VTIX 10-Q/A
Virtuix Holdings Inc. (VTIX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the quarterly period ended
or
For the transition period from __________ to __________
Commission File Number:
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
As of August 18, 2026, the registrant had a total of
EXPLANATORY NOTE
VIRTUIX HOLDINGS INC.
INDEX TO FORM 10-Q
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” of our Prospectus dated January 26, 2026 and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.
ii
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
VIRTUIX HOLDINGS INC.
INDEX TO FINANCIAL STATEMENTS
1
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2026 AND MARCH 31, 2026 (UNAUDITED)
ASSETS
| March 31, | ||||||||
| June 30, 2026 |
2026 (As Revised) |
|||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Receivables, net of allowance for credit losses | ||||||||
| Inventory | ||||||||
| Prepaids and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| NONCURRENT ASSETS | ||||||||
| Property and equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | ||||||||
| Intangibles | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Net intangibles | ||||||||
| Investment in joint venture | ||||||||
| Other assets | ||||||||
| Right-of-use asset - operating | ||||||||
| TOTAL NONCURRENT ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2026 AND MARCH 31, 2026 (UNAUDITED)
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
| March 31, | ||||||||
| June 30, 2026 |
2026 (As Revised) |
|||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Gift card liability | ||||||||
| Current portion of notes payable, net of discount and unamortized deferred loan costs | ||||||||
| Derivative liabilities at fair value | ||||||||
| Current portion of EIDL loan | ||||||||
| Lease liability - operating | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Notes payable, net of discount and unamortized deferred loan costs | ||||||||
| EIDL loan | ||||||||
| Lease liability, net of current portion - operating | ||||||||
| TOTAL LONG-TERM LIABILITIES | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025 (UNAUDITED)
| Three Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| SALES | $ | $ | ||||||
| COST OF GOODS SOLD | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on disposal of assets | ( | ) | ||||||
| Interest income | ||||||||
| Other income | ||||||||
| Loss on extinguishment of debt | ( | ) | ( | ) | ||||
| Loss on derecognition of equity method investment | ( | ) | ||||||
| Change in fair value of derivative liabilities | ||||||||
| Change in fair value of debt | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Financing expense | ( | ) | ||||||
| TOTAL OTHER EXPENSE, NET | ( | ) | ( | ) | ||||
| PROVISION FOR INCOME TAX | ||||||||
| SHARE OF LOSS IN JOINT VENTURE | ( | ) | ||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic and Diluted | ||||||||
| Net loss per share: | ||||||||
| Basic and Diluted | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025 (UNAUDITED)
| Preferred Stock | Class A Common Stock |
Class B Common Stock |
Additional Paid-In |
Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Exercise of common stock warrants | - | |||||||||||||||||||||||||||||||||||
| Issuance of preferred stock | - | |||||||||||||||||||||||||||||||||||
| Issuance of preferred stock for debt extinguishment | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of warrants for debt extinguishment | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Preferred Stock | Class A Common Stock |
Class B Common Stock |
Additional Paid-In |
Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance at March 31, 2026, as revised | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Exercise of common stock warrants, net of issuance costs | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt extinguishment | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||||||||||
| Warrant modification (financing expense) | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025 (UNAUDITED)
| Three Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of discount on notes payable | ||||||||
| Amortization of loan costs | ||||||||
| Credit loss expense | ||||||||
| Lease expense - right of use operating | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Change in fair value of debt | ( | ) | ||||||
| Loss on disposal of assets | ||||||||
| Loss on derecognition of the equity method investment | ||||||||
| Share of loss in joint venture | ||||||||
| Warrant modification expense | ||||||||
| Loss on extinguishment of debt | ||||||||
| Stock issuance in exchange for services | ||||||||
| Payments on operating leases | ( | ) | ( | ) | ||||
| Due from related parties | ||||||||
| (Increase) decrease in assets: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other assets | ||||||||
| Inventory | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Gift card liability | ( | ) | ||||||
| Operating lease liabilities | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for purchases of property and equipment | ( | ) | ( | ) | ||||
| Cash paid for purchases of intangibles | ( | ) | ( | ) | ||||
| CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Issuance of preferred stock | ||||||||
| Payments on short-term notes payable | ( | ) | ( | ) | ||||
| Payments on long-term notes payable | ( | ) | ( | ) | ||||
| Proceeds from short-term notes payable | ||||||||
| Warrants exercised | ||||||||
| Equity issuance costs | ( | ) | ||||||
| CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025 (UNAUDITED)
| Three Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| Enterprise income taxes paid to People’s Republic of China | $ | $ | ||||||
| Delaware franchise tax paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||||||||
| Debt extinguished for issuance of preferred stock | $ | $ | ||||||
| Reduction of debt and accrued interest through issuance of common stock | $ | $ | ||||||
| Issuance of common stock for debt extinguishment | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 1. Nature of Operations
Virtuix Holdings Inc. (“Virtuix Holdings” or “VHI” or the “Company”) was formed on December 20, 2013 as a Delaware Corporation. The Company has a wholly-owned subsidiary, Virtuix Inc., a Delaware corporation formed on April 15, 2013. Virtuix Inc. develops AI-driven, full-body simulation systems, originally the Omni Pro, the first omni-directional treadmill that lets players walk and run freely in 360 degrees inside video games and other virtual worlds. In February 2019, the Company began to offer Omni Arena, a four-player esports attraction that includes four Omni Pro motion platforms. In January 2023, the Company started shipping beta units of Omni One, the first Omni entertainment system designed for the home. Virtuix Manufacturing, Limited (“VML”), a wholly-owned subsidiary, is a Hong Kong corporation that was formed to conduct manufacturing operations and transact USD-denominated business with suppliers. Virtuix Manufacturing (Zhuhai) Co., Ltd. (“VML_ZH”) was formed on July 28, 2016, and is a wholly-owned subsidiary of VML. VML_ZH is a Wholly Foreign-Owned Enterprise (“WFOE”) registered in Zhuhai, Guangdong, China that was formed to sell products to Chinese customers and transact CNY-denominated business with Chinese suppliers. Virtuix Manufacturing Taiwan Ltd. (“VMT”) was formed on January 17, 2023, and is a wholly-owned foreign subsidiary of VHI. VMT is a Taiwan corporation that was formed to employ staff in Taiwan and conduct manufacturing operations. Virtuix Arabia LLC (“VA”) was formed in June 2024, and is a
In July 2016, the Company formed a joint venture with Hero Entertainment, a Chinese game publisher and esports operator, to develop active virtual reality content and product bundles for the Chinese and U.S. markets. The joint venture, named Heroix VR (Shanghai) Co., Ltd. (the “Joint Venture” or “Heroix”), was a Sino-foreign equity joint venture company established under the laws of the People’s Republic of China and registered in Shanghai. The Company held a
To service the Chinese market more efficiently, Hero Entertainment and the Company transferred the China sales channel to the Company’s China subsidiary and initiated the process to dissolve Heroix during fiscal year 2026. During the quarter ended June 30, 2026, the Company received a Certification of Dissolution and Tax Clearance from the People’s Republic of China confirming that Heroix had been legally dissolved, liquidated, and deregistered, with its legal personality terminated effective September 29, 2025. Based on this information, the Company concluded that it no longer possessed an ownership interest in Heroix and, accordingly, derecognized its remaining equity method investment. The Company recognized a non-cash loss on derecognition of approximately $
Note 2. Summary of Significant Accounting Policies
Revision of Previously Issued Financial Statements
In connection with the preparation and review of the Company’s financial statements for the quarter ended June 30, 2026, management, with the assistance of its accounting advisers, performed additional analysis of the accounting treatment of certain complex financing arrangements with Streeterville Capital, LLC. As a result of that analysis, management identified errors related principally to the accounting for embedded features in certain debt and other financing instruments under ASC 815, including the initial recognition and subsequent measurement of embedded derivative liabilities and the related accounting for the host instruments, the resulting allocation among the related debt host instruments, embedded derivatives and detachable warrants, and the related debt-discount amortization.
Management evaluated the errors, individually and in the aggregate, in accordance with ASC 250, Accounting Changes and Error Corrections, and SEC Staff Accounting Bulletins No. 99, Materiality, and No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Management concluded that the errors were not material to the Company’s previously issued consolidated financial statements as of and for the year ended March 31, 2026. Accordingly, amendment of the previously issued financial statements was not required.
However, the Company has revised the previously reported March 31, 2026 financial information presented in this Quarterly Report to correct the errors. The revisions resulted principally in the recognition of embedded derivative liabilities, corresponding adjustments to the carrying amounts of the related debt instruments and debt discounts, adjustments to amounts recorded in additional paid-in capital related to detachable warrants, and the recognition of related interest expense and changes in fair value in the periods in which such amounts should have been recognized.
8
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
The following table presents the effect of the revisions on the Company’s previously reported consolidated balance sheet as of March 31, 2026:
| As Previously Reported | Adjustment | As Revised | ||||||||||
| Balance Sheet Caption: | ||||||||||||
| Current portion of notes payable, net of discount and unamortized deferred loan costs | $ | $ | ( | ) | $ | |||||||
| Derivative liabilities | $ | $ | ||||||||||
| Total current liabilities | $ | $ | $ | |||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Additional paid-in capital | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ equity | $ | $ | ( | ) | $ | |||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | |||||||||
The revisions increased the Company’s net loss for the three months ended September 30, 2025 by $
Basis of Presentation and Principles of Consolidation
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and the Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Significant intercompany accounts and transactions have been eliminated upon consolidation.
The Company’s fiscal year ends March 31.
The accompanying interim condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as the Company’s annual consolidated financial statements for the fiscal year ended March 31, 2026. In the opinion of the Company’s management, these interim condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from these estimates.
The March 31, 2026 year-end condensed consolidated balance sheet data in the accompanying interim condensed consolidated financial statements was derived from audited consolidated financial statements and has been revised to correct immaterial errors as described under “Revision of Previously Issued Financial Statements” above. These condensed consolidated financial statements and notes do not include all disclosures required by GAAP and should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended March 31, 2026 and the notes thereto included in the Company’s Annual Report on Form 10-K, dated June 25, 2026, on file with the Securities and Exchange Commission.
The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.
Management’s Estimates
Preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting reported amounts of assets, liabilities, revenues, and expenses, as well as disclosures of contingent items. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from these estimates.
9
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Significant estimates and judgments include the valuation of embedded derivative liabilities and financial instruments measured at fair value, including assumptions regarding expected volatility, discount rates, expected term, probabilities and timing of contractual settlement features, and other market and instrument-specific inputs.
Going Concern
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has not generated profits since inception and has incurred net losses of $
Management has taken several actions to support the Company’s ability to continue as a going concern, including:
| 1. | Continuing to ramp up marketing and sales of Omni One, with anticipated increased revenues from this product line; and | |
| 2. | Raising capital from existing and new shareholders as necessary to fund operations. |
No assurance can be given that the Company will be successful in these efforts. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which provides a five-step model to determine when and how revenue is recognized. Under this model, revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring control of goods or services to a customer.
The Company applies the following five steps to all revenue-generating arrangements:
| 1. | Identify the contract with a customer; |
| 2. | Identify the performance obligations in the contract; |
| 3. | Determine the transaction price; |
| 4. | Allocate the transaction price to the performance obligations; and |
| 5. | Recognize revenue when or as each performance obligation is satisfied. |
The Company’s contracts typically include product sales, installation services, support programs, or the sale of digital playtime credits. Each arrangement is evaluated to determine whether it contains one or more performance obligations. The majority of contracts involve a single performance obligation to transfer or install physical goods. Revenue is recognized when control transfers to the customer, which occurs as follows:
| ● | Omni Pro units and related accessories – revenue recognized upon shipment, when control and title pass. |
| ● | Omni One units – revenue recognized upon shipment, consistent with the Company’s shipping terms. |
| ● | Omni Arena systems – revenue recognized upon installation at the customer’s location, when control transfers. |
| ● | Omniverse credits – revenue recognized over the estimated consumption period, typically two months from purchase based on usage patterns. |
10
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
| ● | Omni Online – revenue recognized ratably over the subscription period. |
| ● | Omni Care service program – Treated as a separate performance obligation included with each Omni Arena contract. The transaction price is allocated to this performance obligation on a relative standalone selling price basis, using observable standalone pricing of $ |
| ● | Omni One extended warranty – Sold separately from the Omni One unit and represents a service–type warranty. The transaction price is allocated on a relative standalone selling price basis, with observable standalone pricing of $ |
| ● | Omni One games – Revenue from sales of digital games is recognized when the game is made available for download to the customer. |
Contracts with multiple performance obligations are allocated based on relative standalone selling prices. Payment terms are generally fixed and do not include significant financing components.
Amounts received in advance of satisfying performance obligations are recorded as contract liabilities and recognized when the related obligation is fulfilled.
The Company’s contracts generally do not include variable consideration, material rights, or warranties that give rise to separate performance obligations. The Company has also concluded it acts as the principal in the sale of digital content, as it controls the content before transfer to the customer.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand and investments with original maturities of three months or less, when purchased, to be cash equivalents. As of June 30, 2026 and March 31, 2026, the Company’s cash and cash equivalents were deposited primarily in five financial institutions. Deposits with these institutions may exceed federally insured limits. Management believes that the financial institutions holding the Company’s cash are financially sound and, accordingly, the Company does not believe it is exposed to any significant credit risk related to its cash and cash equivalents.
Accounts Receivable
Trade receivables are generally due within thirty days. Receivables are presented net of an allowance for credit losses, which is estimated using the current expected credit loss model and is based on historical loss experience, current economic conditions, and customers’ ability to pay. The Company evaluates the collectability of trade receivables and records estimated credit losses based on expected losses over the contractual life of the receivables.
Inventory
Inventory is stated at lower of cost or net realizable value. Cost is computed using weighted average cost at one subsidiary and specific identification cost at the remaining subsidiaries.
Net realizable value is estimated based on projected demand; slow-moving products are impaired accordingly.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is straight-line over the following estimated useful lives:
| Computer Equipment | |
| Furniture and Fixtures | |
| Machinery and Equipment | |
| Office Equipment | |
| Leasehold Improvements |
11
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Fair Value Measurements
The Company determines the fair value of its financial instruments in accordance with ASC 820, Fair Value Measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used in measuring fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 quoted prices, including quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that reflect management’s assumptions regarding the assumptions market participants would use in pricing the asset or liability.
The classification of a fair value measurement within the hierarchy is based on the lowest-level input that is significant to the measurement. The Company’s derivative liabilities and certain debt instruments measured at fair value are classified within Level 3 because their valuations incorporate significant unobservable inputs. Changes in fair value are recognized in earnings, except as otherwise required by U.S. GAAP.
The carrying amounts of the Company’s other financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, approximate fair value primarily due to their short-term nature.
Financial liabilities measured at fair value on a recurring basis were as follows:
| Financial liability | Hierarchy | June 30, 2026 | March 31, 2026 (As Revised) | |||||||
| First pre-paid purchase arrangement embedded derivative liability | Level 3 | $ | $ | |||||||
| Secured convertible promissory notes - embedded derivative liabilities | Level 3 | |||||||||
| Second pre-paid purchase arrangement – at fair value | Level 3 | |||||||||
| Total Level 3 liabilities | $ | $ | ||||||||
The following table presents a reconciliation of the Company’s Level 3 financial liabilities measured at fair value on a recurring basis for the three months ended June 30, 2026:
| Amount | ||||
| Balance at March 31, 2026, as revised | $ | |||
| Change in fair value of first pre-paid purchase arrangement embedded derivative liability | ( | ) | ||
| Derecognition of convertible note embedded derivative liabilities upon extinguishment | ( | ) | ||
| Initial recognition of second pre-paid purchase arrangement at fair value | ||||
| Balance at June 30, 2026 | $ | |||
12
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Valuation Techniques and Significant Unobservable Inputs
The Company used valuation techniques that were considered appropriate based on the contractual terms and economic characteristics of the respective instruments. The embedded derivative liabilities associated with the pre-paid purchase arrangement and secured convertible promissory notes were valued using valuation techniques that incorporated simulated equity-price paths, probability-weighted outcomes and the contractual settlement provisions of the instruments.
| Financial Instrument | Valuation Date | Valuation Technique | Significant Unobservable Inputs | |||
| First pre-paid purchase arrangement (PPP #1) – embedded derivative liability | Annualized equity volatility: 70.0% Derivative / hybrid discount rate: 20.0% Modeled settlement timing: nine monthly tranches at 11.1% each Total prepayment probability: 0.0% Default probability: 5.0% Change-of-control probability: 5.0% | |||||
| August 25, 2025 secured convertible promissory note – embedded derivative liability | Annualized equity volatility: 70.0% Derivative / hybrid discount rate: 18.0% Investor conversion probability: 35.0% Automatic exchange probability: 85.0% Total prepayment probability: 0.0% Default probability: 2.5% Change-of-control probability: 2.5% | |||||
| October 30, 2025 secured convertible promissory note – embedded derivative liability | Annualized equity volatility: 70.0% Derivative / hybrid discount rate: 18.0% Investor conversion probability: 35.0% Automatic exchange probability: 85.0% Total prepayment probability: 0.0% Default probability: 2.5% Change-of-control probability: 2.5% | |||||
| December 19, 2025 secured convertible promissory note – embedded derivative liability | Annualized equity volatility: 70.0% Derivative / hybrid discount rate: 20.0% Investor conversion probability: 35.0% Automatic exchange probability: 85.0% Total prepayment probability: 0.0% Default probability: 2.5% Change-of-control probability: 2.5% | |||||
| First pre-paid purchase arrangement (PPP #1) – embedded derivative liability | Annualized equity volatility: 70.0% Derivative / hybrid discount rate: 20.0% Modeled settlement timing: nine monthly tranches at 11.1% each Total prepayment probability: 0.0% Default probability: 5.0% Change-of-control probability: 5.0% | |||||
| Second pre-paid purchase arrangement (PPP #2) – fair value option | Annualized equity volatility: 70.0% Derivative / hybrid discount rate: 21.0% Modeled settlement timing: nine monthly tranches at 11.1% each Total prepayment probability: 0.0% Default probability: 5.0% Change-of-control probability: 5.0% |
13
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Significant unobservable inputs used in the Level 3 measurements included expected equity volatility, discount rates, the expected timing of share settlements, and management’s estimates of the probability and timing of prepayment, default, change-of-control and other contractual settlement events. Observable inputs included the Company’s common stock price and market interest rates at the applicable measurement dates.
There were no transfers into or out of Level 3 during the periods presented.
The Company’s Level 3 fair value measurements are sensitive to changes in significant unobservable inputs. In general, changes in expected volatility, discount rates, expected settlement timing or the probability of contingent settlement events could result in a higher or lower fair value measurement. Because certain contractual features interact with one another, changes in one assumption may affect the impact of other assumptions, and the effect of changes in individual inputs may therefore not be independent.
Derivative Liabilities
Certain of the Company’s financing arrangements contain embedded features that require bifurcation and separate accounting as derivative liabilities under ASC 815, Derivatives and Hedging. The derivative liabilities are initially and subsequently measured at fair value, with changes in fair value recognized in earnings. Amounts initially recognized as derivative liabilities may result in a discount to the related debt host, which is subsequently amortized to interest expense.
Fair Value Option
ASC 825, Financial Instruments, permits an entity to elect the fair value option for certain eligible financial instruments on an instrument-by-instrument basis at specified election dates, including upon initial recognition of an eligible instrument. Once elected, the fair value option is generally irrevocable. Financial instruments for which the fair value option is elected are measured at fair value, with changes in fair value recognized in earnings, except for changes in the fair value of financial liabilities attributable to instrument-specific credit risk, which are recognized in other comprehensive income.
On May 22, 2026, the Company elected the fair value option for its second pre-paid purchase arrangement with Streeterville Capital, LLC (the “Second Pre-Paid Purchase Arrangement” or “PPP #2”) upon its initial recognition. PPP #2 is therefore measured in its entirety at fair value rather than separately accounting for embedded features. Contractual interest expense is recognized separately in interest expense, and changes in the fair value of PPP #2, other than changes attributable to instrument-specific credit risk, are recognized in other income (expense).
During the three months ended June 30, 2026, the Company determined that no portion of the change in the fair value of PPP #2 was attributable to changes in instrument-specific credit risk. Accordingly, no amount related to PPP #2 was recognized in other comprehensive income during the period.
14
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Intangibles
Intangible assets include software, trademarks, customer lists, and a website. Amortization is straight-line over the following estimated useful lives:
| Software | |
| Trademarks | |
| Customer Lists | |
| Website |
Software and Website Development Costs
The Company accounts for software development costs in accordance with several accounting pronouncements, including Topic 730, Research and Development, Topic 985-20, Costs of Computer Software to be Sold, Leased, or Marketed, and Topic 330-10, Inventory. Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for internal and external use, are charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market are expensed as research and development.
The Company capitalizes certain costs in the development of its proprietary software (computer software to be sold, leased, or licensed) for the period after technological feasibility has been determined and prior to marketing and initial sales. Once technological feasibility is reached, and the software has been released for sale, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. These capitalized costs are amortized over their estimated useful lives and reviewed for impairment in accordance with Topic 330 when indicators of impairment exist.
Website development costs are accounted for separately under Topic 350-50, Website Development Costs.
Deferred Revenue
Deferred revenue represents cash received from customers for which the related revenue has not yet been earned. Deferred revenue primarily consists of (i) orders of Omni One units and extended warranties, (ii) unfilled orders of Omni Pro systems, (iii) amounts billed but not yet recognized for Omni Arena installations, (iv) unearned subscription revenue related to Omni Online, (v) unredeemed Omniverse game credits, and (vi) unearned subscription revenue related to Omni Care.
The following table summarizes deferred revenue balances:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Omni One | $ | $ | ||||||
| Omni One extended warranty | ||||||||
| Omni Pro | ||||||||
| Omni Arena | ||||||||
| Omni Online | ||||||||
| Omniverse credits | ||||||||
| Omni Care subscriptions | ||||||||
| Total deferred revenue | $ | $ | ||||||
Revenue recognized during the three months ended June 30, 2026 and 2025, that was included in deferred revenue at the beginning of the respective periods, was $
15
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Payments received from customers during the three months ended June 30, 2026 and 2025, that increased deferred revenue were $
Gift Card Liability
During the fiscal year ended March 31, 2026, the Company converted outstanding customer Omni One preorder deposits to gift cards and reclassed them from deferred revenue. The total amount reclassed from deferred revenue was $
Consistent with ASC 606, the gift card liability will be recognized as revenue when the cards are redeemed.
Advertising Costs
Advertising costs are expensed as incurred, and are included in selling expenses in the accompanying consolidated statements of operations. Total advertising expense for the three months ended June 30, 2026 and 2025, was $
Federal Income Taxes
No uncertain tax positions were identified. Tax-related interest and penalties, if any, are included in income tax expense. The U.S. federal tax returns are subject to examination by the Internal Revenue Service, generally for three years after they are filed. State tax returns are subject to examination generally for five years after they are filed.
Net Loss Per Share
Basic and diluted net loss per share is computed by dividing net loss by weighted-average shares outstanding. Potentially dilutive securities that were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive include stock options, restricted stock units, and warrants.
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| Shares underlying outstanding stock options (vested and unvested) | ||||||||
| Shares underlying outstanding restricted stock units (unvested) | ||||||||
| Shares issuable upon conversion of preferred stock | ||||||||
| Shares underlying outstanding warrants | ||||||||
| Total potentially dilutive shares | ||||||||
Major Customers Concentrations
For the three months ended June 30, 2026, one customer accounted for
Recent Accounting Pronouncements
On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures, which enhances transparency regarding income tax disclosures, primarily through additional information regarding the income tax rate reconciliation and income taxes paid by jurisdiction. The Company adopted ASU 2023-09 effective April 1, 2026. The amendments are applied prospectively, with retrospective application permitted. Because the amendments relate solely to disclosures, adoption did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. The Company is currently evaluating the impact of the ASU on its annual income tax disclosures, which will first be reflected in the Company’s financial statements for the fiscal year ending March 31, 2027.
16
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
In March 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. The ASU requires public business entities to disclose in a tabular format significant expense categories that are included in each relevant income statement line item. The standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact that this standard may have on its consolidated financial statements and related disclosures.
Foreign Currency Remeasurements
The Company’s non-U.S. subsidiaries, VML and its wholly-owned subsidiary VML_ZH, along with VMT, operate using the U.S. dollar as the functional currency. The effect of foreign currency exchange rate fluctuations on consolidated balance sheet accounts were not material for the three months ended June 30, 2026 and 2025.
Note 3. Receivables
Receivables, net of allowance for credit losses consisted of the following at:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Accounts receivable, trade | $ | $ | ||||||
| Other receivables | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Receivables, net | $ | $ | ||||||
Changes in the allowance for credit losses account for the three months ended June 30, 2026, and the year ended March 31, 2026, are as follows:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Beginning balance | $ | $ | ||||||
| Credit loss (recovery) expense | ||||||||
| Write-offs charged against the allowance | ( | ) | ||||||
| Recoveries of amounts written off | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
Note 4. Prepaids and Other Current Assets
Prepaids and other current assets consisted of the following at:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Security deposits | $ | $ | ||||||
| Recoverable VAT | ||||||||
| Prepaid insurance | ||||||||
| Other prepaid expenses | ||||||||
| $ | $ | |||||||
17
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 5. Inventory
Inventory consisted of the following at:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| $ | $ | |||||||
Note 6. Property and Equipment
Property and equipment, net include the following at:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Computer equipment | $ | $ | ||||||
| Furniture and equipment | ||||||||
| Machinery and equipment | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense for the three months ended June 30, 2026 and 2025, was $
Note 7. Intangibles
Intangibles, net include the following at:
| June 30, | March 31, | |||||||
| 2026 | 2026 | |||||||
| Software and game design | $ | $ | ||||||
| Trademarks | ||||||||
| Website | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization expense for the three months ended June 30, 2026 and 2025, was $
18
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 8. Notes Payable
Convertible Notes
Effective August 25, 2025, the Company issued a secured convertible promissory note to Streeterville Capital, LLC in the amount of $
The Company granted warrants associated with this note to acquire shares of Class A common stock. In accordance with ASC 470-20, the Company allocated the proceeds between the note and the warrants using the relative fair value method. After giving effect to the bifurcation of the embedded derivative described below, the amount allocated to the warrants was revised to $
On May 22, 2026, the note was exchanged pursuant to Prepaid Purchase Agreement #2 (“PPP #2”), and the note was extinguished. Accordingly, there was no outstanding balance under the note at June 30, 2026. As revised, the carrying value of the note at March 31, 2026 was approximately $
Effective October 30, 2025, the Company issued a second secured convertible promissory note to Streeterville Capital, LLC in the amount of $
The Company granted warrants associated with the second note to acquire shares of Class A common stock. In accordance with ASC 470-20, the Company allocated the proceeds between the note and the warrants using the relative fair value method. After giving effect to the bifurcation of the embedded derivative described below, the amount allocated to the warrants was revised to $
On May 22, 2026, the second note was exchanged pursuant to PPP #2, and the note was extinguished. Accordingly, there was no outstanding balance under the note at June 30, 2026. As revised, the carrying value of the note at March 31, 2026 was approximately $
19
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 8. Notes Payable (continued)
Effective December 19, 2025, the Company issued a third secured convertible promissory note to Streeterville Capital, LLC in the amount of $
The Company granted warrants associated with the third note to acquire shares of Class A common stock. In accordance with ASC 470-20, the Company allocated the proceeds between the note and the warrants using the relative fair value method. After giving effect to the bifurcation of the embedded derivative described below, the amount allocated to the warrants was revised to $
On May 22, 2026, the third note was exchanged pursuant to PPP #2, and the note was extinguished. Accordingly, there was no outstanding balance under the note at June 30, 2026. As revised, the carrying value of the note at March 31, 2026 was approximately $
Embedded Derivative Liabilities
The Company determined that certain embedded features contained in the three secured convertible promissory notes required bifurcation and separate accounting as derivative liabilities under ASC 815. The derivative liabilities were initially measured at fair value, with corresponding amounts recorded as additional debt discounts, and were subsequently remeasured at fair value each period, with changes recognized through earnings.
The aggregate initial fair value of the embedded derivatives associated with the three notes was $
Immediately prior to the May 22, 2026 exchange, the aggregate derivative liabilities were $
Extinguishment of Convertible Promissory Notes
On May 22, 2026, the Company entered into the PPP #2 with Streeterville Capital, LLC pursuant to the automatic exchange provisions of the existing secured convertible promissory notes. In connection with the transaction, the August 25, 2025, October 30, 2025, and December 19, 2025 secured convertible promissory notes, with an aggregate outstanding principal balance of $
The Company accounted for the exchange as an extinguishment of debt under ASC 470-50. Immediately prior to the exchange, the aggregate carrying amount of the liabilities extinguished, including the debt host instruments and related embedded derivative liabilities, were approximately $
20
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 8. Notes Payable (continued)
Prepaid Purchase Agreement
Effective August 25, 2025, the Company entered into a Securities Purchase Agreement with Streeterville Capital, LLC pursuant to which Streeterville Capital, LLC committed to provide up to $
The Advances do not have a stated maturity date and bear interest at a rate of
The Company granted warrants associated with this PPP #1 to acquire shares of Class A common stock. In accordance with ASC 470-20, the Company allocated the proceeds between the note and the warrants using the relative fair value method. After giving effect to the bifurcation of the embedded derivative described below, the amount allocated to the warrants was revised to $
The Company determined that certain embedded features contained in PPP #1 required bifurcation and separate accounting as a derivative liability under ASC 815. The fair value of the embedded derivative was $
As revised, the fair value of the PPP #1 derivative liability was $
As revised, the carrying value of the debt host associated with PPP #1 at June 30, 2026 and March 31, 2026 was approximately $
21
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 8. Notes Payable (continued)
Second Prepaid Purchase Agreement
On May 22, 2026, the Company entered into PPP #2 with Streeterville Capital, LLC. PPP #2 had an original principal amount of $
Upon initial recognition of PPP #2 on May 22, 2026, the Company elected the fair value option under ASC 825 and therefore measures the entire instrument at fair value on a recurring basis. PPP #2 was initially recognized at a fair value of $
Contractual interest expense on PPP #2 was $
Exchange Note
Effective March 31, 2026, the Company entered into an exchange agreement with Streeterville Capital, LLC (the “Exchange Agreement”) pursuant to which certain previously issued 2024 subordinated promissory notes (see below “2024 Notes”) originally issued to various investors between July 15, 2024 and December 10, 2024 were exchanged for a new promissory note (the “Exchange Note”) in the aggregate principal amount of $
Pursuant to the Exchange Agreement, Streeterville Capital, LLC acquired the 2024 Notes from the original holders and surrendered the 2024 Notes to the Company in exchange for the Exchange Note. Streeterville did not acquire the 2024 Note held by Ugo de Charette. Instead, on March 30, 2026, the Company repaid Ugo de Charette’s note in full through a cash payment of $
Upon surrender, the 2024 Notes were cancelled and the Company’s remaining obligations under the 2024 Notes became evidenced solely by the Exchange Note. No additional cash consideration was received by the Company in connection with the transaction.
Between May 1, 2026 and May 27, 2026, Streeterville made partial redemptions under the Exchange Agreement with an aggregate Redemption Amount of $
The carrying value of the Exchange Note at June 30, 2026 and March 31, 2026 was $
22
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 8. Notes Payable (continued)
Warrant Amendments
On June 1, 2026 and June 29, 2026, the Company entered into amendments to the Equity Financing Warrant, the Second Debt Financing Warrant, and the Third Debt Financing Warrant (collectively, the “Warrant Amendments”) with Streeterville Capital, LLC. The Warrant Amendments were intended to provide additional flexibility in connection with the Company’s ongoing relationship with Streeterville Capital. Effective June 1, 2026, the exercise price under each warrant was reduced from $
The Company accounted for each Warrant Amendment as a modification of the existing warrants. As a result, the Company recognized aggregate incremental fair value adjustments of $
Extinguishment of Certain 2024 Notes
In June 2025, the Company and certain investors amended the terms of the 2024 Notes to allow cancellation in exchange for Series B Preferred Stock and warrants. Under ASC 470, this amendment represented a debt extinguishment. At that time, the Company extinguished $
Cancellation of Certain 2024 Notes
On June 30, 2025, the amended notes were cancelled in exchange for the issuance of
Western Technology Investment Note
The Company repaid all outstanding obligations under its note payable with Western Technology Investment on August 22, 2025. There was no outstanding balance at June 30, 2026 or March 31, 2026. Discount amortization and amortization of deferred loan costs included in interest expense was $
EIDL Loan
On August 29, 2020, the Company received a loan from the U.S. Small Business Administration under its Economic Injury Disaster Loan assistance program (the “EIDL Loan”). The principal amount was $
The EIDL Loan matures in August 2050, bears interest at
The carrying amount of the EIDL Loan was $
23
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 8. Notes Payable (continued)
Future Maturities of Notes Payable
At June 30, 2026, the future maturities of notes payable are as follows for the ficscal years ending:
| Notes Payable | EIDL | Total | ||||||||||
| 2027 (remaining nine months) | $ | $ | $ | |||||||||
| 2028 | ||||||||||||
| 2029 | ||||||||||||
| 2030 | ||||||||||||
| 2031 | ||||||||||||
| Thereafter | ||||||||||||
| Total | ||||||||||||
| Less: unamortized discount | ( | ) | ( | ) | ||||||||
| Add: PPP #2 fair value adjustment | ||||||||||||
| $ | $ | $ | ||||||||||
Note 9. Leases
The Company accounts for leases in accordance with ASC 842, Leases. The Company has elected the package of practical expedients permitted under the transition guidance within ASC 842, which allows the Company to (i) not reassess whether any expired or existing contracts contain leases, (ii) not reassess the lease classification of any expired or existing leases, and (iii) not reassess initial direct costs for any existing leases. The Company has also elected the short-term lease exemption for certain leases with a term of 12 months or less.
Right-of-use (“ROU”) assets are presented in non-current assets on the consolidated balance sheets, while the corresponding lease liabilities are split between current and non-current liabilities. Because the Company does not have access to the rate implicit in its leases, it applies an incremental borrowing rate based on the information available at lease commencement to determine the present value of future lease payments.
The Company leases office, warehouse, and apartment space in the United States, China, and Hong Kong under various operating lease agreements. The U.S. headquarters lease, originally entered into in 2015, has been extended multiple times and currently expires
As of June 30, 2026, ROU assets totaled $
At June 30, 2026, the future estimated minimum lease payments under non-cancelable operating leases are as follows for the fiscal years ending:
| 2027 (remaining nine months) | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total lease payments | ||||
| Imputed Interest | ( | ) | ||
| $ |
Lease expense recognized in the consolidated statements of operations for the three months ended June 30, 2026 and 2025, was $
As of June 30, 2026, the weighted-average remaining lease term for the operating leases is
24
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 10. Research and Development
Research and Development expense for the three months ended June 30, 2026 and 2025, was $
Note 11. Commitments and Contingencies
In February 2024, the Company was named a co-defendant and served a citation by a customer related to alleged injuries obtained when attempting to use the Omni Arena attraction at an entertainment venue. The Company’s attorneys, retained by the Company’s insurance provider, filed a general denial and alleged contributory negligence against the plaintiff. During the three months ended June 30, 2026, the parties signed a final settlement agreement and release, resolving the matter. All legal costs and settlement fees are covered by the Company’s insurance provider.
From time to time, the Company may become involved in legal proceedings and claims arising in the ordinary course of business. The Company assesses such matters based on the information available and records a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. The Company also considers whether disclosure is required for matters for which a loss is reasonably possible. The ultimate outcome of legal proceedings and claims is subject to inherent uncertainty and could have a material adverse effect on the Company’s business, financial condition, or results of operations. There is no pending litigation involving the Company at this time.
Note 12. Capital Stock
Authorized Capital Stock
On August 6, 2025, stockholders approved, and on August 7, 2025, the Company filed with the Secretary of State of the State of Delaware, the Sixth Amended and Restated Certificate of Incorporation (the “Certificate”). Pursuant to the Certificate, the Company reclassified and converted each share of its previously outstanding capital stock into shares of Class A common stock, effective immediately upon the acceptance of the Certificate for filing by the Secretary of State of Delaware.
As a result of the reclassification and conversion, all outstanding shares of the Company’s capital stock, including all series of preferred stock and any previously outstanding common stock, were automatically reclassified and converted on a one-for-one basis into shares of Class A common stock. Following the effectiveness of the Certificate, only Class A common stock, Class B common stock, and undesignated and unissued Preferred Stock are authorized.
As of June 30, 2026, the Company is authorized to issue
Capital Stock Rights
Holders of Class A common stock, Class B common stock, and future holders of Preferred Stock are entitled to dividends, voting rights, liquidation preferences, conversion rights, and anti-dilution protections as described in the Company’s Sixth Amended and Restated Certificate of Incorporation.
Common Stock
Voting Rights
Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters submitted to a vote of stockholders, except as otherwise required by Delaware law or the Company’s Certificate of Incorporation. Each share of Class A common stock is entitled to
Under the Company’s Certificate of Incorporation, the number of authorized shares of either class of common stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority in voting power of the outstanding shares of capital stock entitled to vote, without a separate class vote, except as otherwise required by law or the Certificate of Incorporation.
25
VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 12. Capital Stock (continued)
Dividend Rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, holders of Class A common stock and Class B common stock are entitled to receive dividends and other distributions as may be declared from time to time by the board of directors out of funds legally available therefor. Dividends and distributions must be paid equally, identically, and ratably on a per-share basis to holders of Class A common stock and Class B common stock, unless different treatment is approved by a majority of each class, voting separately as a class. In the event a dividend is paid in the form of shares of common stock, holders of Class A common stock will receive Class A common stock and holders of Class B common stock will receive Class B common stock.
Subdivisions and Combinations
If the Company subdivides or combines the outstanding shares of either class of common stock, the outstanding shares of the other class will be subdivided or combined in the same proportion and manner, unless different treatment is approved by a majority of each class, voting separately as a class.
Conversion Rights
Each share of Class B common stock is convertible at any time at the option of the holder into one (1) share of Class A common stock. Shares of Class B common stock will automatically convert into an equal number of shares of Class A common stock upon (i) any transfer of such shares, except for certain permitted transfers to affiliates or family members as described in the Certificate, or (ii) the date specified by written notice and certification request from the Company if the holder fails to provide satisfactory certification of continued ownership, subject to certain exceptions. In addition, all outstanding shares of Class B common stock will automatically convert into Class A common stock upon the affirmative vote of the holders of at least two-thirds of the outstanding shares of Class B common stock, voting as a single class. Once converted, shares of Class B Common Stock may not be reissued.
Other Rights
Holders of Class A common stock and Class B common stock have no preemptive or subscription rights, and there are no redemption or sinking fund provisions applicable to either class. Upon liquidation, dissolution, or winding up of the Company, holders of Class A common stock and Class B common stock are entitled to share ratably in all assets remaining after payment of liabilities and any preferential rights of any outstanding preferred stock.
Common Stock Equity Transactions
During the three months ended June 30, 2026, the Company issued an aggregate of
Between May 1, 2026 and May 27, 2026, Streeterville Capital, LLC exchanged portions of the Exchange Note with an aggregate Redemption Amount of $
During the three months ended June 30, 2026, the Company incurred $
Preferred Stock Equity Transactions
During the three months ended June 30, 2025, the Company issued Series B Preferred Stock in connection with equity financings and debt extinguishments. Additional information regarding these transactions is included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
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VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 12. Capital Stock (continued)
Warrants
Warrants are issued in connection with debt (see Note 8) and equity financings from time to time at the Company’s discretion.
June 1, 2026 Warrant Amendment
Effective June 1, 2026, the Company amended the Equity Financing Warrant, the Second Debt Financing Warrant and the Third Debt Financing Warrant to reduce the exercise price from $
The significant assumptions used in the Black-Scholes valuation immediately before and after the June 1, 2026 modification included a stock price of $
June 29, 2026 Warrant Amendment
Effective June 29, 2026, the Company further amended the Equity Financing Warrant, the Second Debt Financing Warrant and the Third Debt Financing Warrant to reduce the exercise price from $
The significant assumptions used in the Black-Scholes valuation immediately before and after the June 29, 2026 modification included a stock price of $
During the three months ended June 30, 2026, Streeterville Capital, LLC exercised portions of its Equity Financing Warrant to purchase an aggregate of
The following is a rollforward of warrants to purchase shares of Class A common stock for the three months ended June 30, 2026:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Beginning balance | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Expired | ||||||||
| Ending balance | $ | |||||||
Warrants are recorded in equity at fair value at the date of issuance.
Note 13. Stock Compensation Expense
The Company accounts for stock-based compensation under ASC 718. Stock-based compensation expense related to stock options for the three months ended June 30, 2026 and 2025, was $
Stock-based compensation expense related to restricted stock units for the three months ended June 30, 2026 and 2025, was $
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VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 14. Income Taxes
Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to depreciable assets using accelerated depreciation methods for income tax purposes, share-based compensation expense, and for net operating loss carryforwards.
The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making this determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and recent operating results. The federal tax rate in effect affecting future tax benefits at June 30, 2026 and 2025 was
Note 15. Investment in Joint Venture
As mentioned in Note 1, the Company had an investment in a Joint Venture named Heroix VR (Shanghai) Co., Ltd. (the “Joint Venture” or “Heroix”). VML had
For the three months ended June 30, 2026, the Joint Venture had operating revenue of $
For the three months ended June 30, 2025, the Joint Venture had operating revenue of $
Note 16. Revenue Disaggregation
Revenue streams from performance obligations included in net sales for the three months ended June 30, 2026 and 2025, in the consolidated statements of operations are as follows:
| June 30, | June 30, | |||||||
| 2026 | 2025 | |||||||
| SALES | ||||||||
| Omni Pro units and accessories | $ | $ | ||||||
| Omniverse credits | ||||||||
| Omni Care program | ||||||||
| Omni Arena | ||||||||
| Omni One | ||||||||
| TOTAL SALES | $ | $ | ||||||
Substantially all of the Company’s revenues are derived from customers located in the United States. Revenue attributable to individual foreign countries was not material for the periods presented. Accordingly, the Company has not separately presented revenue by geographic area.
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VIRTUIX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026 AND 2025 (UNAUDITED)
Note 17. Segment Reporting
The Company operates in a operating segment: the design, development, marketing, and sale of omni-directional treadmills, accessories, and related services to consumer and commercial customers. This single operating segment has been identified based on internal management structure and reporting to the Company’s Chief Operating Decision Maker (“CODM”), the Company’s .
The Company has not identified any reportable segments other than the single operating segment discussed.
Note 18. Patents
As of June 30, 2026, the Company owns fifteen issued utility patents and ten issued design patents, and five additional applications are still pending. Four of the patents are also issued internationally in one or more countries, including Australia, Brazil, China, South Korea, Russia, Europe, and India.
Note 19. Subsequent Events
In July and August 2026, the Company issued an aggregate of
Between July 1, 2026, and July 27, 2026, Streeterville Capital, LLC exercised portions of its Equity Financing Warrant to purchase an aggregate of
On July 21, 2026, the Company entered into amendments to the Equity Financing Warrant, the Second Debt Financing Warrant, and the Third Debt Financing Warrant to purchase shares of Class A common stock (collectively, the “Warrant Amendments”) with Streeterville Capital, LLC amending the exercise price and extending the Reduced Exercise Price Period to each such warrant. Each of the warrants listed above was previously amended to establish a reduced exercise price period (the “Reduced Exercise Price Period”) during which the exercise price was amended to $
Between July 28, 2026 and August 5, 2026, David Allan, the Company’s Chief Operating Officer (“COO”) and President, sold an aggregate of
On August 5, 2026, Streeterville Capital, LLC made a partial redemption in connection with the Exchange Agreement pursuant to which new promissory notes in the principal amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this Item regarding our financial position, business strategy and the plans and objectives of Management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our Management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our Management, as well as assumptions made by, and information currently available to, our Management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Report under “Item 1. Interim Financial Statements”.
Overview and History
We believe Virtuix is a leader in AI-driven, full-body simulation for immersive entertainment, defense training, and enterprise applications. We pioneer movement in AI-generated worlds, whether imaginary or real, through the development of omni-directional treadmills that let users walk and run in 360 degrees without boundaries. Our flagship product, Omni One, represents a breakthrough in natural locomotion, enabling full freedom of movement, including crouching, kneeling, and jumping, in every direction within a small footprint. We operate a vertically integrated business across product design, manufacturing, content and simulation development, and distribution, with a focus on three key markets: consumer, enterprise, and defense.
Our earlier products, Omni Pro and Omni Arena, established our footprint in commercial entertainment. We’ve sold more than 4,000 Omni Pro systems for enterprise, installed 80 Omni Arena systems at entertainment venues in the U.S., and built an Omni Arena player base of over 500,000 players who signed up with an email address to play. Omni One, our most recent product, was designed for the home consumer and supports full freedom of movement within popular virtual reality games. We also sell a version of Omni One for enterprise markets and, in parallel, we are developing immersive training systems for the defense market, including Virtual Terrain Walk (“VTW”), an AI-driven, multi-user simulation system for mission planning and leader rehearsals.
We derive revenue through a combination of hardware sales and recurring software and service income. These include:
| ● | Omni One hardware sales, with pricing ranging from $2,495 to $2,995. |
| ● | Omni Online subscription service ($14/month or $140/year), offering multiplayer access, esports leaderboards, and free games. |
| ● | Game sales via Omni One’s proprietary game store. |
| ● | Enterprise solutions, including Omni One Enterprise and Omni Arena systems. |
| ● | Accessory and replacement parts sales for Omni One and Omni Arena systems. |
| ● | Omni Care maintenance subscriptions for Omni Arena. |
| ● | Omniverse Credits for Omni Pro and Omni Arena gameplay (per-minute usage fees). |
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We target a gross margin of 40% on hardware sales of Omni One and second-hand Omni Arena systems, and 70% gross margin on Omni One Enterprise hardware sales. Recurring revenue from Omni Online, game sales, Omni Care, and Omniverse Credits provide high-margin, predictable cash flows that recur after initial hardware sales.
Since inception, we have operated at a loss, with revenues of $767,300 and $1,032,136 for the three months ended June 30, 2026 and 2025, respectively. Our net losses were $(7,170,566) and $(2,307,155) for the three months ended June 30, 2026 and 2025, respectively. We anticipate continued operating losses as we pursue market penetration and revenue growth in fiscal year 2027.
Key milestones for achieving sustainable profitability include:
| ● | Scaling Omni One consumer sales through increased marketing and increased adoption as part of the Made for Meta program. |
| ● | Supplementing potentially high-volume Omni One consumer sales with potentially high-value defense contracts. We believe a “dual-use” strategy of building consumer sales plus defense contracts can position us for achieving revenue growth and sustainable profitability. |
Our technology is getting early traction in the defense market. Over the last year, we sold Omni One test units to the U.S. Marine Corps, the U.S. Air Force Academy, the U.S. Military Academy at West Point, and the Air National Guard. We also got selected for Phase 1 SBIR Funding by the U.S. Air Force to advance the development of VTW, we got assigned to be the lead integrator on the development of a virtual infantry training system by the U.S. Marine Corps Training and Education Command (TECOM), we signed a development agreement with the U.S. Navy, and we integrated Omni One in a Counter-UAS training system developed for evaluation by the U.S. Marine Corps. However, we expect that meaningful sales in the defense sector may not materialize until fiscal year 2028 at the earliest. Despite the long sales cycle for penetrating the defense market, we believe that our simulation systems will retain a strong competitive moat because of our expansive omni-directional treadmill patent portfolio, our position as a U.S. company, and the inherent barriers to entry for defense applications that competitors will face, including multi-year procurement cycles and high switching costs. To sell to defense customers, we will need to comply with certain requirements and regulations to qualify for government contracts or awards, depending on the type of contract or award, including but not limited to compliance with the FAR and DFARS, Export Administration Regulations, cybersecurity regulations, and requirements and restrictions related to the secure sourcing of components, including the Buy American Act and Berry Amendment. For additional information, see “Risk Factors — Our business with governmental entities will be subject to the policies, priorities, regulations, mandates and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto” of our Prospectus dated January 26, 2026.
Following our shift in R&D and marketing efforts to Omni One, and the shift in demand for entertainment attractions from staffed VR attractions such as Omni Arena to unstaffed, lower-tech offerings, we consider the Omni Arena business to be in sustaining mode. We no longer produce new systems or invest in new games or software upgrades for the system, but we continue to support our existing Omni Arena operators and earn recurring revenues from Omni Care maintenance contracts, Omniverse Credits sales, and the sale of repair and replacement parts. We also facilitate secondary market sales of Omni Arena systems and earn a target gross margin of approximately 40% on revenues earned from reselling second-hand systems and disassembling, moving, and installing such systems.
Our path to profitability relies on scaling Omni One sales at an acceptable customer acquisition cost and on gaining adoption in the defense sector. Although we believe that our plans are realistic, there is no guarantee that we will be able to scale Omni One sales or find product-market fit in the defense sector.
We believe Virtuix is at the leading edge of immersive entertainment, enterprise training, defense simulation, and the development of hyper-realistic digital twins of the real world through Gaussian splatting and other AI-driven 3D reconstruction technologies. In a world where AI is used to rapidly generate realistic virtual environments, whether imaginary game worlds or digital twins of the real world, we pioneer the technology and products for physically moving around in these virtual environments. We believe we are positioned to help define the next decade of XR advancements and be a leader in immersive gaming and simulation.
Factors Affecting our Business and Results of Operations
This section includes a summary of our historical results of operations, including detailed comparisons of our results for the three months ended June 30, 2026 and 2025. We have derived the three month data from our financial statements included elsewhere in this Report.
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Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
Revenues
Sales for the three months ended June 30, 2026, were $767,300, a 26% decrease from sales of $1,032,136 for the three months ended June 30, 2025. This decrease is primarily attributable to the fulfillment of the final batch of the large backlog of Omni One orders accumulated since the start of the preorder period in August 2023, during the three months ended June 30, 2025, whereas revenues in the three months ended June 30, 2026 resulted from sales to newly acquired customers. New orders for Omni One systems increased 72% in the three months ended June 30, 2026 compared to unit orders placed in the three months ended June 30, 2025. Following the launch of Omni One for Quest in June 2026, new orders for Omni One systems increased by a factor of 2.5x compared to the same period last year.
The following table summarizes our revenue by product line:
| Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | |||||||
| SALES | ||||||||
| Omni Pro units and accessories | $ | 19,444 | $ | 15,191 | ||||
| Omniverse Credits | 26,959 | 45,100 | ||||||
| Omni Care program | 41,333 | 48,667 | ||||||
| Omni Arena | 157,173 | 101,266 | ||||||
| Omni One, net of discounts | 522,391 | 821,912 | ||||||
| TOTAL SALES | $ | 767,300 | $ | 1,032,136 | ||||
Cost of Goods Sold
Cost of goods sold primarily consists of material costs and shipping costs of Omni One and Omni Arena.
Cost of goods sold in the three months ended June 30, 2026 was $540,142, a decrease of $315,917 from cost of goods sold of $856,059 in the three months ended June 30, 2025. The decrease was primarily attributable to lower revenues during the current period compared to the prior period that included shipments of a large backlog of Omni One preorders.
Gross profit in the three months ended June 30, 2026 was $227,158, an increase of $51,081, or 29%, compared to gross profit of $176,077 in the three months ended June 30, 2025. Gross margin as a percentage of revenues increased to 30% in the three months ended June 30, 2026 from 17% in the three months ended June 30, 2025. Omni One revenue in the three months ended June 30, 2025 included deliveries of prepaid units sold at a lower price point in prior quarters.
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Operating Expenses
Operating expenses consist of general and administrative expenses, which are primarily salaries, professional fees, and expenses related to investor relations and the administrative functions of the Company, research and development expenses, which consist primarily of product development costs and salaries, and sales and marketing expenses, which represent advertising and other marketing costs, as well as the associated personnel costs.
| Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | |||||||
| Selling Expenses | $ | 738,978 | $ | 1,049,658 | ||||
| General & Administrative | 3,080,778 | 959,392 | ||||||
| Research & Development | 309,375 | 208,716 | ||||||
| Total Operating Expenses | $ | 4,129,131 | $ | 2,217,766 | ||||
Total operating expenses increased to $4,129,131 in the three months ended June 30, 2026, from $2,217,766 in the three months ended June 30, 2025.
| ● | Selling Expenses: For the three months ended June 30, 2026 compared to the same period in 2025, Selling Expenses decreased to $738,978 from $1,049,658. The higher expense in the 2025 period was largely driven by the significant digital ad spend for our Regulation Crowdfunding (“Reg CF”) investment campaign with StartEngine that ended around the end of June 2025. |
| ● | General and Administrative Expenses: For the three months ended June 30, 2026 compared to the same period in 2025, General and Administrative Expenses increased to $3,080,778 from $959,392. The increase was primarily attributable to expenses associated with operating as a publicly traded company since our public listing in January 2026. Professional services, such as legal, accounting, investor relations, and other professional services, increased by $1,236,175 for the 2026 period compared to the same period in 2025. Insurance expenses increased by $150,833 for the 2026 period compared to the same period in 2025. Employee stock compensation expense, a non-cash expense, increased by $608,960 for the 2026 period as a result of RSUs granted under the 2025 Omnibus Incentive Plan. |
| ● | Research and Development: For the three months ended June 30, 2026 compared to the same period in 2025, Research and Development expenses increased to $309,375 from $208,716. This increase was due to an increase in staffing and salaries to advance Omni One for Quest and other projects in development. |
Other Expense
For the three months ended June 30, 2026, Other Expense totaled $3,219,202, primarily driven by interest expense of $2,539,592, including $2,052,255 of non-cash amortization of debt discount related to the Company’s financing arrangements, $584,150 of non-cash financing expenses recognized in connection with amendments to certain outstanding warrants, and $431,224 of non-cash loss on debt extinguishment, consisting primarily of the loss recognized in connection with the May 22 exchange of the secured convertible promissory notes for PPP #2 and losses recognized in connection with Exchange Note limited redemptions during the quarter, These were partially offset by $349,128 of non-cash gain on change in fair value of PPP #1 derivative liability. For the three months ended June 30, 2025, Other Expense totaled $241,978, primarily comprised of interest expense and loss on extinguishment of debt.
Net Loss
As a result of the foregoing, net loss for the three months ended June 30, 2026 was $(7,170,566) compared to $(2,307,155) for the three months ended June 30, 2025, representing an increase in net loss of $4,863,411. Although gross profit increased during the 2026 period, the improvement in gross profit was offset by higher non-cash expenses such as amortization of debt discount, warrant modification expenses, loss on debt extinguishment, and stock compensation expenses, as well as higher professional services expenses related to operating as a publicly traded company, resulting in a higher net loss despite underlying improvement in gross profitability.
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Non-GAAP Financial Measures
Management reviews a variety of operational and financial metrics to assess the Company’s performance, allocate resources, and inform strategic decision-making. In addition to net sales, net loss, and other measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), this report includes certain operating metrics and non-GAAP financial measures that management considers meaningful in evaluating the Company’s operating performance.
These measures are used by management and the Board of Directors to assess trends in the business, evaluate the effectiveness of operational initiatives, and support decisions regarding investment and cost management. Management believes that the presentation of these non-GAAP financial measures provides investors with additional insight into the Company’s operating results and facilitates period-to-period comparisons.
Adjusted EBITDA
| For the Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| Reconciliation of GAAP net loss to Adjusted EBITDA | ||||||||
| NET LOSS | $ | (7,170,566 | ) | $ | (2,307,155 | ) | ||
| Plus: | ||||||||
| Taxes | 49,391 | 23,418 | ||||||
| Interest expense, net(1) | 2,539,429 | 119,114 | ||||||
| Depreciation and amortization | 142,953 | 158,776 | ||||||
| EBITDA | $ | (4,438,793 | ) | $ | (2,005,847 | ) | ||
| Plus: | ||||||||
| Stock-based compensation(2) | 722,937 | 10,897 | ||||||
| Financing expense(3) | 584,150 | 0 | ||||||
| Loss on extinguishment of debt | 431,224 | 122,864 | ||||||
| Less: | ||||||||
| Change in fair value of financial instruments | (372,350 | ) | 0 | |||||
| ADJUSTED EBITDA | $ | (3,072,832 | ) | $ | (1,872,086 | ) | ||
| 1. | Interest expense for the three months ended June 30, 2026 includes $2,052,255 of non-cash amortization of debt discount related to the Company’s financing arrangements with Streeterville Capital, LLC (see Note 8 – Notes Payable to the Consolidated Financial Statements). The debt discount results from the issuance of warrants as well, original issue discounts, related closing costs, and embedded derivative bifurcation, which are being amortized to interest expense over the term of the notes. |
| 2. | Stock-based compensation expense for the three months ended June 30, 2026 consisted of non-cash expenses of $103,080 related to equity awards granted to vendors and service providers and $619,857 related to equity awards granted to employees, officers, and directors. Stock-based compensation expense for the three months ended June 30, 2025 consisted entirely of employee, officer, and director awards. |
| 3. | Financing expense represents a non-cash charge recognized in connection with amendments to certain outstanding warrants during the three months ended June 30, 2026. |
Adjusted EBITDA is a non-GAAP financial measure that we use to evaluate our operating performance. Adjusted EBITDA represents net income (loss), adjusted to exclude: (i) provision for (benefit from) income taxes, (ii) interest expense, net, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) financing expense, (vi) loss on extinguishment of debt, and (vii) gains or losses from changes in the fair value of financial instruments.
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We believe Adjusted EBITDA is useful to investors because it provides a supplemental measure of our operating performance by excluding non-cash expenses and other items that may not be indicative of our core operating results or that may vary significantly from period to period. For the periods presented, such non-cash items include amortization of debt discount, depreciation and amortization, stock-based compensation expense, and changes in the fair value of financial instruments, which can significantly impact reported net loss but does not impact our cash flow. However, Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP. These limitations include the following:
| ● | Stock-based compensation has been, and is expected to continue to be, a significant recurring expense and an important component of our compensation strategy. |
| ● | Depreciation and amortization relate to assets that may require replacement in the future, and Adjusted EBITDA does not reflect the cash requirements for capital expenditures. |
| ● | Adjusted EBITDA does not reflect changes in working capital or the cash requirements necessary to service our debt. |
| ● | Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently, limiting their usefulness as comparative measures. |
Accordingly, Adjusted EBITDA should be considered only as a supplement to, and not as a substitute for, net income (loss) and other measures prepared in accordance with GAAP.
Liquidity and Capital Resources
We continue to experience negative cash flows from operations as we expand our business. Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as sales and marketing, product development, and general and administrative. Our operating cash flows are also affected by our working capital needs to support the scaling of manufacturing and inventories.
As of June 30, 2026 and March 31, 2026, the Company had cash on hand of $7,443,869 and $9,471,288, respectively. Since its inception, the Company has incurred net losses and funded its operations primarily through the issuance of equity securities. As of June 30, 2026 and March 31, 2026, the Company had a total stockholders’ deficit of $(3,080,495) and a total stockholders’ equity of $1,096,752, respectively. The Company has incurred recurring losses from operations, and as of June 30, 2026 and March 31, 2026, had an accumulated deficit of $(86,517,001) and $(79,346,435), respectively.
The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. The Company has developed plans to raise funds and continues to pursue sources of funding that management believes, if successful, would be sufficient to support the Company’s operation and growth. As discussed in the Subsequent Events section of the Notes to the Consolidated Financial Statements, the Company has successfully executed sources of funding and debt conversions in July 2026. Streeterville has exercised 455,500 warrants during this period, resulting in proceeds to the Company of $1,181,250. Additionally, outstanding notes with a principal amount of $67,389 were converted to shares of the Company’s Class A common stock.
During the three months ended June 30, 2026, the Company raised the following proceeds from financing activities:
| ● | $1,380,000 through the exercise of warrants, pursuant to which Virtuix issued 230,000 shares of Class A common stock. |
On January 27, 2026, in connection with the closing of the Company’s direct listing, Streeterville funded the initial pre-paid purchase under the Equity Purchase Agreement. The Company received $8,000,000 in cash proceeds, net of an 8% original issue discount, and the pre-paid purchase had an original principal balance of $8,640,000 (“PPP #1”). PPP #1 bears interest at a rate of 6% per annum and has no stated maturity date.
On May 22, 2026, the Company and Streeterville exchanged the outstanding First Note, Second Note and Third Note, including accrued interest thereon, for a second pre-paid purchase under the Equity Purchase Agreement (“PPP #2”). PPP #2 had an original principal balance of $3,471,923. The exchange did not provide the Company with additional cash proceeds. As a result of the exchange, the Streeterville Notes were extinguished, and no amounts remained outstanding under those notes as of June 30, 2026.
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PPP #2 bears interest at a rate of 6% per annum and contains terms substantially consistent with those of PPP #1, including Streeterville’s ability to apply outstanding amounts toward the purchase of shares of the Company’s Class A common stock in accordance with the applicable agreement. The Company may prepay all or a portion of the outstanding balance of each pre-paid purchase, subject to specified prepayment premiums. The agreements also contain customary events of default, ownership limitations and other Company covenants.
During the three months ended June 30, 2026, Streeterville delivered limited redemption notices under the Exchange Note with an aggregate redemption amount of $284,500. The Company settled the limited redemptions through the issuance of an aggregate of 93,333 shares of Class A common stock. The settlements were non-cash financing transactions and did not provide the Company with additional liquidity. As of June 30, 2026, the Exchange Note had an outstanding principal balance of approximately $2,422,664.
Under the Equity Purchase Agreement, Streeterville committed to purchase up to an aggregate of $50,000,000 of the Company’s Class A common stock through one or more pre-paid purchases over a 24-month period. The Company’s ability to obtain additional advances is subject to several conditions, including minimum market-capitalization and trading-volume requirements, continued compliance with Nasdaq listing standards and the effectiveness of an applicable resale registration statement. Accordingly, Streeterville’s obligation to fund additional advances is not solely within the Company’s control, and there can be no assurance that the Company will be able to access the full amount, or any particular amount, remaining under the Equity Purchase Agreement. For additional information, see “Risk Factors — Our pre-paid purchase arrangements with Streeterville may result in substantial dilution and, if our stock price is below the $2.00 Floor Price for six consecutive months, could require cash payments that adversely affect our liquidity” in Part II, Item 1A of this Quarterly Report on Form 10-Q.
See Note 8, Notes Payable, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding PPP #1, PPP #2, the Exchange Note and the Equity Purchase Agreement.
As of June 30, 2026, our current obligations include the Exchange Note issued to Streeterville Capital, LLC, with a principal amount of $2,422,664 maturing in July 2027, an EIDL loan with a carrying amount of approximately $24,000 maturing in August 2050, a PPP advance with Streeterville Capital, LLC, with an original principal balance of $8,640,000, accrued interest of $224,611, and no stated maturity date, a second PPP advance with Streeterville Capital, LLC, with an original principal balance of $3,471,923, accrued interest of $23,222, and no stated maturity date, current operating lease obligations totaling approximately $256,966, and outstanding gift card liabilities of approximately $446,000.
We anticipate incurring additional losses for the foreseeable future, and we may never become profitable.
As of the date of this filing, following proceeds from Streeterville warrant exercises in July 2026, the Company believes its existing cash resources will be sufficient to fund its planned operations in the near term. However, to continue as a going concern and execute its operating plan over the next 12 months, the Company will need to obtain additional financing. The timing and amount of additional financing required will depend on a number of factors, including the Company’s operating performance, cash expenditures and the timing and amount of any additional financing activities.
Our operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, our ability to continue to raise additional financing and the state of the general economic environment in which we operate. There can be no assurance that these assumptions will prove accurate in all material respects, or that we will be able to successfully execute our operating plan. In the absence of additional appropriate financing, we may have to modify our plan or slow down the pace of development and commercialization.
The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended June 30, 2026 and June 30, 2025:
| Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | |||||||
| Net cash used in operating activities | $ | (3,294,829 | ) | $ | (1,491,122 | ) | ||
| Net cash used by investing activities | $ | (11,247 | ) | $ | (3,496 | ) | ||
| Net cash provided by financing activities | $ | 1,278,657 | $ | 1,600,504 | ||||
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Tariffs
Our products are currently manufactured primarily in China and imported into the United States. U.S. import tariff rates have fluctuated significantly in recent years and have the potential to materially impact our financial results by reducing our profit margins or requiring us to raise consumer selling prices, which could in turn depress demand. We consider the materiality threshold to be any tariff level that exceeds 30% and remains elevated for a sustained period. For additional information, see “Risk Factors — Unfavorable global economic and political conditions, including tariffs and trade barriers, could adversely affect our business, financial condition or results of operations” of our Prospectus dated January 26, 2026.
On February 20, 2026, the U.S. Supreme Court ruled against tariffs imposed by the Trump administration under the International Emergency Economic Powers Act (IEEPA). Following this ruling, the administration imposed a new 10% global tariff under Section 122 of the Trade Act of 1974, effective February 24, 2026. Section 122 tariffs are limited by statute to 150 days without congressional extension and expired on July 24, 2026. In May 2026, the U.S. Court of International Trade found the Section 122 tariffs unlawful, although this ruling was stayed pending appeal and the tariffs remained in effect through their expiration. The Company paid IEEPA tariffs on its imports during the period in which such tariffs were in effect and has submitted refund claims to U.S. Customs and Border Protection. The amounts involved are not material to the Company’s condensed consolidated financial statements.
Effective July 24, 2026, the administration imposed additional tariffs under Section 301 of the Trade Act of 1974. These tariffs currently apply to imports from approximately 60 countries at rates ranging from 10% to 12.5%.
While the near-term tariff environment remains difficult to predict, and the duration, scope, and legal validity of currently imposed tariffs remain uncertain, the Company believes it is well positioned to manage a range of potential outcomes.
As detailed in our Prospectus, we have mitigated the potential impact of high tariffs on China-made goods by developing Taiwan as an alternative manufacturing location. In February 2026, the United States and Taiwan signed the U.S.-Taiwan Agreement on Reciprocal Trade, which caps the U.S. reciprocal tariff rate on Taiwanese goods at no more than 15%. This agreement is subject to legislative approval in Taiwan. Following the expiration of the Section 122 tariffs on July 24, 2026, Section 301 tariffs of 10% to 12.5% currently apply to imports from Taiwan. Future actions or modifications through Section 301 and other tariff-related measures could result in additional or different tariff rates on Taiwanese goods. Accordingly, the ultimate tariff treatment of Taiwanese goods remains subject to significant legal and policy uncertainty.
In January 2023, we opened a wholly owned Taiwan subsidiary named Virtuix Manufacturing Taiwan Ltd. and began outsourcing some Omni One materials to Taiwanese factories. If import tariffs on goods from China were to exceed the materiality threshold for a sustained period, we can expand our Taiwan manufacturing program by assembling the entire Omni One product in Taiwan. There can be no assurance, however, that tariff mitigation strategies, including geographic diversification, will fully offset the impact of new or increased tariffs, or that the current tariff framework applicable to Taiwanese goods will remain in effect.
Emerging Growth Company
We are an “emerging growth company,” as defined in the JumpStart Our Business Startups Act of 2012 (“JOBS Act”). The status of “emerging growth company” enables us to invest more in research & development and customer acquisition rather than compliance overhead. As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies, and we have elected to take advantage of those exemptions. For so long as we remain an emerging growth company, we will not be required to:
| ● | have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); |
| ● | submit certain executive compensation matters to shareholder advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; or |
| ● | disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. |
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In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. We have elected to take advantage of the extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.
We will remain an emerging growth company for up to five years, or until the earliest of: (i) the last date of the fiscal year during which we had total annual gross revenues of $1.235 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iii) the date on which we are deemed to be a “large accelerated filer” as defined under Rule 12b-2 under the Exchange Act.
We do not believe that being an emerging growth company will have a significant impact on our business. Also, even once we are no longer an emerging growth company, we still may not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we meet the definition of a large accelerated filer.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in accordance with U.S. GAAP requires management to apply accounting policies and make estimates, assumptions and judgments that affect the amounts reported in our financial statements and accompanying notes. We consider accounting policies and estimates to be critical when their application requires significant judgment or involves a significant level of estimation uncertainty and when changes in those judgments, assumptions or estimates have had, or are reasonably likely to have, a material effect on our financial condition or results of operations.
Management bases its estimates and judgments on historical experience, current conditions, contractual terms, available market information and other factors that management believes to be reasonable under the circumstances. Because estimates and judgments involve inherent uncertainty, actual results may differ from those estimates. The critical accounting policies and estimates discussed below should be read in conjunction with the significant accounting policies described in Note 2 to our condensed consolidated financial statements.
Except as described below, there have been no material changes to our critical accounting policies and estimates since March 31, 2026.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. The application of ASC 606 requires management to make judgments regarding the identification of performance obligations, the timing of the transfer of control of products and services to customers and, for arrangements containing multiple performance obligations, the allocation of the transaction price based on relative standalone selling prices.
Revenue from our hardware products is generally recognized upon shipment or installation, depending on when control transfers to the customer. Revenue associated with service and support arrangements, including Omni Care, Omni Online and extended warranties, is recognized over the applicable service period. Revenue from Omniverse credits is recognized over the estimated period in which the credits are expected to be consumed based on customer usage patterns. For arrangements containing multiple performance obligations, we use observable standalone selling prices when available to allocate consideration among the respective performance obligations. Changes in estimates or judgments regarding the timing of satisfaction of performance obligations, customer usage patterns or allocation of consideration could affect the timing and amount of revenue recognized. See Note 2 to our condensed consolidated financial statements for additional information regarding our revenue recognition policies.
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Fair Value of Complex Financing Instruments
During the three months ended June 30, 2026, the Company corrected its analysis of certain financing arrangements, including its pre-paid purchase arrangements with Streeterville Capital, LLC and related debt and equity-linked features. As a result, certain embedded features are accounted for separately and measured at fair value, and certain financing instruments are measured in their entirety at fair value pursuant to the fair value option. The additional analysis also resulted in revisions to the accounting for certain previously reported amounts. Accordingly, the determination of fair value for these financing instruments and related features represents a critical accounting estimate for the current period. See Note 8 to the condensed consolidated financial statements for additional information regarding the Company’s financing arrangements.
The Company estimates the fair value of these instruments and features using valuation techniques appropriate to the specific contractual terms and economic characteristics of each instrument. These techniques may include option-pricing methodologies, discounted cash flow analyses and probability-weighted scenario analyses. The valuations incorporate observable market information when available as well as significant assumptions for which directly observable market information may not be available.
Depending on the instrument or feature being valued, significant inputs and assumptions may include the market price of the Company’s Class A common stock, expected stock-price volatility, risk-free interest rates, expected term or settlement period, market yields or discount rates, and the probability and expected timing of conversion, prepayment, redemption, trigger events and other contractual settlement outcomes. The valuations also consider applicable contractual provisions, including floor prices, prepayment premiums, ownership limitations and other settlement provisions that may affect the amount or timing of expected cash or equity settlement.
Management develops these assumptions based on the facts and circumstances existing at each measurement date, including available market data, the contractual terms of the instruments, the Company’s historical experience, current liquidity and financing circumstances, and other contemporaneous information relevant to the probability and expected timing of potential settlement outcomes. Certain of these assumptions require significant judgment, particularly where a contractual outcome is dependent on future market conditions, financing activity or actions that may be taken by the Company or the counterparty.
The estimated fair values of these instruments and features may be sensitive to changes in the underlying assumptions. Changes in the Company’s stock price or expected volatility, market interest rates or discount rates, or the estimated probability or timing of conversion, prepayment or other contractual outcomes could result in materially different fair value measurements. As a result, changes in these estimates may materially affect the carrying amounts of the related financing instruments and derivative liabilities and the related gains, losses or other amounts recognized in the Company’s condensed consolidated financial statements.
Management reassesses the assumptions used in these valuations at each required measurement date. Because the ultimate timing and manner of settlement may differ from the assumptions used in the valuation models, actual results may differ materially from the amounts estimated, and the fair value of these instruments and features may fluctuate significantly from period to period. Certain of these fair value measurements utilize significant unobservable inputs and, accordingly, are classified within Level 3 of the fair value hierarchy.
Quantitative and Qualitative Disclosures About Market Risk
We have not utilized any derivative financial instruments for hedging purposes such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. We believe that adequate controls are in place to monitor any hedging activities, if they were to occur in the future. We do not intend to hedge any existing or future borrowings and, consequently, we do not expect to be affected by changes in market interest rates. We do currently have sales and own assets and operate facilities in countries outside the United States and, consequently, we may be affected by foreign currency fluctuations or exchange rate changes.
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Recent Accounting Pronouncements
On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures, which enhances transparency regarding income tax disclosures, primarily through additional information regarding the income tax rate reconciliation and income taxes paid by jurisdiction. The Company adopted ASU 2023-09 effective April 1, 2026. The amendments are applied prospectively, with retrospective application permitted. Because the amendments relate solely to disclosures, adoption did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. The Company is currently evaluating the impact of the ASU on its annual income tax disclosures, which will first be reflected in the Company’s financial statements for the fiscal year ending March 31, 2027.
In March 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. The ASU requires public business entities to disclose in a tabular format significant expense categories that are included in each relevant income statement line item. The standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements and related disclosures.
Management has reviewed other recently issued but not yet effective accounting standards and believes they will not have a material impact on the Company’s consolidated financial statements. The Company will adopt applicable standards as required.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
During the preparation of the Company’s condensed consolidated financial statements for the three months ended June 30, 2026, management identified a material weakness in the Company’s internal control over financial reporting related to the accounting for complex financing transactions. This material weakness existed as of March 31, 2026 and continued to exist as of June 30, 2026. The material weakness is separate from the material weaknesses previously disclosed by the Company, which management concluded had been remediated as of March 31, 2026.
Management identified a material weakness in the Company’s internal control over financial reporting related to the accounting for complex financing transactions. Specifically, the Company did not maintain effective controls designed to identify, evaluate, and document the application of U.S. GAAP to debt and other financing arrangements containing potentially complex terms and embedded features. As a result, management did not perform a timely technical accounting assessment of certain debt instruments to determine whether embedded features required bifurcation and separate accounting as derivative liabilities. This control deficiency resulted in errors in the Company’s accounting for certain financing arrangements and required adjustments and revision to prior period financial information to record embedded derivative liabilities and related accounting impacts.
Although management concluded that the identified control deficiency constituted a material weakness because there was a reasonable possibility that it could result in a material misstatement that would not be prevented or detected on a timely basis, management separately evaluated the actual errors resulting from the deficiency and concluded that those errors, individually and in the aggregate, were not material to the Company’s previously issued financial statements.
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Management has begun implementing remediation measures designed to strengthen the Company’s internal control over financial reporting with respect to complex and non-routine financing transactions. These measures include enhancing procedures for identifying transactions requiring technical accounting analysis, implementing formal and documented reviews of significant contractual terms and embedded features, enhancing review and approval by personnel with appropriate technical accounting expertise, and utilizing third-party technical accounting and valuation specialists when appropriate.
Management will continue to evaluate and enhance these controls as necessary. The material weakness will not be considered remediated until the applicable controls have been implemented, have operated for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively. See Part I, Item 4, “Controls and Procedures,” for additional information regarding the material weakness and the Company’s disclosure controls and procedures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2026 due to the material weakness in internal control over financial reporting described below.
Material Weakness and Remediation
During the preparation of our condensed consolidated financial statements for the three months ended June 30, 2026, management identified a material weakness in internal control over financial reporting related to the accounting for complex financing transactions. Specifically, the Company did not maintain controls designed at a sufficient level of precision to timely identify, evaluate and document the application of U.S. GAAP to debt and other financing arrangements containing complex contractual terms and embedded features. This material weakness existed as of March 31, 2026 and continued to exist as of June 30, 2026. See “Internal Control Over Financial Reporting” in Part I, Item 2 of this Quarterly Report for a description of the material weakness and management’s remediation efforts.
Changes in Internal Control over Financial Reporting
Other than the identification of the material weakness described above, which reflected a deficiency in controls that existed as of March 31, 2026 and continued through June 30, 2026 and therefore did not constitute a change in ICFR during the quarter, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Subsequent to June 30, 2026, management began implementing the remediation measures described above.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In February 2024, the Company was named a co-defendant and served a citation by a customer related to alleged injuries obtained when attempting to use the Omni Arena attraction at an entertainment venue. The Company’s attorneys, retained by the Company’s insurance provider, filed a general denial and alleged contributory negligence against the plaintiff. During the three months ended June 30, 2026, the parties signed a final settlement agreement and release, resolving the matter. All legal costs and settlement fees are covered by the Company’s insurance provider.
From time to time, we may be party to litigation arising in the ordinary course of business. As of June 30, 2026, we are not subject to any material legal proceedings nor, to the best of our knowledge, are any material legal proceedings pending or threatened against us.
Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. For additional risks relating to our operations carefully consider the factors discussed in “Risk Factors” of our Prospectus dated January 26, 2026, which could materially affect our business, financial condition or future results. Other than as set forth below, we have identified no material changes from the risk factors previously disclosed in the Prospectus.
We have identified a material weakness in our internal control over financial reporting related to the accounting for complex financing transactions, and our failure to remediate this material weakness or otherwise maintain effective internal controls could adversely affect our financial reporting and investor confidence.
During the preparation of our condensed consolidated financial statements for the three months ended June 30, 2026, management identified a material weakness in our internal control over financial reporting related to the accounting for complex financing transactions. Specifically, the Company did not maintain effective controls designed to identify, evaluate, and document the application of U.S. GAAP to debt and other financing arrangements containing potentially complex terms and embedded features. As a result, management did not perform a timely technical accounting assessment of certain debt instruments to determine whether embedded features required bifurcation and separate accounting as derivative liabilities. This control deficiency resulted in errors in the Company's accounting for certain financing arrangements and required adjustments and revision to prior period financial information to record embedded derivative liabilities and related accounting impacts.
This material weakness existed as of March 31, 2026 and continued to exist as of June 30, 2026, and resulted in errors in the accounting for certain financing arrangements that required revisions to previously reported financial information.
We have begun implementing remediation measures designed to strengthen our controls over complex and non-routine financing transactions, including enhanced procedures for identifying transactions requiring technical accounting analysis, documented review of significant contractual terms and embedded features, and the use of qualified technical accounting and valuation resources, including third-party specialists when appropriate. However, we cannot provide assurance that these measures will successfully remediate the material weakness or that additional material weaknesses or significant deficiencies will not be identified in the future. Management, under the oversight of the Audit Committee, is monitoring the implementation and effectiveness of these remediation measures.
Until this material weakness is remediated, there is a reasonable possibility that a material misstatement of our annual or interim financial statements may not be prevented or detected on a timely basis. If we are unable to remediate this material weakness or otherwise maintain effective internal control over financial reporting and disclosure controls and procedures, we could experience additional errors in our financial reporting, be required to revise or restate our financial statements, experience delays in meeting our reporting obligations, incur additional costs associated with remediation and compliance efforts, and experience reduced investor confidence in our financial reporting, any of which could adversely affect the market price of our Class A common stock.
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Our pre-paid purchase arrangements with Streeterville may result in substantial dilution and, if our stock price is below the $2.00 Floor Price for six consecutive months, could require cash payments that adversely affect our liquidity.
As previously disclosed, we entered into an Equity Purchase Agreement with Streeterville Capital, LLC (“Streeterville”) under which Streeterville committed to purchase up to $50,000,000 of our Class A common stock through one or more pre-paid advances. On May 22, 2026, we entered into a second pre-paid purchase with Streeterville in exchange for our outstanding secured convertible promissory notes held by Streeterville. Under the pre-paid purchases, if specified trigger events occur, the share purchase price may be based on a market-price formula tied to 90% of the lowest volume-weighted average price of our Class A common stock during the applicable ten-trading-day measurement period. Because our Class A common stock has recently traded below $2.00 per share, issuances under this formula could require us to issue a substantially greater number of shares to satisfy a given portion of the outstanding pre-paid purchase balance, which could result in substantial dilution to existing stockholders and place downward pressure on the market price of our Class A common stock.
The pre-paid purchases also define a $2.00 floor price (the “Floor Price”). The Floor Price does not operate as a fixed minimum price at which shares may be issued in all circumstances. However, if the applicable share purchase price remains below the Floor Price for at least six consecutive months, Streeterville may elect to have the applicable purchase amount paid in cash rather than shares of Class A common stock. Any such cash payment requirement, or any default arising from our inability to deliver shares or comply with the pre-paid purchase documents, could materially and adversely affect our liquidity, financial condition and ability to continue executing our business strategy.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Between April and June 2026, we issued an aggregate of 12,000 shares of Class A common stock to FMW Media Works LLC (“New To The Street”) pursuant to that certain agreement entered into in connection with a 12-month marketing and media services engagement. The consideration received by the Company consisted of marketing and media services. The shares were issued as restricted securities in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder, as a transaction not involving a public offering to an accredited investor.
Between April 10, 2026 and April 22, 2026, Streeterville Capital, LLC (“Streeterville”) exercised portions of the Equity Financing Warrant to purchase an aggregate of 230,000 shares of Class A common stock at an exercise price of $6.00 per share, for aggregate proceeds to the Company of $1,380,000. The shares were issued upon exercise of warrants previously issued to Streeterville in connection with private financing transactions. Pursuant to our placement agent agreement with Maxim Partners LLC, we are obligated to pay a cash success fee equal to 7.0% of gross proceeds received, including warrant exercise proceeds, and to reimburse expenses. The issuance was made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as a transaction not involving a public offering.
Between May 1, 2026 and May 27, 2026, Streeterville made partial redemptions in connection with the Exchange Agreement, pursuant to which new promissory notes in the principal amount of $284,500 were partitioned from the Exchange Note and exchanged for 93,333 shares of Class A common stock, reducing the outstanding balance of the Exchange Note by approximately $259,054. The consideration received by the Company consisted of the corresponding reduction in indebtedness under the Exchange Note. The shares were issued free of any restrictive securities legend pursuant to Rule 144. The exchanges were made in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act, as exchanges by the Company with an existing security holder.
We did not sell securities pursuant to a registration statement during the three months ended June 30, 2026 that would require disclosure of use of proceeds under Rule 463 under the Securities Act or Item 701(f) of Regulation S-K.
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Our Section 16 officers and directors, as defined in Rule 16a-1(f) of the Exchange Act, may from time to time enter into plans for the purchase or sale of our common stock that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act. During the quarter ended June 30, 2026, the following Section 16 officers and directors, as defined in Rule 16a-1(f), adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K of the Exchange Act):
| ● | On May 6, 2026, Jan Goetgeluk, our Chief Executive Officer, completed all sales contemplated under his Rule 10b5-1 trading arrangement, which was adopted on January 6, 2026 for up to 500,000 shares of our Class A common stock. As a result, Mr. Goetgeluk’s 10b5-1 trading arrangement terminated on May 6, 2026. Mr. Goetgeluk has informed the Company that he does not currently intend to adopt a new Rule 10b5-1 trading arrangement to sell additional shares of the Company’s Class A common stock. |
| ● | On June 30, 2026, Ugo de Charette, a member of our Board of Directors, adopted a new written trading plan. The plan’s maximum duration is until March 29, 2027 and the first trade will not occur until September 29, 2026, at the earliest. The trading plan is intended to permit Mr. de Charette to sell up to an aggregate of 888,002 shares of our Class A common stock. |
Other than as set forth above, no other director or officer of the Company
Item 6. Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: August 20, 2026 | Virtuix Holdings Inc. | |
| By: | /s/ Jan Goetgeluk | |
| Jan Goetgeluk | ||
| Chief Executive Officer | ||
| By: | /s/ Thomas McGinnis | |
| Thomas McGinnis | ||
| Chief Financial Officer |
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