July 26, 2026  ·  Complaint filed July 24, 2026  ·  utd, No. 2:26-cv-00695

Newman News, By David Brunk

Read the filing

LaChance v. TruGolf Asks Whether Floating Preferred Stock Hid $6M in Dilution

Series A Convertible Preferred Stock Allegedly Omitted Key Terms in Registration Statements

The class action complaint filed July 24, 2026 alleges that TruGolf Holdings Inc. and its officers and directors concealed the full dilutive impact of its Series A Convertible Preferred Stock in registration statements and periodic reports, enabling preferred investors to convert and resell 420.8 million Class A shares at successive discounts while public shareholders absorbed a 98% decline in the company’s stock price. The complaint alleges that the continuous conversion and resale of these shares drove the TRUG Class A share price down by over 98% and forced two reverse stock splits. The company reported a fiscal 2025 net loss of $15.2 million, a significant deterioration from prior periods (Compl. ¶79).

The complaint, brought by shareholder Parker LaChance individually, on behalf of a class, and derivatively on behalf of TruGolf, centers on board approval of agreements exchanging PIPE notes and warrants for Series A Convertible Preferred Stock with a floating, ratcheting conversion price. The stock was registered for resale in June 2025, and the complaint alleges that the registration statements and subsequent filings omitted material terms that would have revealed the true velocity and scale of the ongoing dilution. The company’s stockholders’ equity stood at $2,508,089 as of March 31, 2026, a margin of only $8,089—or 0.32%—above Nasdaq’s $2.5 million minimum stockholders’ equity requirement (Compl. ¶3).

PIPE Notes and Series A Preferred Stock Transactions

The complaint details a series of transactions beginning on February 2, when TruGolf entered into a Securities Purchase Agreement to issue PIPE notes with an aggregate principal amount of $15,500,000, subject to a 10% original issue discount, and an initial conversion price of $10.00 per share (Compl. ¶2). In April 2025, the company executed Exchange Agreements that exchanged these PIPE warrants and notes for Series A Convertible Preferred Stock and warrants. The complaint alleges that by July 2025, the remaining $3,938,311 in PIPE note principal was exchanged for 3,938 Series A Preferred shares. The conversion price for the Series A Preferred Stock was subject to a ratcheting mechanism, which adjusted downward based on the company’s stock price. By December 31, 2025, the pre-split conversion price had ratcheted to $2.16 per share, and following a reverse stock split on March 27, 2026, the post-split conversion price was reset to $2.76 per share on April 22, 2026 (Compl. ¶3).

The complaint alleges that these transactions resulted in significant dilution for existing shareholders. The complaint highlights an unexplained discrepancy of $4.2 million in Class A share counts between the May 2025 proxy statement and a June 2025 Form 8-K, which the complaint alleges demonstrates the unreliability of the company’s disclosures (Compl. ¶5).

Registration Statements Allegedly Omitted Triggering Event, Default Rate, and Floor Price

The complaint alleges that the June 20, 2025 Form S-1 registration statement, which registered 420,825,000 shares of Class A common stock for resale, and the November 18, 2025 Form S-3 registration statement, which registered $200 million in securities, failed to disclose the penalty architecture of the Series A Preferred Stock. Specifically, the filings omitted:

• The Triggering Event, defined as the failure to file a resale registration statement by June 14, 2025.
• The Default Rate, which would have increased the conversion rate if the Triggering Event occurred.
• The Floor Price, which set a minimum conversion price regardless of the stock’s market price.
• The five-year dividend Make-Whole Amount, which converted over $1.08 million in make-whole interest into Class A shares in 2025 (Compl. ¶61).

The complaint alleges that "the fiscal 2025 Form 10-K contains no reference to any Triggering Event, to the Default Rate, or to the Floor Price" (Compl. ¶61). The complaint further alleges that the dilution tables in the filings labeled make-whole shares as "undeterminable" despite the conversions being calculable from conversion-date inputs. The complaint contends that these omissions were material, as they obscured the true extent of the dilution and the financial risks associated with the Series A Preferred Stock. The complaint also notes that the company’s fiscal 2025 net loss of $15.2 million was a critical financial metric that, when combined with the undisclosed terms of the Series A Preferred Stock, would have provided investors with a clearer picture of TruGolf’s financial health and the risks of further dilution (Compl. ¶79).

The complaint states that "a reasonable investor... would have regarded the true velocity and scale of the ongoing dilution... as significantly altering the total mix of available information" (Compl. ¶62). The complaint alleges that the undisclosed terms of the Series A Preferred Stock, including the Triggering Event, Default Rate, and Floor Price, were material to investors assessing the risks of dilution and the company’s ability to maintain compliance with Nasdaq’s listing requirements. The company’s stockholders’ equity of $2,508,089 as of March 31, 2026, which was just $8,089 above Nasdaq’s minimum requirement, further underscored the financial risks facing the company (Compl. ¶3).

Fiscal 2025 Form 10-K Allegedly Understated Dilution by Excluding Make-Whole Shares

The complaint alleges that the fiscal 2025 Form 10-K omitted the make-whole conversion mechanics despite $1,082,194 of make-whole interest being converted into Class A shares in 2025 (Compl. ¶61). The complaint further alleges that the 10-K understated the dilutive impact by excluding make-whole shares from its dilution tables, labeling them as "undeterminable." The complaint notes that this omission was particularly egregious given that the company’s financial statements already reflected a $6,135,160 loss on extinguishment and $4,693,111 in preferred dividends converted into Class A shares in fiscal 2025 (Compl. ¶79).

The complaint highlights a correction to the 10-K filed on April 17, 2026, which admitted a 52% overstatement of Class A shares outstanding. The original 10-K reported approximately 1.4 million Class A shares, but the correction reduced this figure to 914,267 shares. The complaint alleges that this correction, along with irreconcilable share counts in the Q1 2026 Form 10-Q and a 4.2 million-share discrepancy between the May 2025 proxy statement and a June 2025 Form 8-K, demonstrates the unreliability of TruGolf’s capital-structure disclosures. The split-adjusted trailing-year high for TRUG Class A shares was $85, but by mid-June 2026, the share price had fallen to $1.45, reflecting a 98% decline (Compl. ¶3).

Insiders Allegedly Knew of Conversions in Real Time but Framed Dilution as Hypothetical Risk

The complaint alleges that TruGolf’s insiders, including CEO Christopher Jones and directors Humphrey P. Polanen, Riley Russell, and AJ Redmer, knew of the Series A conversions in real time but framed the dilution as a hypothetical future risk in public disclosures. The complaint states that public disclosures framed the dilution as a hypothetical future risk despite insiders’ real-time knowledge of conversion notices (Compl. ¶4).

The complaint alleges that Jones, who signed every operative filing and Sarbanes-Oxley certifications, had access to Series A conversion notices and increases in the Maximum Percentage by SandTrap Opportunities LLC. The complaint states that Jones had a substantial interest in preserving TruGolf’s Nasdaq listing, his continued executive authority, disproportionate Class B voting leverage, and a $2.25 million direct and indirect insider-creditor position (Compl. ¶63).

The complaint notes that Jones served as CEO, President, director, former interim CFO, and principal executive and financial officer of TruGolf, and that the company misstated its outstanding share count, corrected the fiscal 2025 Form 10-K, reported irreconcilable share counts, filed its quarterly report late, and lacked a CFO for over a year. The company appointed Steven Passey as CFO effective May 15, 2026 (Compl. ¶63).

The complaint alleges that the misstatements and omissions maintained TRUG Class A shares at artificially inflated levels, causing economic losses upon corrective disclosures. The complaint states that "the price of TRUG Class A shares declined, damaging Class members" (Compl. ¶65). The complaint further alleges that the defendants’ actions enabled preferred investors to convert and resell shares at successive discounts while insiders retained disproportionate voting leverage and creditor leverage. At the May 2025 special shareholder meeting, Class B shareholders held 88.8% of the voting control, with Jones alone holding approximately 18.4% of the total voting power (Compl. ¶88, ¶95). The complaint notes that as of January 20, 2026, Class B shares represented 50.7% of the total voting power, with 4,857,445 Class A shares (one vote each) and 199,999 Class B shares (4,999,975 votes) outstanding (Compl. ¶87).

Governance Failures and Nasdaq Compliance Issues

The complaint details a series of governance failures and compliance issues that allegedly exacerbated the company’s financial and operational challenges. On January 5, 2026, Nasdaq notified TruGolf of an annual meeting deficiency under Listing Rules 5620(a) and 5810(c)(2)(G), which the company disclosed on Form 8-K on January 9, 2026. TruGolf cured the deficiency by holding its annual meeting on February 17, 2026 (Compl. ¶3). The complaint alleges that these compliance issues were symptomatic of broader governance failures, including the lack of a permanent CFO and the company’s reliance on Jones to oversee financial reporting despite his conflicts of interest.

The complaint also highlights the company’s redomestication from Delaware to Nevada, which was approved at the February 17, 2026 annual meeting. Proposal 4, which authorized the redomestication, received 6,228,794 votes in favor and 161,758 votes against, while Proposal 5, which increased the authorized Class A shares from 650,000,000 to 1,000,000,000, received 6,148,384 votes in favor (Compl. ¶87). The complaint alleges that these proposals were approved with minimal opposition due to the disproportionate voting power held by Class B shareholders, who controlled 88.8% of the vote at the May 2025 special meeting (Compl. ¶88).

Causes of Action Include Securities Act Violations, Proxy Violations, and Securities Fraud

The complaint asserts seven causes of action, including:

• Count I: Violation of Securities Act § 11 (15 U.S.C. § 77k) (strict liability) against TruGolf, Jones, Director Defendants (Limbers, Polanen, Russell, Redmer), and Haynie & Company. The complaint alleges that the registration statements contained untrue statements of material fact or omitted material facts required to be stated therein (Compl. ¶80-81). The complaint specifically alleges that the registration statements failed to disclose the Triggering Event, Default Rate, Floor Price, and Make-Whole Amount associated with the Series A Preferred Stock, which were material to investors assessing the risks of dilution and the company’s financial health.
• Count II: Violation of Securities Act § 15 (15 U.S.C. § 77o) (control person liability) against Jones and the Director Defendants (Compl. ¶83). The complaint alleges that these defendants controlled TruGolf and are therefore liable for the company’s violations of the Securities Act.
• Count III: Violation of Exchange Act § 14(a) (15 U.S.C. § 78n(a)) and Rule 14a-9 (proxy violations) against TruGolf and insiders (Jones, Director Defendants). The complaint alleges that the proxy materials contained false and misleading statements or omitted material facts, including the true extent of the dilution and the financial risks associated with the Series A Preferred Stock (Compl. ¶84). The complaint further alleges that the proxy materials failed to disclose the $4.2 million discrepancy in Class A share counts between the May 2025 proxy statement and a June 2025 Form 8-K, which would have been material to investors assessing the reliability of the company’s disclosures.
• Count IV: Violation of Exchange Act § 10(b) (15 U.S.C. § 78j(b)) and Rule 10b-5 (securities fraud) against TruGolf and Jones. The complaint alleges that the defendants made untrue statements of material fact or omitted material facts in connection with the purchase or sale of securities, including the failure to disclose the ratcheting conversion price and the financial impact of the Series A Preferred Stock (Compl. ¶85).
• Count V: Violation of Exchange Act § 20(a) (15 U.S.C. § 78t(a)) (control person liability) against Jones (Compl. ¶86). The complaint alleges that Jones, as a control person, is liable for the company’s violations of the Exchange Act.

Derivative Claims Allege Breach of Fiduciary Duty and Unjust Enrichment

The complaint alleges that the defendants breached their fiduciary duties by approving the Series A Preferred transaction and failing to disclose its full dilutive impact. The derivative wrongs allegedly caused injury to TruGolf, including equity issuance at ratcheted discounts, a $6,135,160 loss on extinguishment, $4,693,111 in preferred dividends converted into dilutive Class A shares, reverse stock splits, Nasdaq hearings, and delisting risk (Compl. ¶79).

The complaint alleges that demand on the board would have been futile, as no majority of the current board could exercise independent judgment under Nevada or Delaware law (Compl. ¶78). The complaint notes that the board’s approval of the Series A Preferred transaction and its failure to disclose the full extent of the dilution demonstrated a lack of independence and a breach of fiduciary duty.

The complaint also includes a claim for aiding and abetting breach of fiduciary duty (Delaware/Nevada law) against the ATW Defendants (SandTrap Opportunities LLC, ATW Opportunities Master Fund II, L.P., ATW Partners Opportunities Management, LLC, Kerry Propper, and Antonio Ruiz-Giménez) (Compl. ¶99). The complaint alleges that these defendants knowingly participated in the breach of fiduciary duty by the TruGolf board and insiders, including by converting and reselling shares at successive discounts while benefiting from the undisclosed terms of the Series A Preferred Stock.

The complaint further alleges that certain defendants were unjustly enriched at TruGolf’s expense via conversion profits, dividends-in-kind, make-whole amounts, make-whole interest conversions, default rate accruals, extinguishment gains, and retained control benefits. The complaint pleads the unjust enrichment claim in the alternative and alleges that no adequate remedy at law exists. The complaint cites Certified Fire Protection, Inc. v. Precision Construction, Inc., 128 Nev. 371, 283 P.3d 250 (2012), in support of its argument that equity requires disgorgement (Compl. ¶102). The complaint specifically alleges that the ATW Defendants and Jones enriched themselves at the expense of TruGolf and its public shareholders by converting Series A Preferred Stock at ratcheted discounts and reselling the resulting Class A shares, while retaining disproportionate voting leverage and creditor benefits.

The allegations in the complaint are unproven, and no defendant has yet responded.

The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.

David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.