 shares of our Class A Common Stock for waiver of note covenants. |
| |
|
| (8) |
Linwen Huang is the beneficial owner of L&H, Inc. L&H
acquired (i) 3,888,889 Notes Shares at an aggregate purchase price of $1,500,000; and (ii) 2,830,228 Series A Warrants and Series B
Warrants, for a purchase price of $3,820,912 and $7,500,000, respectively. L&H, Inc. was issued 46,404 shares of our Class A Common Stock for waiver of note covenants. |
| |
|
| (9) |
Ke
Li is the beneficial owner of Li Holdings. Mr. Li is also the managing member of Bright Vision Sponsor LLC. Mr. Li owns a maximum
aggregate of 185,179 shares of our Class A Common Stock through his role with Bright Vision Sponsor LLC. Li Holdings acquired (i)
2,592,593 Notes Shares at an aggregate purchase price of $1,000,000; and (ii) 1,886,818 Series A Warrants and Series B Warrants, for
a purchase price of $2,547,272 and $5,000,000, respectively. Li Holdings was issued 30,936 shares of our Class A Common Stock for waiver of note covenants. |
| |
|
| (10) |
Barry
Grossman is the beneficial owner of Ellenoff Grossman & Schole LLP. The shares were issued to Ellenoff Grossman & Schole
LLP as a compensation for their services at no cost basis. |
| |
|
| (11) |
Shelley Leonard is the beneficial owner of I-Bankers. I- Bankers acquired (i) 113,000 private units, with each units comprised of one shares
of Class A Common Stock and one right to receive one-tenth of one Class A Common Stock, for a purchase price of $10.0 per unit, (ii) 212,752 shares of Class A Common Stock as deferred underwriters’ fees of $2,427,500. and (iii) 632,500 shares
of Class A Common Stock issuable upon the exercise of the Representative Warrants, at an exercise price of $12.00 per Share. |
| |
|
| (12)
|
Ke
Li is the beneficial owner of Bright Vision Sponsor LLC. Bright Vision acquired (i) 257,869 private units, with each units comprised
of one shares of Class A Common Stock and one right to receive one-tenth of one Class A Common Stock, for a purchase price of $10.0
per unit, and (ii) 2,614,089 shares of Class A Common Stock as founder shares, at a cost of $0.02 per share. |
| |
|
| (13) |
Sarah
Hawk is the beneficial owner of Dechomai Asset Trust. Dechomai acquired 150,000 founder shares from Greentree at a cost of $0.02
per share. |
| |
|
| (14) |
Feng Wang
is the beneficial owner of Join surplus International Limited. Join surplus acquired (i) 127,911 private units, with each units comprised
of one shares of Class A Common Stock and one right to receive one-tenth of one Class A Common Stock, for a purchase price of $10.0
per unit, and (ii) 110,661 shares of Class A Common Stock as founder shares, at a cost of $0.02 per share. |
| |
|
| (15) |
Humphrey
P. Polanen is the beneficial owner of Polanen and Nicodimos Family Trust. Bright Vision Sponsor LLC acquired 25,000 shares of Class
A Common Stock as founder shares, at a cost of $0.02 per share. Mr. Polanen was issued 125,000 shares of class A Common Stock as
a consideration for his services to the Company. |
| |
|
| (16) |
Stephen Y Zhang
is the beneficial owner of XL Golden Stone Investment LLC. XL Golden acquired (i) 10,360 private units, with each units comprised
of one shares of Class A Common Stock and one right to receive one-tenth of one Class A Common Stock, for a purchase price of $10.0
per unit, and (ii) 106,375 shares of Class A Common Stock as founder shares, at a cost of $0.02 per share. |
| |
|
| (17) |
The
shares were issued as a consideration for the individuals services to the Company. |
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In
March 2021, we issued an aggregate of 2,875,000 founder shares to our initial stockholders for an aggregate purchase price of $50,000
in cash, or approximately $0.017 per share, resulting in our initial stockholders holding an aggregate of 2,875,000 founder shares (up
to 375,000 shares of which were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option
was exercised). The number of founder shares issued was determined based on the expectation that such founder shares would represent
20% of our outstanding shares upon completion of the IPO (not including the shares of Class A common stock underlying the private placement
units or the representative shares). In October 2021, we effected a 0.1 for 1 stock dividend for each share of Class B common stock outstanding,
resulting in Purchaser Representative holding an aggregate of 3,162,500 founder shares. The founder shares (including the Class A common
stock that is issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the
holder.
On
December 23, 2022, we held the 2022 Special Meeting at which our stockholders approved, among other things, an amendment to our amended
and restated certificate of incorporation to provide for the right of a holder of Class B common stock to convert into Class A common
stock on a one-for-one basis prior to the closing of an initial business combination.
Also
on December 23, 2022, stockholders holding all of the issued and outstanding Class B common stock elected to convert their Class B common
stock into Class A common stock on a one-for-one basis. As a result, 3,162,500 shares of Class B common stock were cancelled, and 3,162,500
shares of Class A common stock were issued to such holders of the converting Class B common stock.
Our
Insiders have purchased an aggregate of 406,500 units at a price of $10.00 per unit, for an aggregate purchase price of $4,065,000 and
I-Bankers purchased an aggregate of 113,000 units at a price of $10.00 per unit, for an aggregate purchase price of $1,130,000. The private
placement units are identical to the units sold in the IPO, so long as they are held by Purchaser Representative or the underwriters
or their permitted transferees, and (i) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders
until 30 days after the completion of our initial business combination, and (ii) will be entitled to registration rights. The private
placement units (including the private placement shares, the private placement rights, and the shares of Class A common stock issuable
upon conversion thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
We
paid Weixuan Luo, our former chief financial officer, monthly fees of $5,000 for her services commencing on August 1, 2020. Upon completion
of our business combination or our liquidation, we ceased paying these monthly fees. We also issued to our officers and directors
an aggregate of 300,000 post business combination shares.
Other
than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect
of any payment of a loan, has been or will be paid by us to Purchaser Representative, officers and directors, or any affiliate of Purchaser
Representative or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial
business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence
on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that were made to Purchaser Representative,
officers, directors or our or their affiliates and determines which expenses and the amount of expenses that are reimbursed. There is
no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
As
of January 31, 2024, the date the business combination was consummated, there were $1,565,000 of loans payable to Purchaser Representative
and its affiliates (the “Sponsor Note”)
as discussed below:
Prior
to the consummation of the IPO, Purchaser Representative agreed to loan us $500,000 to be used for a portion of the expenses of the IPO.
Purchaser Representative Note is non-interest bearing, unsecured and due upon completion of our initial business combination. Under no
circumstances shall any individual, including but not limited to any officer, director, employee or stockholder, be obligated personally
for any obligations or liabilities of Purchaser Representative Note. On February 6, 2024, the Purchaser Representative Note was amended.
Two affiliates of the Purchaser Representative (Greentree and R-Opus (Issuer’s determination on whether disclosure is required))
became the payees under the Purchaser Representative Note in exchange for the termination of notes made by the affiliates to the Purchaser
Representative in the same amount. The Purchaser Representative Note was further amended to be repayable in full upon the earlier of
(a) March 31, 2024, or (b) the First Additional Mandatory Closing Date, as defined in the Purchase Agreement.
On
October 15, 2022, we issued the First Sponsor Affiliate Notes to two affiliates of Purchaser Representative in connection with the First
Extension, from October 29, 2022 to January 29, 2023. The First Sponsor Affiliate Notes bear no interest and are repayable in full upon
the earlier of (a) the date of the consummation of the initial business combination, or (b) the date of our liquidation.
On
October 19, 2022, an aggregate of $1,265,000 from the First Sponsor Affiliate Notes was deposited into the trust account, which amount
was included in the pro rata amount distributed to (i) holders of public shares upon our liquidation or (ii) holders of public
shares who elect to have their shares redeemed in connection with the consummation of the initial business combination. On February 6,
2024, the First Sponsor Affiliate Notes were amended. $500,000 of the notes became due and repayable on the consummation of the
business combination. The remaining balance of $765,000 is repayable in full upon the earlier of (a) September 3, 2024 (as amended),
or (b) within two (2) business days from the Effective Date, as defined in the Transaction Documents.
On
February 9, 2023, we issued the Second Sponsor Affiliate Note to an affiliate of Purchaser Representative, in connection with the Second
Extension, from January 29, 2023 to July 29, 2023, pursuant to which a monthly payment of $50,000 is to be deposited into the trust account
after January 29, 2023. The Second Sponsor Affiliate Note bears no interest and is repayable in full upon the earlier of (a) the date
of the consummation of the initial business combination, or (b) the date of our liquidation. Accordingly, an aggregate of $300,000 had
been deposited into the trust account as of June 30, 2023. On February 6, 2024, the Second Sponsor Affiliate Note was amended. The Second
Sponsor Affiliate Note is repayable in full upon the earlier of (a) September 3, 2024 (as amended), or (b) within two (2) business
days from the Effective Date, as defined in the Transaction Documents.
On
July 11, 2023, DMA and Purchaser Representative entered into certain non-redemption agreements (“Non-Redemption Agreement”)
with certain unaffiliated third parties in exchange for such third parties agreeing not to redeem (or shall use commercially reasonable
efforts to request that the Company’s transfer agent reverse any previously submitted redemption demand) certain DMA Class A Shares
(the “Non-Redeemed Shares”) in connection with the Third Extension Meeting. In exchange for the foregoing commitments
not to redeem such Non-Redeemed Shares, Purchaser Representative agreed to transfer to such third-parties certain DMA Class A Shares
(the “Founder Shares”) held by Purchaser Representative immediately following consummation of an initial business
combination if they continue to hold such Non-Redeemed Shares through the Third Extension Meeting. Such Founder Shares had been issued
to Purchaser Representative upon conversion of the DMA Class B Shares held by Purchaser Representative. In addition, DMA agreed that,
to mitigate the current uncertainty surrounding the implementation of the Inflation Reduction Act of 2022, funds held in the Trust Account,
including any interest thereon, will not be used to pay for any excise tax liabilities with respect to any future redemptions prior to
or in connection with the extension voted upon at the Third Extension Meeting, an initial business combination, or liquidation of DMA.
Until the earlier of (a) the consummation of DMA’s initial business combination; and (b) the liquidation of the Trust Account,
DMA will maintain the investment of funds held in the Trust Account in interest-bearing United States government securities within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having a maturity of 185 days or less, or in money market
funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act
of 1940, as amended, which invest only in direct U.S. government treasury obligations, or maintain such funds in cash in an interest-bearing
demand deposit account at a bank.
DMA
and Purchaser Representative entered into such Non-Redemption Agreements with six unaffiliated third parties in total, with respect to
a maximum aggregate of 514,773 DMA Class A Shares, and Purchaser Representative has agreed to transfer a maximum aggregate of 185,179
DMA Class A Shares pursuant to the Non-Redemption Agreements upon the consummation of DMA’s business combination.
Under
no circumstances shall any individual, including but not limited to any officer, director, employee or stockholder, be obligated personally
for any obligations or liabilities of the loans payable to Purchaser Representative and its affiliates.
In
addition, in order to finance transaction costs in connection with an intended initial business combination, Purchaser Representative
or an affiliate of Purchaser Representative or certain of our officers and directors may, but are not obligated to, loan us Working Capital
Loans as may be required. Upon completion of the business combination, we would repay such Working Capital Loans. Up to $1,500,000 of such Working
Capital Loans may be convertible into private placement-equivalent units at a price of $10.00 per unit (which, for example, would result
in the holders being issued 165,000 shares of Class A common stock if $1,500,000 of notes were so converted since the 150,000 rights
included in such units would result in the issuance of 15,000 shares upon the closing of our business combination), at the option of
the lender. Such units would be identical to the private placement units. The terms of such Working Capital Loans by Purchaser
Representative or its affiliates, or our officers and directors, if any, have not been determined and no written agreements exist with
respect to such loans. We do not expect to seek loans from parties other than Purchaser Representative or an affiliate of Purchaser Representative
as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access
to funds in our trust account. At the time of the closing of the business combination, the Company agreed to repay the working capital
loans with the proceeds from the second tranche fundings from the PIPE loans.
After
the business combination, members of our management team who remain with us may be paid consulting, management or other fees from
the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer
or proxy solicitation materials, as applicable, furnished to our stockholders, such as the TruGolf prospectus. It is unlikely the amount
of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting
held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business
to determine executive and director compensation.
Our
initial stockholders, officers and directors and I-Bankers have entered into a letter agreement with us, pursuant to which they have
waived their rights to liquidating distributions from the trust account with respect to any founder shares, private placement shares
or representative shares held by them if we fail to complete our initial business combination within the Combination Period. However,
if our initial stockholders, officers or directors acquire public shares in or after the IPO, they will be entitled to liquidating distributions
from the trust account with respect to such public shares if we fail to complete our initial business combination within the Combination
Period
We
have entered into a registration rights agreement with respect to the private placement units, the private placement shares, the private
placement rights, the representative shares, the representative warrants, the securities issuable upon conversion of Working Capital
Loans (if any), the post business combination shares, and the shares of Class A common stock issuable upon exercise or conversion or
exercise of the foregoing and upon conversion of the founder shares. These shares are included herein.
Other
than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect
of any payment of a loan, will be paid by us to Purchaser Representative, officers and directors, or any affiliate of Purchaser Representative
or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination
(regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred
in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable
business combinations. Our audit committee will review on a quarterly basis all payments that were made to Purchaser Representative,
officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed.
There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our
behalf.
Prior
to the closing of the IPO, Purchaser Representative agreed to loan us up to $500,000 to be used for a portion of the expenses of the
IPO. These loans were non-interest bearing, unsecured and were repaid upon closing of our business combination. The
value of Purchaser Representative’s interest in this transaction corresponds to the principal amount outstanding under any such
loan. The loans were paid off from with proceeds of the first tranche funding from the PIPE loans.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires TruGolf’s directors, officers and persons owning more than 10% of our Class A Common Stock to
file reports of ownership and changes of ownership with the SEC. Based on our review of the copies of such reports furnished to us, or
representations from certain reporting persons that no other reports were required, we believe that all applicable filing requirements
were complied with to date.
DESCRIPTION
OF OUR SECURITIES
The
following is a description of our securities of as set forth in certain provisions of our Second Amended and Restated Certificate of
Incorporation (the “Charter”) and our Second Amended and Restated Bylaws (the “Bylaws”), and applicable forms
of warrant, each previously filed with the SEC and incorporated by reference as an exhibit to this registration statement to which this
prospectus forms a part. This summary does not purport to be complete and is qualified in its entirety by the full text of the Charter,
Bylaws, applicable forms of warrant, and the applicable provisions of the Delaware General Corporation Law (the “DGCL”).
We encourage you to read our Charter, Bylaws, applicable forms of warrant, and the applicable portions of the DGCL carefully.
Authorized
Capitalization
We
are authorized to issue 110,000,000 shares, of which 90,000,000 shares are shares of TruGolf Class A common stock, par value $0.0001
per share, 10,000,000 shares are shares of TruGolf Class B common stock, par value $0.0001 per share, and 10,000,000 shares are shares
of preferred stock, par value $0.0001 per share.
TruGolf
Common Stock Following the Business Combination
Class
A Common Stock
Voting
Power
Holders
of TruGolf Class A common stock are entitled to cast one vote per share of TruGolf Class A common stock. Generally, holders of all classes
of TruGolf common stock will vote together as a single class, and an action will be approved by TruGolf stockholders if the number of
votes cast in favor of the action exceeds the number of votes cast in opposition to the action, while directors are elected by a plurality
of the votes cast. Holders of TruGolf Class A common stock will not be entitled to cumulate their votes in the election of directors.
Dividends
Subject
to applicable law, the rights, if any, of the holders of any outstanding series of preferred stock or any class or series of stock having
a preference over TruGolf Class A commons stock, the holders of shares of TruGolf Class A commons stock are entitled to receive such
dividends and other distributions (payable in cash, property or capital stock of TruGolf) when, as and if declared thereon by the TruGolf
Board from time to time out of any assets or funds of TruGolf legally available therefor and will share equally on a per share basis
in such dividends and distributions.
Liquidation,
Dissolution and Winding Up
Subject
to applicable law, the rights, if any, of the holders of any outstanding series of the preferred stock or any class or series of stock
having a preference over TruGolf Class A commons stock, in the event of any voluntary or involuntary liquidation, dissolution or winding
up of TruGolf, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of
TruGolf Common Stock shall be entitled to receive all the remaining assets of TruGolf available for distribution to its stockholders,
ratably in proportion to the number of shares of TruGolf A common stock (on an as converted basis with respect to the TruGolf B common
stock) held by them.
Preemptive
or Other Rights
No
shares of TruGolf Class A common stock are subject to redemption or have preemptive rights to purchase additional shares of TruGolf Class
A common stock. Holders of shares of TruGolf Class A common stock will not have subscription, redemption or conversion rights. All the
outstanding shares of TruGolf Class A common stock will be validly issued, fully paid and non-assessable.
Class
B Common Stock
Issuance
of TruGolf Class B Common Stock
Shares
of TruGolf Class B common stock may be issued only to, and registered in the name of, Christopher Jones, Steven R. Johnson, and David
Ashby (the “TruGolf Founders”) and any entities wholly owned by a TruGolf Founder (including all subsequent successors,
assigns and permitted transferees), which we collectively refer to as “Permitted Class B Owners”.
Voting
Rights
Holders
of TruGolf Class B common stock are entitled to cast 25 votes per share of TruGolf Class B common stock. Generally, holders of all classes
of TruGolf common stock will vote together as a single class, and an action will be approved by TruGolf stockholders if the number of
votes cast in favor of the action exceeds the number of votes cast in opposition to the action, while directors are elected by a plurality
of the votes cast. Holders of TruGolf Class B common stock will not be entitled to cumulate their votes in the election of directors.
Dividend
Rights
Subject
to applicable law, the rights, if any, of the holders of any outstanding series of preferred stock or any class or series of stock having
a preference over TruGolf Class B commons stock, the holders of shares of TruGolf Class B commons stock are entitled to receive such
dividends and other distributions (payable in cash, property or capital stock of TruGolf) when, as and if declared thereon by the TruGolf
Board from time to time out of any assets or funds of TruGolf legally available therefor and will share equally on a per share basis
in such dividends and distributions.
Liquidation
Rights
Subject
to applicable law, the rights, if any, of the holders of any outstanding series of the preferred stock or any class or series of stock
having a preference over TruGolf Class B common stock, in the event of any voluntary or involuntary liquidation, dissolution or winding
up of TruGolf, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of
TruGolf Class B common stock shall be entitled to receive all the remaining assets of TruGolf available for distribution to its stockholders,
ratably in proportion to the number of shares of TruGolf B common stock on an as converted basis held by them.
Voluntary
Conversion of Class B Common Stock.
Each
share of TruGolf Class B common stock shall be convertible into one fully paid and nonassessable share of TruGolf Class A common stock
at the option of the holder thereof at any time upon written notice to TruGolf. In order to effectuate a conversion of shares of TruGolf
Class B common stock, a holder shall (a) submit a written election to TruGolf that such holder elects to convert shares of TruGolf Class
B common stock, the number of such shares elected to be converted and (b) (if such shares are certificated), along with such written
election, surrender to TruGolf the certificate or certificates representing the shares being converted, duly assigned or endorsed for
transfer to TruGolf (or accompanied by duly executed stock powers relating thereto) or, in the event the certificate or certificates
are lost, stolen or missing, accompanied by an affidavit of loss executed by the holder. The conversion of such shares hereunder shall
be deemed effective as of the date of surrender of such TruGolf Class B common stock certificate or certificates, delivery of such affidavit
of loss or the written election to convert for uncertificated shares. Upon the receipt by TruGolf of a written election and, if applicable,
the surrender of such certificate(s) and accompanying materials, TruGolf shall as promptly as practicable (but in any event within 10
days thereafter) either (a) deliver to the relevant holder (i) a certificate in such holder’s name (or the name of such holder’s
designee as stated in the written election) for the number of shares of TruGolf Class A common stock to which such holder shall be entitled
upon conversion of the applicable shares as calculated pursuant to this Section 4.2 and, if applicable (ii) a certificate in such holder’s
(or the name of such holder’s designee as stated in the written election) for the number of shares of TruGolf Class B common stock
(including any fractional share) represented by the certificate or certificates delivered to TruGolf for conversion but otherwise not
elected to be converted pursuant to the written election or (b) note the conversion of the shares on the stock ledger of TruGolf. All
shares of capital stock issued hereunder by TruGolf shall be duly and validly issued, fully paid and nonassessable, free and clear of
all taxes, liens, charges and encumbrances with respect to the issuance thereof. Each converted share of Class B Common Stock will be
retired by the Corporation and shall not be available for reissuance.
Automatic
Conversion of Class B Common Stock
Each
share of TruGolf Class B common stock will automatically convert into one (1) share of TruGolf Class A common stock any sale, pledge
or other transfer, whether or not for value, by the initial registered holder thereof, upon any transfer, other than in each case any
transfer to a Permitted Class B Owner. Notwithstanding anything to the contrary set forth herein, any holder of TruGolf Class B common
stock may pledge his, her or its shares of TruGolf Class B common stock to a pledgee pursuant to a bona fide pledge of the shares as
collateral security for indebtedness due to the pledgee so long as the shares are not transferred to or registered in the name of the
pledgee. In the event of any pledge meeting these requirements, the pledged shares will not be converted automatically into shares of
TruGolf Class A common stock. If the pledged shares of TruGolf Class B common stock become subject to any foreclosure, realization or
other similar action by the pledgee, they will be converted automatically into shares of TruGolf Class A common stock upon the occurrence
of that action.
Other
Matters
No
shares of TruGolf Class B common stock are subject to redemption or have preemptive rights to purchase additional shares of TruGolf Class
B common stock. All outstanding shares of TruGolf Class B common stock are validly issued, fully paid and non-assessable.
Preferred
Stock
TruGolf
Board has the authority, without action by the stockholders, to designate and issue shares of preferred stock in one or more classes
or series, and the number of shares constituting any such class or series, and to fix the voting powers, designations, preferences, limitations,
restrictions and relative rights of each class or series of preferred stock, including, without limitation, dividend rights, dividend
rates, conversion rights, exchange rights, voting rights, rights and terms of redemption, dissolution preferences, and treatment in the
case of a merger, business combination transaction, or sale of TruGolf’ assets, which rights may be greater than the rights of
the holders of the TruGolf common stock.
It
is expected that, immediately after the Business Combination, including the mergers, no shares of TruGolf preferred stock are outstanding.
The
purpose of authorizing the TruGolf Board to issue TruGolf preferred stock and determine the rights and preferences of any classes or
series of preferred stock is to eliminate delays associated with a TruGolf stockholder vote on specific issuances. The simplified issuance
of TruGolf preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate
purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking
to acquire, a majority of the outstanding voting stock of TruGolf. Additionally, the issuance of TruGolf preferred stock may adversely
affect the holders of TruGolf Class A common stock, including by restricting dividends on the TruGolf Class A common stock, diluting
the voting power of the TruGolf Class A common stock or subordinating the dividend or liquidation rights of the TruGolf Class A common
stock. As a result of these or other factors, the issuance of TruGolf preferred stock could have an adverse impact on the market price
of TruGolf Class A common stock.
Rights
Each
holder of a right will receive one-tenth (1/10) of one share of Class A common stock upon consummation of our initial business combination,
even if the holder of such right redeemed all shares of common stock held by it in connection with the initial business combination.
No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation
of an initial business combination, as the consideration related thereto has been included in the unit purchase price paid for by investors
in this offering.
If
we enter into a definitive agreement for a business combination in which we will not be the surviving entity, the definitive agreement
will provide for the holders of rights to receive the same per share consideration the holders of the common stock will receive in the
transaction on an as-converted into common stock basis, and each holder of a public right will automatically receive the 1/10 share of
common stock underlying such public right (without paying any additional consideration); and each holder of a private placement right
or working capital right will be required to affirmatively convert its rights in order to receive the 1/10 share underlying each right
(without paying any additional consideration) upon consummation of the business combination. More specifically, the holder of a private
placement right or working capital right will be required to indicate its election to convert the rights into underlying shares as well
as to return the original rights certificates to us.
If
we are unable to complete an initial business combination within the required time period and we liquidate the funds held in the trust
account, holders of rights will not receive any such funds with respect to their rights, nor will they receive any distribution from
our assets held outside of the trust account with respect to such rights, and the rights will expire worthless.
Upon
the consummation of our initial business combination, we issued to each registered holder of the public rights the number of full shares
of Class A common stock to which he, she or it was entitled, registered in such name or names as may be directed by him, her or it and
issue to such registered holder(s) a certificate or book-entry position for the such shares.
With
respect to the private placement rights or working capital rights, as soon as practicable upon the consummation of our initial business
combination, we directed registered holders of those rights to return their rights to our rights agent.
Upon
receipt of the private placement rights or working capital rights, the rights agent will issue to the registered holder of such rights
the number of full shares of common stock to which it is entitled. We will notify registered holders of the rights to deliver their rights
to the rights agent promptly upon consummation of such business combination and have been informed by the rights agent that the process
of exchanging their rights for shares of common stock should take no more than a matter of days. The foregoing exchange of private placement
rights or working capital rights is solely ministerial in nature and is not intended to provide us with any means of avoiding our obligation
to issue the shares underlying the private placement rights or working capital rights upon consummation of our initial business combination.
Other than confirming that the private placement rights or working capital rights delivered by a registered holder are valid, we will
have no ability to avoid delivery of the shares underlying the private placement rights or working capital rights. Nevertheless, there
are no contractual penalties for failure to deliver securities to the holders of the private placement rights or working capital rights
upon consummation of an initial business combination.
Additionally,
in no event will we be required to net cash settle the rights. Accordingly, you might not receive the shares of Class A common stock
underlying the rights.
The
shares issuable upon conversion of the rights are freely tradable (except to the extent held by affiliates of ours). We will not issue
fractional shares upon conversion of the rights. If, upon conversion of the rights, a holder would be entitled to receive a fractional
interest in a share, we will, upon conversion, comply with Section 155 of the Delaware General Corporation Law (which provides that Delaware
companies shall either (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such fractions are determined or (3) issue scrip or rights in registered
form (either represented by a certificate or uncertificated) or in bearer form (represented by a certificate) which shall entitle the
holder to receive a full share upon the surrender of such scrip or rights aggregating a full share).
Representative’s
Warrants
The
Representative’s Warrants are exercisable at $12.00 per share. The warrant may be exercised for cash or on a cashless basis, at
the holder’s option, at any time during the period commencing on the later of the first anniversary of the effective date of DMA’s
IPO Prospectus and the closing, and terminate on the fifth anniversary of the commencement date of sales in DMA’s IPO. The Representative’s
Warrants grant to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the commencement
date of sales in DMA’s IPO with respect to the registration under the Securities Act of the shares of Class A common stock issuable
upon exercise of the Representative’s Warrants. TruGolf will bear all fees and expenses attendant to registering the securities,
other than underwriting commissions, which will be paid for by the holders themselves. The exercise price and number of shares issuable
upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or our recapitalization,
reorganization, merger or consolidation. However, the Representative’s Warrants will not be adjusted for issuances of common stock
at a price below its exercise price. There will be no obligation to net cash settle the exercise of the Representative’s Warrants.
The holder of the Representative’s Warrants will not be entitled to exercise the warrants for cash unless a registration statement
covering the securities underlying the warrants is effective or an exemption from registration is available.
Private
Placement of Notes and Warrants
On
November 2, 2023 and December 7, 2023, Deep Medicine Acquisition Corp. executed loan agreements with certain accredited investors (together,
the “Prior Loan Agreements”) pursuant to which such investors agreed to loan Deep Medicine up to an aggregate $11,000,000
in exchange for the issuance of convertible notes and warrants. On February 2, 2024, the Company 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 Company (i) senior convertible notes in the aggregate principal
amount of up to $15,500,000 (the “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
Company’s Class A common stock (the “Series B Warrants,” and collectively with the Series A Warrants, the “PIPE
Warrants”) (the “PIPE Financing”).
On
August 13, 2024 the Company and the Selling Shareholders entered into to a waiver of the certain terms and conditions of the Purchase
Agreement and the Note, pursuant to which 349,733 shares of Class A Common Stock issued to the certain Selling Securityholders.
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 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”), the Company will also issue the PIPE Investors the Series A Warrants and the Series
B Warrants.
Subject
to satisfying the conditions discussed below, the Company 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, the Company may require that the PIPE Investors purchase an additional aggregate principal amount
of $4,650,000 of 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, the Company
may require that the PIPE Investors purchase an additional aggregate principal amount of $6,200,000 of 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,
the Company 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 Notes (each such additional closing, an “Additional Optional Closing”);
provided that, the principal amount of the additional 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.
Notes
General.
The Notes will mature on the date that is five years from each respective issuance date (the “Maturity Date”),
unless earlier converted (only upon the satisfaction of certain conditions). The Maturity Date may be extended at the sole option of
the holders, under certain circumstances specified therein. The Notes will have an original issue discount of 10%.
Ranking.
The Notes will be our senior unsecured obligations and not the financial obligations of our subsidiaries. Until such date no Notes remain
outstanding, all payments due under the Notes will be senior to all of our subordinated indebtedness and subordinated indebtedness of
any of our subsidiaries and equal in right of payment with all of our other indebtedness and other indebtedness of any of our subsidiaries.
Interest.
The Notes bear interest at the rate of 10.0% per annum that (a) shall commence accruing on the date of issuance, (b) shall be computed
on the basis of a 360-day year and twelve 30-day months, and (c) shall be payable in shares of our Class A common stock so long as certain
conditions are met, provided that the Company may at its option pay such interest in cash or a combination of cash and shares of our
Class A common stock; provided further that if such interest is being paid in shares of our Class A common stock it shall bear interest
at the rate of 15.0% per annum. If a holder elects to convert or redeem all or any portion of a Note prior to the Maturity Date, all
accrued and unpaid interest, any make-whole amount, and any late charges on the amount being converted or redeemed will also be payable.
The
interest rate of the Notes will automatically increase to 15% per annum (the “Default Rate”) upon the occurrence and continuance
of an event of default (See “— Events of Default” below).
Conversion
Rights.
Conversion
at Option of Holder. Each holder of Notes may convert all, or any part, of the outstanding Notes, at any time at such holder’s
option, into shares of our Class A common stock at an initial “Conversion Price” of $10.00 per share, which is subject to
proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions. Upon the
voluntary conversion by the holders of the Notes, in addition to the issuance of the Class A common stock issuable upon conversion of
the principal amount of Notes, the Company shall issue to the holders in Class A common stock the sum of (A) all accrued interest on
the Notes to date plus (B) all interest that would otherwise accrued on such principal amount of the Notes if such converted principal
would be held to the Maturity Date at the Conversion Price.
With
limited exceptions, if the Company at any time while a PIPE Convertible Note is outstanding, issues any Class A common stock or securities
entitling any person or entity to acquire shares of Class A common stock (upon conversion, exercise or otherwise), at an effective price
per share less than the Conversion Price then the Conversion Price shall be reduced to the same price as the new investment.
Limitations
on Conversion. A holder shall not have the right to convert any portion of a Note to the extent that, after giving effect to such
conversion, the holder (together with certain related parties) would beneficially own in excess of 4.99%, or the “Maximum Percentage”,
of shares of our common stock outstanding immediately after giving effect to such conversion. The Maximum Percentage may be raised or
lowered to any other percentage not in excess of 9.99%, at the option of the holder, except that any increase will only be effective
upon 61 days’ prior notice to us.
Voluntary
Adjustment Right. Subject to the rules and regulations of the Nasdaq, we have the right, at any time, with the written consent of
the Required Holders, to lower the fixed conversion price to any amount and for any period of time deemed appropriate by our board of
directors.
Alternate
Conversion Upon Event of Default. Following the occurrence and during the continuance of a Event of Default (as defined below), each
holder may alternatively elect to convert all or any portion of such holder’s Notes at the “Alternate Conversion Price”
equal to the lesser of (i) the Conversion Price, and (ii) 90% of the lowest VWAP of the Class A common stock during the five (5) consecutive
trading days immediately prior to such conversion.
Other
Adjustments. The initial conversion price (the “Conversion Price”) of the Notes is $10.00 per share; provided that the
Conversion Price will be automatically reduced to the applicable Adjustment Price (as defined below) if on (i) the 45th calendar day
after the initial issuance date, and/or (ii) the date the Registration Statement (as described below) is declared effective by the SEC
(each, an “Adjustment Measuring Date”), the greater of (A) $2.00 with respect to $5.0 million in principal amount of Notes
and $2.50 with respect to the remainder of the Notes (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations
and similar events), and (B) the lowest volume weighted average price (“VWAP”) on any trading day during the five trading
day period ended, and including, the trading day immediately prior to such applicable Adjustment Measuring Date (each, an “Adjustment
Price”), is less than the Conversion Price then in effect.
Redemption
Rights.
Holder
Event of Default Redemption. Upon an Event of Default, each holder may elect to redeem all or any portion such holder’s Notes
in cash at a redemption premium of 25% to the greater of (i) the amount then outstanding under such notes, and (ii) the equity value
of our Class A common stock underlying the Notes. The equity value of our Class A common stock underlying the Notes is calculated using
the greatest closing sale price of our Class A common stock on any trading day immediately preceding such event of default and the date
we make the entire payment required.
Holder
Bankruptcy Event of Default Mandatory Redemption. Upon any bankruptcy Event of Default, we shall immediately redeem in cash all amounts
due under the Notes at a 25% premium unless the holder waives such right to receive such payment.
Holder
Change of Control Redemption. Upon a change of control of the Company, each holder may require us to redeem in cash all, or any portion,
of the Notes at a 5% redemption premium to the greater of the amount then outstanding under the Notes to be redeemed, and the equity
value of our Class A common stock underlying the Notes. The equity value of our Class A common stock underlying the Notes is calculated
using the greatest closing sale price of our Class A common stock on any trading day immediately preceding the earlier of (i) the public
announcement of such change of control and (ii) the consummation of such change of control, and ending on the date we make the entire
payment required.
Company
Optional Redemption. At any time the Company shall have the right to redeem in cash all, but not less than all, of the Notes at price
equal to the greater of (i) the amount outstanding under such PIPE Convertible Note, and (ii) the equity value of our Class A common
stock underlying the Notes. The equity value of our Class A common stock underlying the Notes is calculated using the greatest closing
sale price of our Class A common stock on any trading day immediately preceding the date that we deliver notice of such redemption and
the date we make the entire payment required.
Events
of Default. The Notes contain standard and customary events of defaults (each, an “Event of Default”), including but
not limited: (i) the suspension from trading or the failure to list our Class A common stock within certain time periods; (ii) failure
to pay to the holder any amount of principal, Make-Whole Amount, interest, late charges or other amounts when due; (iii) the failure
to timely file or make effective a registration statement on Form S-3 pursuant to the Registration Rights Agreement, (iv) our failure
to cure a conversion failure or failure to deliver shares of our Class A common stock under the PIPE Warrants, or notice of our intention
not to comply with a request for conversion of any PIPE Convertible Note or a request for exercise of any PIPE Warrants, and (iv) bankruptcy
or insolvency of the Company.
Purchase
Rights. If at any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants,
securities or other property pro rata to all or substantially all of the record holders of any class of our Class A common stock (the
“Purchase Rights”), then each holder of Notes will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Class A common stock
acquirable upon complete conversion of all the Notes held by such holder immediately prior to the date as of which the record holders
of shares of Class A common stock are to be determined for the grant, issue or sale of such Purchase Rights; subject to certain limitations
on beneficial ownership.
Fundamental
Transaction. The Notes prohibit us from entering specified fundamental transactions (including, without limitation, mergers, business
combinations and similar transactions) unless we (or our successor) assumes in writing all of our obligations under the Notes and the
other transaction documents in the PIPE Financing.
Warrants
As
additional consideration for the purchase of the Notes, the Company will issue to the PIPE Investors, the Series A Warrants and the Series
B Warrants.
Series
A Warrants.
Exercise
Period. The Series A Warrants shall expire five years after issuance and shall initially be exercisable for an aggregate of 1,409,091
shares of Class A common stock, which number of shares shall be increased each time the holder exercises any Series B Warrants in an
amount equal to 91% of the shares of Class A common stock issued pursuant to such Series B Warrant exercise.
Exercise
Price. The initial exercise price of the Series A Warrants shall be $13.00 per share; provided that if on (A) the 45th
calendar day after issuance, and/or (B) the date the Registration Statement (as described below) is declared effective by the SEC (each,
a “Warrant Adjustment Measuring Date”), the exercise price then in effect is greater than the greater of (i) $4.00 (as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations and similar events), and (ii) the lowest VWAP on any trading
day during the five trading day period ended, and including, the trading day immediately prior to such applicable Warrant Adjustment
Measuring Date, the exercise price shall automatically lower to such price.
Cashless
Exercise. If at the time of exercise of the Series A Warrants, there is no effective registration statement registering the shares
of our Class A common stock underlying such warrants, such warrants may be exercised on a cashless basis pursuant to their terms.
Series
B Warrants
Exercise
Period. The Series B Warrants shall expire 30 months after issuance and shall initially be exercisable for an aggregate of 1,550,000
shares of Class A common stock.
Exercise
Price. The initial exercise price of the Series B Warrants shall be $10.00 per share.
Adjustments.
If at any time the sum of (i) the product of (x) the shares underlying the Series B Warrants then remaining and (y) the greater of (A)
$4.00 (as adjusted for stock split, stock dividends, stock combinations, recapitalizations and similar events) and (B) the exercise price
then in effect and (ii) the sum of the amounts in aggregate exercise price received from prior exercises is less than $15.5 million (the
amount of such difference, if any, each a “Deficiency Amount”), the shares underlying the Series B Warrants shall be increased
by the quotient of (I) such applicable Deficiency Amount, divided by (II) the exercise price then in effect; provided that the number
of shares underlying the Series B Warrants shall not be increased an amount greater than 250% of the original number of shares underlying
the Series B Warrants.
Participation
Rights. If we issue options, convertible securities, warrants, shares, or similar securities to holders of our shares of our Class
A Common Stock, each Series B Warrant holder has the right to acquire the same as if the holder had exercised its warrant.
Dilutive
Issuances. With limited exceptions, if the Company at any time while the PIPE Warrants are outstanding, issues any Class A common
stock or securities entitling any person or entity to acquire shares of Class A common stock (upon conversion, exercise or otherwise),
at an effective price per share less than the exercise price of the PIPE Warrants (a “Dilutive Issuance”), then the exercise
price of the PIPE Warrants shall be reduced to the same price as the new investment. The adjustment to the Notes described above on the
Adjustment Measuring Date shall be deemed a Dilutive Issuance to the extent the date the Registration Statement (as described below)
is declared effective by the SEC after the 45th day after the issuance of the PIPE Warrants.
Fundamental
Transactions. The PIPE Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes
all of our obligations under the PIPE Warrants under a written agreement before the transaction is completed. Upon specified corporate
events, a PIPE Warrant holder will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any
other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had
the PIPE Warrant been exercised immediately prior to the applicable corporate event.
Certain
Anti-Takeover Provisions of Delaware Law
So
long as the outstanding shares of TruGolf Class B common stock represent a majority of the combined voting power of TruGolf Common Stock,
the TruGolf Founders will effectively control all matters submitted to TruGolf stockholders for a vote, as well as the overall management
and direction of TruGolf, which will have the effect of delaying, deferring or discouraging another person from acquiring control of
TruGolf .
After
such time as the shares of TruGolf Class B common stock no longer represent a majority of the combined voting power of TruGolf Common
Stock, the provisions of Delaware law, charter and bylaws may have the effect of delaying, deferring or discouraging another person from
acquiring control of TruGolf.
Section
203 of the Delaware General Corporation Law
TruGolf
will be subject to Section 203 of the Delaware General Corporation Law, which prohibits a person deemed an “interested stockholder”
from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date such
person becomes an interested stockholder unless the business combination is, or the transaction in which the person became an interested
stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder”
is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder
status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision
may have an anti-takeover effect with respect to transactions not approved in advance by the TruGolf Board, such as discouraging takeover
attempts that might result in a premium over the price of TruGolf Common Stock.
Dual
Class Stock
TruGolf
charter provides for a dual class common stock structure, which provides the TruGolf founders, with the ability to control the outcome
of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of TruGolf Common stock,
including the election of directors and significant corporate transactions, such as a merger or other sale of TruGolf or its assets.
Special
Meetings of Stockholders
The
charter and the bylaws provide that a special meeting of stockholders may be called only by the Chairman of the TruGolf Board, the Chief
Executive Officer of the TruGolf, or a majority of the TruGolf Board then in office.
Advance
Notice Requirements for Stockholder Proposals and Director Nominations
The
charter and the bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for
election as directors, other than nominations made by or at the direction of the TruGolf Board or a committee of the TruGolf Board.
Transfer
Agent
The
transfer agent and registrar for the Common Stock is Equiniti Trust Company, LLC.
SECURITIES
ACT RESTRICTIONS ON RESALE OF OUR SECURITIES
Pursuant
to Rule 144 under the Securities Act (“Rule 144”), a person who has beneficially owned restricted our Class A Common Stock
or our Warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have
been our affiliate at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act
periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d)
of the Exchange Act during the 12 months (or such shorter period as the Company was required to file reports) preceding the sale.
Persons
who have beneficially owned restricted Common Stock shares or our Warrants for at least six months but who are our affiliates at the
time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person
would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
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1%
of the total number of our Class A Common Stock then outstanding; or |
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the average weekly reported
trading volume of our Class A Common Stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect
to the sale. |
Sales
by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current
public information about us.
Restrictions
on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule
144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell
companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to
this prohibition if the following conditions are met:
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the issuer of the securities
that was formerly a shell company has ceased to be a shell company; |
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the issuer of the securities
is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
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the issuer of the securities
has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter
period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
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at least one year has elapsed
from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not
a shell company. |
As
a result, Purchaser Representative will be able to sell their founder shares and private placement warrants, as applicable, pursuant
to Rule 144 without registration one year after the Business Combination.
Following
the recent completion of the Business Combination, the Company is no longer a shell company, and, once the conditions set forth in the
exceptions listed above are satisfied, Rule 144 will become available for the resale of the above noted restricted securities.
Lock-up
Agreements
Pursuant
to certain lock-up restrictions agreed to into in connection with the Merger Agreement, subject to certain exceptions, certain of the
Company’s key stockholders are contractually restricted from selling or transferring any of their shares of our Class A Common
Stock. Such restrictions commencing from the closing (A) with respect to fifty percent (50%) of the restricted securities, ending on
the earliest of (x) the six (6) month anniversary of the closing of the business combination, (y) the date on which the closing sale
price of the DMA’s common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations) for any twenty (20) trading days within any thirty (30) trading day period commencing after the closing of the
business combination, and (z) the date after the closing of the business combination on which the DMA consummates a liquidation, merger,
share exchange or other similar transaction with an unaffiliated third party that results in all of the DMA’s stockholders having
the right to exchange their shares of DMA common stock for cash, securities or other property (a “Subsequent Transaction”)
and (B) with respect to the remaining fifty percent (50%) of the restricted securities, ending on the earlier of (x) the six (6) month
anniversary of the closing of the business combination, and (y) a Subsequent Transaction: (i) lend, offer, pledge, hypothecate, encumber,
donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any restricted securities, (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the restricted
securities, or (iii) publicly disclose the intention to do any of the foregoing.