AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

PRELIMINARY OFFERING CIRCULAR DATED AUGUST 31, 2020

VIRTUIX HOLDINGS INC.

1826 Kramer Lane, Suite H, Austin, TX 78758

www.virtuix.com

UP TO                    SHARES OF SERIES A-2 PREFERRED STOCK AND UP TO             SHARES OF COMMON STOCK INTO WHICH THE SERIES A-2 PREFERRED STOCK MAY CONVERT

*[The Series A-2 Preferred Stock is convertible into Common Stock either at the discretion of the investor or automatically upon the occurrence of certain events, like effectiveness of registration of the Common Stock in an initial public offering. The total number of shares of the Common Stock into which the Series A-2 Preferred Stock may be converted will be determined by dividing the original issue price per share by the conversion price per share. See “Securities Being Offered” on page 39 for additional details.

(1) The company has engaged SI Securities, LLC (“SeedInvest”) to act as an underwriter of this offering as set forth in “Plan of Distribution and Selling Securityholders.” The company and the selling stockholders will pay a cash commission of 8.5% to SeedInvest on sales of the Series A-2 Preferred Stock. FINRA fees will be paid by the company. This does not include processing fees paid directly to SeedInvest by investors. See “Plan of Distribution and Selling Securityholders” on page 18 for details of compensation payable to third parties in connection with the offering.

This offering (the “Offering”) will terminate at the earlier of the date at which the maximum offering amount has been sold or the date at which the Offering is earlier terminated by the company at its sole discretion. At least every 12 months after the Offering has been qualified by the United States Securities and Exchange Commission (the “Commission”), the company will file a post-qualification amendment to include the company’s recent financial statements. The company has engaged Bryn Mawr Trust (the “Escrow Agent”) to hold funds that are tendered by investors. The Offering is being conducted on a best-efforts basis, with a minimum target amount of $1,000,000 The company may undertake one or more closings on a rolling basis. After each closing, funds tendered by investors will be made available to the company. After the initial closing of the Offering, the company expects to hold closings on at least a monthly basis.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION

GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, THE COMPANY ENCOURAGES YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, THE COMPANY ENCOURAGES YOU TO REFER TO www.investor.gov.

This offering is inherently risky. See “Risk Factors” on page 9.

Sales of these securities will commence on approximately [date].

The company is following the “Offering Circular” format of disclosure under Regulation A.

In the event that the company becomes a reporting company under the Securities Exchange Act of 1934, it intends to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Summary -- Implications of Being an Emerging Growth Company.”

TABLE OF CONTENTS

In this Offering Circular, the term “Virtuix” or “the company” refers to Virtuix Holdings Inc. and its subsidiaries Virtuix Inc. and Virtuix Manufacturing Ltd., on a consolidated basis.

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

Implications of Being an Emerging Growth Company

The company is not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), because it is not registering its securities under the Exchange Act. Rather, it will be subject to the more limited reporting requirements under Regulation A, including the obligation to electronically file:

In addition, at any time after completing reporting for the fiscal year in which this offering statement was qualified, if the securities of each class to which this offering statement relates are held of record by fewer than 300 persons and offers or sales are not ongoing, the company may immediately suspend its ongoing reporting obligations under Regulation A.

If and when the company becomes subject to the ongoing reporting requirements of the Exchange Act, as an issuer with less than $1.07 billion in total annual gross revenues during its last fiscal year, it will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company it:

The company intends to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. The company’s election to use the phase-in periods may make it difficult to compare its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, the company may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after its initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time should it no longer meet the definition of an emerging growth company. Note that the Offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the Offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that the company would cease to be an “emerging growth company” if the company has more than $1.07 billion in annual revenues, has more than $700 million in market value of its common stock held by non-affiliates, or issues more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to the company due to the fact that it may also qualify, once listed, as a “smaller reporting company” under the Commission’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

SUMMARY

OFFERING CIRCULAR SUMMARY

This Offering Circular Summary highlights information contained elsewhere and does not contain all of the information that you should consider in making your investment decision. Before investing in the company’s Series A-2 Preferred Stock, you should carefully read this entire Offering Circular, including the company’s financial statements and related notes. You should also consider, among other information, the matters described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Company

Virtuix Holdings Inc. (“Virtuix Holdings” or “the company”) was formed on December 20, 2013 as a Delaware Corporation. The company operates three wholly-owned subsidiaries: Virtuix Inc., a Delaware corporation formed on April 15, 2013 for the purpose of developing virtual reality hardware and software; Virtuix Manufacturing Ltd., a subsidiary organized in Hong Kong and formed on January 29, 2015; and Virtuix Manufacturing (Zhuhai) Co., Ltd., a subsidiary organized in China and formed on July 28, 2016.

Brief timeline of the company’s history:

To date, the company has:

The Company’s Current Products

Backed by Mark Cuban and other prominent investors, the company sells the Omni, an “omni-directional treadmill” that lets players walk or run in 360 degrees inside virtual reality (“VR”) videogames and other VR applications. The Omni's immersive experience takes gaming to the next level.

Specifically, the company sells two products related to this concept:

Both products listed above are sold to commercial markets only.

Other Income Streams

The Company’s Plans for New Products

During 2019, in response to requests from Omni fans, Virtuix began developing an at-home Omni system, “Omni One,” that is optimized for consumer use and increases the freedom of movement of the Omni Pro design. Virtuix aims to make Omni One the “Peloton for gamers.” The company intends to make the business model for Omni One similar to Peloton’s. Specifically, it intends to include a monthly subscription fee in addition to an online game store to sell individual games.

Virtuix expects that its existing install base of thousands of commercial Omnis at out-of-home venues will provide an ideal demo and sales channel for Omni One. The company intends to launch Omni One in the second half of 2021.

The Current Offering

Summary Financial Information

The Omni has become a global entertainment hit. Specifically, Virtuix has:

More than 500 entertainment venues worldwide offer the Omni experience. This success in penetrating the commercial entertainment sector has allowed Virtuix to build a large and devoted player community. As of March 31, 2020, the Omniverse game platform has logged more than one million plays.

Selected Risks 

The company’s business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, but are not limited to, the following:

RISK FACTORS

The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events, and technological developments (such as cyber-attacks and the ability to prevent those attacks). Additionally, early-stage companies are inherently riskier than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

Risks Related to the Company

The company has a limited operating history upon which you can evaluate its performance, and has not yet generated profits. Accordingly, the company’s prospects must be considered in light of the risks that any new company encounters. Virtuix was incorporated under the laws of the State of Delaware on December 20, 2013, and it has not yet generated sustained profits. The likelihood of its creating a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the growth of a business, its operation in a competitive industry, and the continued development of its technology and products. The company anticipates that its operating expenses will increase for the near future, and there is no assurance that it will be profitable in the near future. You should consider the business, operations, and prospects in light of the risks, expenses, and challenges faced as an emerging growth company.

The company anticipates initially sustaining operating losses. It is anticipated that the company will initially sustain operating losses. Virtuix’s ability to become profitable depends on success in licensing and selling of products. There can be no assurance that this will occur. Unanticipated problems and expenses are often encountered in offering new products, such as the Omni One, which may impact whether the company is successful. Furthermore, the company may encounter substantial delays and unexpected expenses related to development, technological changes, marketing, regulatory requirements and changes to such requirements, or other unforeseen difficulties. There can be no assurance that the company will ever become profitable. If the company sustains losses over an extended period of time, it may be unable to continue in business.

The company depends on one primary product. The company’s primary product is the Omni, which comes in Omni Pro and Omni Arena configurations. Although the company is developing other products, for example Omni One, the company’s survival in the near term depends its ability to sell its primary product to sufficient commercial customers to make a profit. The company’s current base of commercial customers is still small, and the company will only succeed if it can attract more customers for its primary product.

The delivery and quality of the company's primary product is dependent on third-party manufacturers. The company’s primary product is manufactured by third parties. Although the company provides the product’s design, specifications, and quality standards, to meet the required quality standards it relies on a supply chain of 3 contract manufacturers in China, who assemble the final product, and approximately 50 manufacturers in China, Taiwan, and the U.S. who supply raw materials and components. Difficulties encountered by one or more manufacturers may result in a poor-quality product or the inability to deliver product in a timely manner. If the current manufacturers encounter difficulties, the company may be required to find other manufacturers, resulting in delays.

The technology for the company’s newest product, Omni One, is not yet fully developed, and there is no guarantee that it will successfully develop the technology. The company is developing complex technology for at-home use that will require significant technical expertise to develop and commercialize. If the company is unable to successfully develop and commercialize its technology and products, its viability as a business might be significantly affected. 

The company may not be able to protect its intellectual property. The company's success will depend on its ability to secure additional patent protection for its core technologies and ability to enforce those patents. The patent applications that are pending may not result in issued patents. If any patent application results in an issued patent, that patent may later be invalidated or held unenforceable as patent law changes. Further, the outsourcing of the manufacture of the company’s product may result in the unauthorized exposure of its intellectual property.

If the company cannot raise sufficient funds, it will not succeed. Virtuix is offering Series A-2 Preferred Stock in the amount of [_______] shares of Preferred Stock and up to $[        ] million in this offering on a best-efforts basis and may not raise the complete amount. Even if the maximum amount is raised, the company is likely to need additional funds in the future in order to grow, and if it cannot raise those funds for whatever reason, including reasons relating to the company itself or to the broader economy, it may not survive. If the company raises a substantially lesser amount than the Maximum Raise, it will have to find other sources of funding for some of the plans outlined in “Use of Proceeds.”

Future fundraising may affect the rights of investors. In order to expand, the company is likely to raise funds again in the future, either by offerings of securities or through borrowing from banks or other sources. The terms of future capital-raising, such as loan agreements, may include covenants that give creditors greater rights over the financial resources of the company.

The company’s future success is dependent on the continued service of a small executive management team. The company depends on the skill and experience of two individuals, Jan Goetgeluk and David Allan. Each has a different skill set. The company’s success is dependent on their ability to manage all aspects of the business effectively. Because the company is relying on its small executive management team, it lacks certain business development resources that may hurt its ability to grow its business. Any loss of key members of the executive team could have a negative impact on the company’s ability to manage and grow its business effectively. The company does not maintain a key person life insurance policy on any of the members of its senior management team. As a result, the company would have no way to cover the financial loss if it were to lose the services of its directors or officers. 

The company relies on third-party manufacturers and service providers. The company’s third-party partners provide a variety of essential business functions, including distribution, manufacturing, and many others. It is possible that some of these third parties will fail to perform their services or will perform them in an unacceptable manner. If the company encounters problems with one or more of these parties, their failure to perform to expectations could have a material adverse impact on the company.

New competitors may enter the market. The company operates in a relatively new market and the competitive landscape is not yet clear. New competitors may enter the market with an expanded range of products at a lower cost, targeting the same customer base, which may force the company to cut prices.

Competitors may be able to call upon more resources than the company. While the company believes that the Omni is unique, there may be other ways to provide for 360-degree movement and interaction for virtual reality. Additionally, competitors may replicate Virtuix's business ideas and produce directly competing products, possibly without having to rely on outsourced manufacturing. These competitors may be better capitalized than Virtuix, which would give them a significant advantage. This would particularly be the case if major technology companies were to enter the market.

Virtuix could be adversely affected by product liability, personal injury, or other health and safety issues. The company could be adversely impacted by the supply of defective products. Defective products or errors in the company’s technology could lead to serious injury or death. Product liability or personal injury claims may be asserted against the company with respect to any of the products it supplies or services it provides. Virtuix is also liable for harms caused by any faults in raw materials or products supplied by third-party manufacturers and suppliers that it utilizes. It is the company’s responsibility to maintain a quality management system and to audit its suppliers to ensure that products supplied to the company meet proper standards. Should a product or other liability issue arise, the coverage limits under insurance programs and the indemnification amounts available to the company may not be adequate to protect it against claims and judgments. The company also may not be able to maintain such insurance on acceptable terms in the future. The company could suffer significant reputational damage and financial liability if it experiences any of the foregoing health and safety issues or incidents, which could have a material adverse effect on its business operations, financial condition, and results of operations.

Any valuation at this stage is difficult to assess. The valuation for the Offering was established by the company. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially early-stage companies, is difficult to assess, and you may risk overpaying for your investment.

All of the company’s assets, including intellectual property, are pledged as collateral to a lender. Pursuant to the Loan and Security Agreement dated November 12, 2018 and the IP Security Agreement dated November 12, 2018 between the following parties: Virtuix Holdings, Inc., Virtuix Inc., Virtuix Manufacturing Ltd., and Venture Lending and Leasing VIII and Venture Lending and Leasing IX, Inc., the company has granted a security interest in all of its personal property and intellectual property, whether it exists as of November 12, 2018 or is later acquired. In the event the company is in an Event of Default (as defined by the Loan and Security Agreement), or breaches any warranty or agreement made in the Loan and Security Agreement and does not cure the breach within 30 days, the lender could acquire all of the company’s assets, including all of its intellectual property.

A portion of the proceeds from the Offering will be used for the repayment of existing debt of the company and not used to further invest in its operations. The company intends to use a portion of the proceeds of the Offering to repay existing subordinated promissory notes that have been issued by the company. As such, those funds will not be used to further invest in its operations, but will go to pay off the outstanding balance from previous financing by the company, which has already been put towards the company’s operations.

The Company’s Consolidated Financial Statements include a Going Concern Opinion. The company’s consolidated financial statements were prepared on a “going concern” basis. Certain matters, as described in the accompanying financial statements, indicate there may be substantial doubt about the company's ability to continue as a going concern. The company has not generated profits since inception, has negative cash flows from operations, has sustained net losses of $3,580,222 and $2,672,623 for the years ended March 31, 2020 and 2019, respectively, has an accumulated deficit of $21,388,253 as of March 31, 2020, has a working capital deficit of $3,941,594 as of March 31, 2020, and lacks liquid assets to satisfy its obligations as they come due with $152,376 of cash as of March 31, 2020. These factors, among others, raise substantial doubt about the ability of the company to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

Risks Related to Securities in this Offering

There is no current market for any shares of the company's stock. There is no formal marketplace for the resale of the Series A-2 Preferred Stock or of any shares of Common Stock issuable upon conversion of the Series A-2 Preferred Stock. Shares of Series A-2 Preferred Stock may be traded on the over-the-counter market to the extent any demand exists. Investors should assume that they may not be able to liquidate their investment for some time, or be able to pledge their shares as collateral.

Investors will hold minority interests in the company. Virtuix Holdings Inc. has already issued 3,750,000 shares of its Series Seed Preferred Stock, 3,601,709 shares of its Series 2 Seed Preferred Stock, and 4,622,024 shares of its Series A Preferred Stock. Investors will hold minority interests in the company and will not be able to direct its operations. The rights, preferences, and privileges of the Series A-2 Preferred Stock are similar to those of the Series Seed Preferred Stock and Series 2 Seed Preferred Stock.

The company has previously issued secured debt. The company has an outstanding loan with a balance of $350,000 as of July 1, 2020, secured by a pledge of 2,000,000 shares of the Common Stock of Virtuix Inc. and the intellectual property of the company as collateral for the loan. In the event of default on repayment of this loan, the lender may take possession and sell the collateral to satisfy the company’s obligations under the loan.

Risks Related to Forum selection and Jury Waivers

Investors will be subject to the terms of the Subscription Agreement. As part of this investment, each investor will be required to agree to the terms of the Subscription Agreement included as Exhibit 4 to the Offering Statement of which this Offering Circular is part. The Subscription Agreement requires investors to indemnify the company for any claim of brokerage commissions, finders’ fees, or similar compensation.

All legal conflicts relating to the Subscription Agreement will be heard in Texas courts under Texas law. In addition, by each investor’s execution of the Subscription Agreement and under the terms thereof, each investor will join as a party to the Amendment No. 1 to the Amended and Restated Investors’ Rights Agreement, the Amendment No. 1 to the Amended and Restated Right of First Refusal Agreement, and the Amendment and Restated Voting Agreement, each dated as of March 10, 2016, as entered into by the company with the holders of the company’s Series Seed Preferred Stock, Series 2 Seed Preferred Stock, Series A Preferred Stock, and certain holders of Common Stock. Each of these investment agreements has been filed as an exhibit to the company’s Offering Statement under Regulation A of which this Offering Circular is part.

Investors in this offering may not be entitled to a jury trial with respect to claims arising under the Subscription Agreement, which could result in less favourable outcomes to the plaintiff(s) in any action under the Agreement. Investors in the Offering will be bound by the Subscription Agreement, which includes a provision under which investors waive the right to a jury trial of any claim they may have against the company arising out of or relating to the Agreement, including any claims made under the federal securities laws. By signing the Agreement, the investor warrants that the investor has reviewed this waiver with his or her legal counsel, and knowingly and voluntarily waives the investor’s jury trial rights following consultation with the investor’s legal counsel.

If the company opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To the company’s knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, the company believes that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Texas, which governs the Agreement, by a federal or state court in the State of Texas. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within an agreement is sufficiently prominent such that a party knowingly, intelligently, and voluntarily waived the right to a jury trial. The company believes that this is the case with respect to the Subscription Agreement. You should consult legal counsel regarding the jury waiver provision before entering into the Subscription Agreement.

If you bring a claim against the company in connection with matters arising under the Agreement, including claims under the federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the company. If a lawsuit is brought against the company under the Agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favourable to the plaintiff(s) in such an action.

Nevertheless, if the jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the Agreement with a jury trial. No condition, stipulation, or provision of the Subscription Agreement serves as a waiver by any holder of the company’s securities or by the company of compliance with any substantive provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when the shares are transferred, the transferee is required to agree to all the same conditions, obligations, and restrictions applicable to the shares or to the transferor with regard to ownership of the shares, that were in effect immediately prior to the transfer of the shares, including but not limited to the Subscription Agreement.

Risks Related to COVID-19

The company’s results of operations may be negatively impacted by the coronavirus outbreak. In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has spread to many countries, including the United States, and was declared to be a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified, and the U.S., Europe, and Asia have implemented severe travel restrictions and social distancing. The impacts of the outbreak are unknown and rapidly evolving. A widespread health crisis has adversely affected and could continue to affect the global economy, resulting in an economic downturn that could negatively impact the value of the shares and investor demand for the shares generally.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase the company’s cost of capital and adversely affect its ability to access the capital markets in the future. It is possible that the continued spread of COVID-19 could cause a further economic slowdown or recession or cause other unpredictable events, each of which could adversely affect Virtuix’s business, results of operations, or financial condition.

The extent to which COVID-19 affects the company’s financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others. Moreover, the COVID-19 outbreak has had and may continue to have indeterminable adverse effects on general commercial activity and the world economy, and the company’s business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.

Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect Virtuix’s business. Virtuix’s business could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of COVID-19. The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could adversely affect the value of the shares and the financial condition of the company’s investors or prospective investors, resulting in reduced demand for the shares generally. Further, such risks could cause limited attendance to location-based entertainment venues, such as arcades, or result in persons avoiding holding or appearing at in-person events that utilize Virtuix products. “Shelter-in-place” or other such orders by governmental entities could also disrupt the company’s operations, if those employees of the company who cannot perform their duties from home are unable to report to work.

DILUTION

Dilution means a reduction in value, control, or earnings of the shares the investor owns.

Immediate dilution

An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares.

The following table compares the price that new investors are paying for their shares with the effective cash price paid by existing shareholders, giving effect to full conversion of all outstanding convertible notes and assuming that the shares are sold at $[_____] per share. The schedule presents shares and pricing as issued and reflects all transactions since inception, which gives investors a better picture of what they will pay for their investment compared to the company’s insiders than just including such transactions for the last 12 months, which is what the SEC requires.

The following table presents the approximate effective cash price paid for all shares and potential shares issuable by the company as of August 31, 2020. 

The following table illustrates the dilution that new investors will experience upon investment in the company relative to existing holders of its securities. Because this calculation is based on the net tangible assets of the company, the company is calculating based on its net tangible book value of (3,821,863) as of March 31, 2020, as included in its audited financial statements.

The offering costs assumed in the following table includes up to $850,000 in commissions to SI Securities, LLC, as well as legal and accounting fees incurred for this offering.

The table presents three scenarios for the convenience of the reader: a $1,000,000 raise from this offering (the minimum offering), a $5,000,000 raise from this offering, and a fully subscribed $10,000,000 raise from this offering (the maximum offering).

Future dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when the company issues more shares, the percentage of the company that you own will go down, even though the value of the company may go up. You will own a smaller piece of a larger company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, or an angel investment), employees exercising stock options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares, or warrants) into stock.

If the company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends, and most early-stage companies are unlikely to offer dividends, preferring to invest any earnings into the company).

The type of dilution that hurts early-stage investors most occurs when the company sells more shares in a “down round,” meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):

This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round,” the holders of the convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue in the future), and to the terms of those notes.

If you are making an investment expecting to own a certain percentage of the company, or expecting each share to hold a certain amount of value, it’s important to realize how the value of those shares can decrease by way of actions taken by the company. Dilution can cause drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

Plan of Distribution

The company is offering a minimum of [___________] and up to [___________] shares of Series A-2 Preferred Stock (the “Shares”) on a “best efforts” basis at a price of $[ __] per share. The minimum subscription is $1,000.00. SeedInvest Auto Invest participants have a lower investment minimum of $200. 

The company has engaged SI Securities, LLC as its sole and exclusive placement agent to assist in the placement of its securities. SI Securities, LLC is under no obligation to purchase any securities or arrange for the sale of any specific number or dollar amount of securities.

Commissions and Discounts

The following table shows the total discounts and commissions payable to the placement agents in connection with this offering, assuming the company raises the maximum amount of offering proceeds:

Other Terms

Except as set forth above, the company is not under any contractual obligation to engage SI Securities, LLC to provide any services to the company after this offering, and it has no present intent to do so. However, SI Securities, LLC may, among other things, introduce the company to potential target businesses or assist the company in raising additional capital, as needs may arise in the future. If SI Securities, LLC provides services to the company after this offering, the company may pay SI Securities, LLC fair and reasonable fees that would be determined at that time in an arm’s length negotiation.

SI Securities, LLC intends to use an online platform provided by SeedInvest Technology, LLC, an affiliate of SI Securities, LLC, at the domain name www.seedinvest.com (the “Online Platform”) to provide technology tools to allow for the sales of securities in this offering. SI Securities, LLC will charge you a non-refundable transaction fee equal to 2% of the amount you invest (up to $300) at the time you subscribe for the company’s shares. This fee will be refunded in the event the company does not reach its minimum fundraising goal. In addition, SI Securities, LLC may engage selling agents in connection with the Offering to assist with the placement of securities.

Selling Security holders

No securities are being sold for the account of security holders. All net proceeds of this offering will go to the company.

Transfer Agent and Registrar 

Carta will serve as transfer agent to maintain shareholder information on a book-entry basis. The company will not issue shares in physical or paper form. Instead, its shares will be recorded and maintained on its shareholder register.

Investors’ Tender of Funds and Return of Funds

After the Commission has qualified the Offering Statement, the company will accept tenders of funds to purchase the Series A-2 Preferred Stock. The company may close on investments on a “rolling” basis (so not all investors will receive their shares on the same date), provided that the minimum offering amount has been met. Tendered funds will remain in escrow until both the minimum offering amount has been reached and a closing has occurred. However, in the event the company has not sold the minimum amount of shares by [_______], or sooner if the Offering is terminated by the company, any money tendered by potential investors will be promptly returned by the Escrow Agent. Upon closing, funds tendered by investors will be made available to the company for its use. 

In the event that it takes some time for the company to raise funds in this offering, the company may rely on cash on hand, or may seek to raise funds by conducting a new offering of equity or debt securities.

In order to invest, you will be required to subscribe to the Offering via the Online Platform and agree to the terms of the Offering, the Subscription Agreement, Investors’ Rights Agreement, and any other relevant exhibits attached thereto. 

Forum Selection Provision

The Subscription Agreement that investors will execute in connection with the Offering includes a forum selection provision that requires any claims against the company based on the Agreement to be brought in a state or federal court of competent jurisdiction in the State of Texas, for the purpose of any suit, action, or other proceeding arising out of, or based upon, the Agreement. Although the company believes the provision benefits it by providing increased consistency in the application of Texas law in the types of lawsuits to which it applies and in limiting its litigation costs, to the extent it is enforceable, the forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favourable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted the provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so that they may continue to focus on operations of the company. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Virtuix believes that the exclusive forum provision applies to claims arising under the Securities Act, but there is uncertainty as to whether a court would enforce such a provision in this context. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Investors will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations thereunder.

Jury Trial Waiver

The Subscription Agreement that investors will execute in connection with the Offering provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the Agreement, including any claim under federal securities laws. By signing the Subscription Agreement, an investor will warrant that the investor has reviewed this waiver with the investor’s legal counsel, and knowingly and voluntarily waives his or her jury trial rights following consultation with the investor’s legal counsel. If the company opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. In addition, by agreeing to the provision, subscribers will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.

USE OF PROCEEDS TO ISSUER

Assuming a maximum raise of $10,000,000, the net proceeds of this offering would be approximately $9,037,000 after subtracting estimated offering costs of $850,000 to SI Securities, LLC in commissions, $40,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. If Virtuix successfully raises the maximum amount under this raise, the company intends to fund the development of Omni One and bring Omni One to market in 2021.

Assuming a raise of $5,000,000, representing 50% of the maximum offering amount, the net proceeds would be approximately $4,462,000 after subtracting estimated offering costs of $425,000 to SI Securities, LLC in commissions, $40,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. In such an event, Virtuix would adjust its use of proceeds by limiting the marketing budget driving Omni One’s initial sales growth and limiting the amount of additional recruiting of new employees.

Assuming a raise of the minimum of $1,000,000, representing 10% of the maximum offering amount, net proceeds would be approximately $802,000 after subtracting estimated offering costs of $85,000 to SI Securities, LLC in commissions, $40,000 in audit fees, $13,000 in Edgarization fees, and $60,000 in legal fees. In such an event, Virtuix would adjust its use of proceeds by limiting considerably the scope of development of Omni One. The company would also limit its speed of growth and limit the amount of additional recruiting of new employees.

Please see the table below for a summary of the company’s intended use of proceeds from this offering:

The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.

THE COMPANY’S BUSINESS

Overview

The company was first founded as Virtuix Technologies LLC in April 2013. In November 2013, Virtuix Technologies LLC converted into Virtuix Inc.

In December 2013, Virtuix Holdings Inc. was incorporated in Delaware to act as the holding company for the following entities:

Virtuix Inc.

Virtuix Inc., a wholly-owned subsidiary, is a Delaware corporation that was formed on April 15, 2013. Virtuix Inc. develops virtual-reality hardware and software, primarily the Omni, the first virtual-reality interface that allows users to move freely and naturally in video games and virtual worlds. In February 2019, Virtuix Inc. released Omniverse VR ARENA, later renamed Omni Arena, a four-player esports attraction that includes four Omni motion platforms.

Virtuix Manufacturing Ltd.

Virtuix Manufacturing Limited (“VML”), a wholly-owned subsidiary, is a Hong Kong corporation that was formed on January 29, 2015. On June 24, 2015, the company acquired 100% of VML’s common stock (10,000 shares). VML conducts manufacturing operations and transacts USD-denominated business with the company’s suppliers.

Virtuix Manufacturing (Zhuhai) Co., Ltd.

Virtuix Manufacturing (Zhuhai) Co., Ltd. (“VML_ZH”), a wholly-owned subsidiary of VML, was formed on July 28, 2016 and is a Wholly Foreign-Owned Enterprise (“WFOE”) registered in Zhuhai, Guangdong, China. VML_ZH sells the company’s products to Asian customers, conducts manufacturing operations, and transacts CNY-denominated business with Chinese suppliers.

Joint Venture

In July 2016, the company announced that it had formed a joint venture with Hero Entertainment, a Chinese game publisher and esports operator, to develop virtual-reality content and distribute the company’s products in Asian markets. The joint venture, named Heroix VR (Shanghai) Co., Ltd. (the “Joint Venture” or “Heroix”), is a Sino-foreign equity joint venture company established under the laws of the People’s Republic of China and registered in Shanghai. The company invested in Heroix via VML. VML holds an ownership percentage in Heroix of 49%, a non-controlling interest. Heroix began operations in October 2016.

Principal Products and Services

Backed by Mark Cuban and other prominent investors, the Omni is the first-of-its-kind motion platform that lets players walk and run in 360 degrees inside video games and other virtual worlds. The Omni's immersive experience takes gaming to the next level.

The company sells three products related to the Omni concept:

OMNI PRO

Omni Pro is a virtual-reality motion platform that lets players walk and run at full speed in 360 degrees without risk of falling or colliding with other people. Players experience unrestricted gameplay action, including sideways and backwards movement, at their real-time physical speed.

Omni Pro is sold mainly to enterprise customers and smaller entertainment venues (for example, VR arcades). The company distributes Omni Pro through a network of 22 distributors covering 45 countries. Consumers cannot purchase this product directly.

With more than 3,500 Omnis shipped to date, the company considers the Omni platform to be the leading and most popular VR motion platform on the market.

Omniverse Game Library & Specialized VR Applications

Players of Omni Pro at commercial entertainment venues have access to the Omniverse library of 23 VR games that are optimized for the Omni experience. These games allow players to walk and run around inside virtual game worlds. They include popular genres such as first-person shooting games, adventure games, kid-friendly experiences, and virtual visits to natural settings like forests and beaches.

Customers outside the entertainment sector use Omni Pro for various non-gaming applications, such as training and simulation. These customers can develop custom VR applications using Virtuix’s software development kit (“SDK”), which allows developers to integrate Omni Pro motion output into applications that serve specialized purposes.

OMNI ARENA

Omni Arena is a virtual reality esports attraction that bundles four Omni Pro platforms into a four-player attraction that can be operated by a single attendant. Omni Arena features ongoing esports contests with a $100,000 prize pool sponsored by Virtuix and HP.

The company believes, based on usage data, that the Omni’s physical engagement combined with Omni Arena’s competitive, multiplayer gaming offers entertainment venues a winning formula for high repeat play. The esports prize pool incentivizes gamers to enter weekly and monthly contests, and serious contestants often come back to compete every week.

Curated Gaming Experience

As with Omni Pro, players of Omni Arena can walk or run at full speed inside video games. Omni Arena offers a curated selection of multiplayer VR games from the Omniverse library. These games feature co-operative and player-vs-player shooters, thrilling adventures, frightening horror, and kid-friendly action. Players engage virtually with their teammates and other teams and players, thus facilitating social and community-based experiences.

Benefits for Venues

The company believes that Omni Arena increases revenues at entertainment venues in the following ways:

The company believes that Omni Arena provides a customer experience that guests consider to be complete and satisfying. Upon finishing the game, guests receive a gameplay video, suitable for sharing on social media, that comes the venue’s logo embedded.

Furthermore, Virtuix has designed Omni Arena to be a highly automated attraction for venues to operate. It includes the following features that help to reduces a venue’s labor costs and boost utilization:

Venues typically sell tickets for Omni Arena’s 20-minute experience for $12 to $15 per player. At top-performing sites, Omni Arena generates monthly revenues of $30,000 or more.

In an ongoing player survey, in which over 10,000 players have participated to date, 97% of players expressed intent to play Omni Arena again, and 43% of players reported they had visited the venue specifically to play Omni Arena.

Driving high revenues, guest traffic, and repeat play are hallmarks of an “anchor attraction,” the class of attraction that is most valuable to entertainment venues. Based on revenue data, usage data, and survey results, the company believes that Omni Arena’s performance meets the criteria for an anchor attraction.

OMNIVERSE

In October 2017, Virtuix launched Omniverse^TM, the Omni’s proprietary content distribution and arcade management platform. Omniverse currently offers 23 top VR games that are optimized for the Omni experience and suited for commercial entertainment venues. Of the 23 games, 9 were developed by Virtuix and 14 by third-party studios.

Omniverse transforms the Omni into a complete entertainment solution for amusement venues. Thanks to Omniverse’s extensive catalog of popular games and its leaderboard functionality, customers come back to play again and again.

The company generates revenues from the sale of “Omniverse credits,” which are gameplay credits needed by commercial operators to play games on Omni Pro and Omni Arena. By selling Omniverse credits, Virtuix collects ongoing game licensing fees from entertainment venues that operate Omni Pro and Omni Arena.

Product Safety

The company believes that the Omni platform is safe to use. Players are strapped into a safety harness inside the Omni ring structure. Virtuix believes that players cannot fall out of the safety harness during use. Before and after gameplay, players use a rubber anti-slip mat to safely enter and exit the Omni platform. Virtuix is not aware of any accidents in the four years since the launch of the Omni and has not been subject to any legal proceedings related to safety incidents.

The Company’s Plans for New Products

During 2019, in response to requests from Omni fans, Virtuix began developing an at-home Omni system, “Omni One,” that is optimized for consumer use. Omni One’s mechanical design offers increased freedom of movement compared to Omni Pro’s design.

Virtuix aims to make Omni One the “Peloton for gamers.” The company intends to make Omni One’s

business model similar to Peloton’s. Specifically, it will include a monthly subscription fee in addition to an online store that sells individual games.

Virtuix believes that its install base of thousands of commercial Omnis at out-of-home venues provides an ideal demo and sales channel for Omni One.

The company intends to release Omni One in the second half of 2021 as a complete entertainment system comprising the following hardware, software, and content elements:

Virtuix’s long-term vision is to bring full-body VR to mass entertainment markets, both commercial and consumer. Virtuix aims to make the Omni system essential to every VR setup, whether inside or outside the home.

Virtuix foresees wide-ranging commercial applications, including out-of-home amusement (arcades, family entertainment centers, and sports centers), training and simulation, education, virtual tourism, and health care and fitness.

Market

Virtuix intends to sell three distinct products: Omni Pro, Omni Arena, and Omni One. These products will be sold through different channels.

Omni Pro and Omni Arena

Virtuix sells Omni Arena directly to arcades, amusement centers, food & beverage venues, sports centers, and entertainment complexes (such as cinema multiplexes) in the U.S. and Canada. Well-known customers include Dave & Buster’s and Sky Zone trampoline parks.

According to research firm IbisWorld, the U.S. market has 8,300 venues within this sector, representing a $1.2 billion potential market for Omni Arena. The company has determined that this sector is highly fragmented, sustaining thousands of small operators. It is not dominated by major participants that would impose barriers to entry by a new entrant such as Virtuix.

Virtuix sells Omni Pro in container-load quantities to its distributors, who resell the systems in their local markets. End customers of Omni Pro include commercial enterprises, universities, and smaller entertainment venues (such as specialized VR arcades).

Omni One

Virtuix estimates that the serviceable addressable market in the U.S. for Omni One, the Omni’s upcoming at-home version, is approximately 14 million households. The company intends to expand sales of Omni One rapidly into Europe and China.

Based on Virtuix’s primary research and surveys of Omni Arena players, it has identified three key buyer personas for Omni One:

·         VR enthusiasts

·         Gamers

·         Parents

Marketing/Distribution Channels

Marketing of Omni Pro and Omni Arena

Virtuix’s methods for marketing Omni Pro and Omni Arena include trade publications and trade shows. The company attends three to four tradeshows each year to demonstrate the Omni experience to potential customers.

Virtuix relies on a network of 22 worldwide distributors to promote and distribute Omni Pro in their local markets. Virtuix does not sell this product directly to end customers.

Virtuix sells Omni Arena directly to customers in the U.S. and Canada. This product is not available outside of the U.S. and Canada.

Marketing of Omni One

The company intends to promote Omni One initially to its existing Omni player community via direct email marketing. The company is in direct contact with fans of its out-of-home experience, a captive audience of registered players that provides a large pool of potential buyers for Omni One. Virtuix estimates that by 2022, 150 venues will operate Omni Arena, and that the number of registered players will exceed one million.

In a survey Virtuix conducted of 1,000 players, 14% indicated they would be “likely or highly likely” to purchase Omni One for an upfront purchase price of $1,995. Virtuix believes that likely buyers of Omni One are consumers who fall within the following categories:

As well as targeting the above groups, the company intends to use digital media advertising and gaming influencers to market Omni One to the wider market.

Competition

The company faces competition mainly from KATVR (China) and Cyberith (Austria).

KATVR currently offers a VR treadmill only, without a headset or computer, for about $1,000. Virtuix believes that Omni One offers customers the following advantages over KATVR’s product:

Cyberith, as of March 31, 2020, had failed to develop a home product and failed to ship a product of any kind to its Kickstarter backers. Cyberith offers only a commercial system, the “Virtualizer,” to enterprise customers in low volumes. Virtuix believes that the Virtualizer’s flat-shaped base makes walking difficult.

In addition to the weaknesses listed above, KATVR and Cyberith’s products are deemed to infringe on several of Virtuix’s patents.

Supply Chain

The company conducts final assembly of Omni Arena at its own facility in Austin, Texas. The company purchases Omni Pro and Omni Arena hardware components from about 50 suppliers in the U.S, China, and Taiwan. To manage this supply chain, Virtuix employs purchasing and quality-control teams at its locations in Austin, Texas and Zhuhai, China.

The company’s top three suppliers are:

Purchases from the above three suppliers account for approximately 54% of Omni Arena’s materials cost.

Although the structural components of Omni Arena are fabricated in China, the company builds the finished Omni Arena product at its facility in Austin, Texas. Final assembly of Omni Arena occurs at the customer site and is performed by the company’s installation team.

The company ships Omni Pro systems in container loads (20’ or 40’) to distributors on EXW China terms (meaning the distributor handles shipping and importing arrangements). The company ships Omni Arena structural components in container loads from China to third-party warehouses in the U.S., and then to customer sites for installation. The company ships other Omni Arena materials, such as electronic components, via LCL trucking services from its Austin, Texas facility to customer sites.

The company intends to produce Omni One hardware using the China, Taiwan, and U.S. suppliers who currently produce Omni Pro, and to manage production using the supply-chain management staff the company currently employs in Austin, Texas and Zhuhai, China.

Research and Development

Since inception, the company has spent approximately $6.9 million on research and development of its products. Most recently, the company spent $805,042 for the year ended March 31, 2020. Part of these funds was allocated to further development of Omni Arena, and part was allocated to research and development of the company’s newest product, Omni One.

Employees

Virtuix has 24 full-time employees: 12 at its Austin, Texas headquarters, 2 remotely in the U.S. (sales reps), and 12 in Zhuhai, China. The company employs 7 part-time hourly workers in Austin for production, installation, and customer support.

Intellectual Property

The company relies on its intellectual property. As of August 2020, the company owns five issued utility patents and nine issued design patents. Six applications are pending.

Patents: Granted

Patents: Applications

*The patent titled “Locomotion System and Apparatus” has been filed with international patent regulators in Australia, Brazil, China, Europe, Hong Kong, India, Russia, and South Korea, and has been granted in Australia, China, Europe, Hong Kong, Russia, and South Korea.

** The patent titled “Method Generating an Input in an Omnidirectional Locomotion System” has been filed with international patent regulators in Australia, Brazil, China, Europe, Hong Kong, India, Russia, and South Korea, and has been granted in Russia.

*** The patent titled “Slip-on Shoe” has been filed with international patent regulators and has been granted in China, Europe, Russia, and South Korea.

**** The patent titled “System and Method of Soft Decoupling an Input” has been filed with international patent regulators and has been granted in China and Europe.

Additionally, Virtuix has entered into a License Agreement with CloudNav, Inc. covering the license of CloudNav, Inc.’s Sensor Fusion Library and Virtual Reality Motion Library.

Trademarks

Regulation

Other than consumer product rules applicable to all companies producing products for consumer use, the company is not aware of any specific regulations that would impact or limit its current or proposed operations.

Litigation

In 2017, the company settled a lawsuit with Glen Jones, who alleged breach of a mutual NDA and misappropriation of trade secrets. In the opinion of the company and its attorneys, the allegations were without merit. For expediency, the company settled the case in exchange for a cash payment of $60,000 and 80,000 shares of its Series A Preferred Stock.

THE COMPANY’S PROPERTY

On June 25, 2015, the company entered into a 39-month non-cancelable operating lease agreement for office space located at 1826 Kramer Lane, Suite H, Austin TX 78758. On February 19, 2018, the company entered into a 60-month extension of the lease term beginning on October 1, 2018 and expiring on September 30, 2023. Monthly rent payments will continue at the previous rate of $7,200 per month and increase at about 3% per square foot to $8,100 over the course of the 60 months. Future minimum lease payments under the agreement, as of March 31, 2020, are as follows:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of the consolidated financial statements and financial condition of Virtuix Holdings Inc. and results of its operations together with its consolidated financial statements and related notes appearing at the end of this Offering Circular. This discussion contains forward-looking statements reflecting the company’s current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Offering Circular.

Overview

The company sells the Omni, an “omni-directional treadmill” that lets players walk or run in 360 degrees inside virtual reality videogames and other virtual reality applications. Virtuix and its subsidiaries have generated $3,855,193 in revenues for the year ended March 31, 2020 and $1,632,202 in revenues for the year ended March 31, 2019.

As a result of the application of ASC 605 and ASC 606, management of the company determined that an adjustment needed to be made to revenue from Omniverse credits. Additionally, errors were noted in recording assets, liabilities, revenues, and expenses as outlined in the following section.

The company has restated its previously reported consolidated financial statements for the year ended March 31, 2019 and all related disclosures. The following is a comparison of the prior year consolidated financial statements as issued compared to the restated consolidated financial statements for the year ended March 31, 2019. The following restatement information was presented in the company's internal-use compiled financial statements that have not been publicly filed.

Results of Operations

Year Ended March 31, 2020 Compared to Year Ended March 31, 2019

Virtuix and its subsidiaries have generated $3,855,193 in revenues for the year ended March 31, 2020 and $1,632,202 in revenues for the year ended March 31, 2019. The costs of goods sold consist of material costs, logistics and warehousing costs, and other costs related to the production and installation of Omni Pro and Omni Arena systems. Net revenues consist of sales of Omni Pro systems, Omni Arena attractions, Omniverse credits, and replacement parts and accessories.

The operating expenses currently consist of selling expenses consisting of marketing expenses and salaries of sales representatives; general and administrative expenses consisting primarily of salaries, travel, and office expenses of administrative employees and contractors; and research and development expenses. Operating expenses totalled $3,821,687 for the year ended March 31, 2020 compared to $3,083,886 for the year ended March 31, 2019, an increase of 24%, primarily due to:

As a result of the foregoing, the company generated a net loss of $3,580,222 as of March 31, 2020 as compared to a net loss of $2,672,623 as of March 31, 2019. A 34% increase in net loss.

The company has certain royalty commitments associated with the shipment of its products for the use of licensed software and modifications together with the company’s hardware and other software. Royalty expense is generally based on a dollar amount per Omni unit shipped and can range from $1 per unit to $8 per unit. For the years ended March 31, 2020 and 2019, management has recorded royalty expense in the consolidated statements of operations of $2,816 and $4,808, respectively.

Liquidity and Capital Resources

As of March 31, 2020 the company’s cash and cash equivalents was $152,376. The company requires the continued infusion of new capital to continue business operations. The company has recorded losses since inception, and as of March 31, 2020, had a net loss of $3,580,222 and a stockholders’ deficit of $21,388,253. The company plans to continue to try to raise additional capital through crowdfunding offerings, equity issuances, or any other method available to the company. Absent additional capital, the company may be forced to significantly reduce expenses and could become insolvent.

In addition, the company has issued subordinated promissory notes with the current outstanding balance of combined principal and interest, as of August 21, 2020, of $2,149,635, and with a continued interest rate of 18% per year. The company intends to have a portion of this balance repaid through the issuance of convertible promissory notes to the lender, and the remaining portion repaid out of the proceeds of this Offering. The company has exercised its option on the subordinated promissory notes to extend the maturity date from July 31, 2020 to January 31, 2021, and may extend it again to July 31, 2021. The portion of the subordinated promissory notes to be repaid through the additional issuance of convertible promissory notes is $640,000.

The company estimates that if it raised the maximum amount sought in this offering, it could continue its current rate of operations through Q2 2022 without raising additional capital. The company’s burn rate is approximately $100,000 per month, assuming sales of 2-3 Omni Arena attractions per month.

Plan of Operations

As of March 31, 2020, the company has achieved the following milestones:

Virtuix has established the following milestones in its plan of operations for the next 12 months:

Trend Information

The company believes that consumer trends are in its favor due to COVID-19 increasing the need for healthy at-home activities. Specifically, the company believes the following consumer trends will contribute to a successful Omni One launch:

The global video game market, worth $165 billion annually (2019), has been steadily growing since 2009. In addition, the company has observed that the global COVID-19 pandemic has pushed demand for games and game-related hardware to new highs. According to a report by The NPD Group, a market research firm, March 2020 was the biggest month for the gaming industry in more than 10 years, as sales of game consoles, games, accessories, and game cards reached $1.6 billion. Shares of gaming companies, including Activision Blizzard and Electronic Arts, reached multi-year highs in 2020.

Other forms of at-home activities are benefitting also. For example, sales of Peloton, the developer of the popular Peloton exercise bike, jumped nearly 61% to $420 million in its fiscal third quarter.

Virtuix believes that its upcoming home product, Omni One, positions the company to participate in these upward trends.

Recent Offerings of Securities and Outstanding Debt

Relaxed Ongoing Reporting Requirements

If Virtuix becomes a public reporting company in the future, it will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which the company refers to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as the company remains an “emerging growth company,” it may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:

If Virtuix becomes a public reporting company in the future, it expects to take advantage of these reporting exemptions until it is no longer an emerging growth company. Virtuix would remain an “emerging growth company” for up to five years, although if the market value of its Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, the company would cease to be an “emerging growth company” as of the following December 31.

If Virtuix does not become a public reporting company under the Exchange Act for any reason, it will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semi-annual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semi-annual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.

In either case, Virtuix will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and shareholders could receive less information than they might expect to receive from more mature public companies.

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The following table sets out the company’s officers and directors. All work with the company on a full-time basis.

Jan Goetgeluk, CEO and Chairman of the Board

Jan Goetgeluk is currently Virtuix’s Chief Executive Officer. He has served in that position for seven years, from April 2013 to the present date. Prior to founding Virtuix, he was an Investment Banking Associate at J.P. Morgan from May 2010 to February 2013. He holds Bachelor of Science and Master of Science degrees in Mechanical Engineering from the University of Ghent in Belgium, and an MBA degree from Rice University in Houston.

David Allan, President and COO

David Allan is currently Virtuix’s President and Chief Operating Officer. He has served in that position for seven years, from August 2013 to the present date. Prior to joining Virtuix, David served as vice president of ERP Power, a California hardware startup, from June 2008 to January 2012. In that position he set up Asian manufacturing operations and helped grow the business to $50 million in sales, 700 employees, and the eventual sale to a private-equity acquirer. From January 2006 to May 2008, he served as Regional Materials Manager at Flextronics, a Fortune 500 manufacturer. David handled large-scale manufacturing programs serving top-tier customers like Apple and Dell. David holds a Bachelor of Applied Science in Systems Design Engineering from the University of Waterloo in Canada.

Brad McGovern, Director

Brad McGovern is currently a Director of Virtuix. He has served as the Managing Partner of Seitz, DeMarco & McGovern (“SDM”) since 2012. Prior to joining SDM, Brad worked in the Investment Management Division of Goldman Sachs from 2010 to 2012, and in the Assurance Department of Ernst & Young from 2005 to 2008. He holds a Bachelor of Business Administration in Finance and Accounting from Texas Christian University, a Masters of Accounting from Texas Christian University, and a Masters of Business Administration from Rice University.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

For the fiscal year ended March 31, 2020 the company compensated its three highest paid directors and executive officers as follows:

For the fiscal year ended March 31, 2020, Virtuix paid its directors as a group $0. There are three directors in this group.

The compensation package was determined based on market rates.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table displays, as of March 31, 2020, the voting securities beneficially owned by (1) any individual director or officer who beneficially owns more than 10% of any class of the company’s capital stock, (2) all executive officers and directors as a group, and (3) any other holder who beneficially owns more than 10% of any class of the company’s capital stock:

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

The company has not entered into any transactions in which the management or related persons have interest in outside of the ordinary course of operations of the company.

SECURITIES BEING OFFERED

Explanatory note: The company has not finalized its Fourth Amended and Restated Certificate of Incorporation, and the discussion below will be updated by amendment.

General

The company is offering Series A-2 Preferred Stock that are convertible into common stock to investors in this offering.

The following description summarizes important terms of the company's capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of the Fourth Amended and Restated Certificate of Incorporation, of which the company has not yet finalized, and its Bylaws, copies of which will be filed as Exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of Virtuix Holdings Inc.’s capital stock, you should refer to its Fourth Amended and Restated Certificate of Incorporation, and Bylaws, and applicable provisions of the Delaware General Corporation Law.

Virtuix Holdings Inc.’s authorized capital stock consists of 23,000,000 shares of Common Stock, $0.001 par value per share, and 15,300,000 shares of Preferred Stock, $0.001 par value per share, of which 7,000,000 of those shares are designated as Series A Preferred Stock, [_________] are designated as Series A-2 Preferred Stock, 4,300,000 shares are designated as Series 2 Seed Preferred Stock, and 4,000,000 are designated as Series Seed Preferred Stock.

[As of August 31, 2020, the outstanding shares of Virtuix Holdings Inc. included:

Preferred Stock

The company has authorized the issuance of four series of Preferred Stock. The series are designated Series Seed Preferred Stock, Series 2 Seed Preferred Stock, Series A Preferred Stock, and Series A-2 Preferred Stock (together the “Designated Preferred Stock”). Each series of Designated Preferred Stock contains substantially similar rights, preferences, and privileges.

Dividend Rights: Holders of Designated Preferred Stock are entitled to receive dividends, as may be declared from time to time by the board of directors out of legally available funds. Those dividends are paid ratably to the holders of Common Stock and Preferred Stock based on the number of shares of Common Stock which would be held by each stockholder if all of the Preferred Stock was converted to Common Stock under the terms of the company's Fourth Amended and Restated Certificate of Incorporation. The company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Voting Rights: Each holder of Designated Preferred Stock is entitled to one vote for each share of Common Stock which would be held by each stockholder if all of the Preferred Stock was converted into Common Stock. Fractional votes are not permitted, and if the conversion results in a fractional share, it will be rounded to the closest whole number. Holders of Preferred Stock are entitled to vote on all matters submitted to a vote of the stockholders, including the election of directors, as a single class with the holders of Common Stock. Specific matters submitted to a vote of the stockholders require the approval of a majority of the holders of Preferred Stock voting as a separate class. These matters include any vote to:

Right to Receive Liquidation Distributions: In the event of the company's liquidation, dissolution, or winding up, holders of its Designated Preferred Stock are entitled to a liquidation preference superior to the Common Stock. Holders of Designated Preferred Stock will receive an amount for each share equal to the original price paid for the shares plus any declared but unpaid dividends thereon. If, upon such liquidation, dissolution or winding up, the assets and funds that are distributable to the holders of Designated Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such assets and funds will be distributed ratably among the holders of the Designated Preferred Stock in proportion to the full preferential amounts to which they would otherwise be entitled to receive.

Preemptive Rights: Investors that acquire at least 85,000 shares of Preferred Stock generally are entitled to preemptive rights to acquire shares in any new offering of equity securities by the company. Holders of less than 85,000 shares do not have preemptive rights. There are no redemptive or sinking fund provisions applicable to the company's Designated Preferred Stock.

Terms of Conversion: The Designated Preferred Stock of Virtuix Holdings Inc. is convertible into the Common Stock of the company as provided by Section 4.3 of the [Fourth Amended and Restated Certificate of Incorporation]. Each share of Designated Preferred Stock is convertible at the option of the holder of the share as any time after issuance and prior to the closing of any transaction that constitutes a liquidation event of the company. The conversion price of the Designated Preferred Stock is equal to the issue price subject to adjustment as discussed under Anti-Dilution Rights below.

Additionally, each share of the Designated Preferred Stock will automatically convert into the Common Stock of the company immediately prior to the closing of a firm commitment underwritten public offering, registered under the Securities Act of 1933, in which the aggregate gross proceeds raised are at least $40 million. The shares will convert in the same manner as the voluntary conversion.

Anti-Dilution Rights: Holders of Virtuix Holdings Inc. Designated Preferred Stock will receive certain anti-dilution protective provisions that will be applied to adjust the number of shares of Common Stock issuable upon conversion of the shares of the respective series of Designated Preferred Stock. If equity securities are subsequently issued by the company at a price per share less than the conversion price of the Designated Preferred Stock then in effect, the conversion price of the Designated Preferred Stock will be adjusted using a broad-based, weighted-average adjustment formula as provided for in the Fourth Amended and Restated Certificate of Incorporation.

Common Stock

Dividend Rights: Holders of Common Stock are not entitled to receive dividends, as may be declared from time to time by the board of directors out of legally available funds, unless such dividends are paid ratably to the holders of Common Stock and Preferred Stock based on the number of shares of Common Stock which would be held by each stockholder if all of the Preferred Stock was converted at the then-effective conversion rate applicable to such shares of Preferred Stock. The company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Voting Rights: Each holder of Common Stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors, but excluding matters that relate solely to the terms of a series of Preferred Stock.

Right to Receive Liquidation Distributions: In the event of the company's liquidation, dissolution, or winding up, holders of its Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of the company’s debts and other liabilities and the satisfaction of the liquidation preferences granted to the holders of all shares of the outstanding Preferred Stock.

Rights and Preferences: Holders of the company's Common Stock have no preemptive, conversion, or other rights, and there are no redemptive or sinking fund provisions applicable to the company's Common Stock.

ONGOING REPORTING AND SUPPLEMENTS TO THIS OFFERING CIRCULAR

The company will be required to make annual and semi-annual filings with the SEC. It will make annual filings on Form 1-K, which will be due by the end of April each year and will include audited financial statements for the previous fiscal year. The company will make semi-annual filings on Form 1-SA, which will be due by September 28 each year, and which will include unaudited financial statements for the six months to June 30. The company will also file a Form 1-U to announce important events such as the loss of a senior officer, a change in auditors, or certain types of capital-raising. Virtuix will be required to keep making these reports unless it files a Form 1-Z to exit the reporting system, which it will only be able to do if it has less than 300 shareholders of record and have filed at least one Form 1-K.

At least every 12 months, the company will file a post-qualification amendment to the Offering Statement of which this Offering Circular forms a part, to include the company’s recent financial statements.

The company may supplement the information in this Offering Circular by filing a Supplement with the SEC.

All these filings will be available on the SEC’s EDGAR filing system. You should read all the available information before investing.

FINANCIAL STATEMENTS

virtuix HOLDINGS, inc. AND sUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2020 AND mARCH 31, 2019 (RESTATED)

AND

FOR THE YEARS ENDED MARCH 31, 2020 AND 2019 (rESTATED)

WITH

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of

Virtuix Holdings, Inc.

Austin, Texas

INDEPENDENT AUDITOR’S REPORT

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Virtuix Holdings, Inc. and subsidiaries (the “Company”), which comprise the consolidated balance sheets as of March 31, 2020 and 2019, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Artesian CPA, LLC

1624 Market Street, Suite 202 | Denver, CO 80202

p: 877.968.3330 f: 720.634.0905

info@ArtesianCPA.com | www.ArtesianCPA.com

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Virtuix Holdings, Inc. and subsidiaries as of March 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

Emphasis of a Matter – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 14 to the consolidated financial statements, the Company has not generated profits since inception, has negative cash flows from operations, has sustained net losses of $3,580,222 and $2,672,623 for the years ended March 31, 2020 and 2019, respectively, has an accumulated deficit of $21,388,253 as of March 31, 2020, has a working capital deficit of $3,941,594 as of March 31, 2020, and lacks liquid assets to satisfy its obligations as they come due with $152,376 of cash as of March 31, 2020. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 14. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Other Matters – Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information, comprised of the consolidating balance sheets as of March 31, 2020 and 2019 and the consolidating statements of operations for the years then ended, are presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Artesian CPA, LLC

1624 Market Street, Suite 202 | Denver, CO 80202

p: 877.968.3330 f: 720.634.0905

info@ArtesianCPA.com | www.ArtesianCPA.com

VIRTUIX HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Independent Auditor's Report and accompanying notes.

VIRTUIX HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Independent Auditor's Report and accompanying notes.

See Independent Auditor's Report and accompanying notes.

See Independent Auditor's Report and accompanying notes.

VIRTUIX HOLDINGS, INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2020 AND 2019 (RESTATED)

See Independent Auditor's Report and accompanying notes.

Virtuix Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Operations

Virtuix Holdings Inc. (“Virtuix Holdings” or the “Company”) was formed in 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 virtual reality hardware and software, primarily the Omni, the first virtual reality interface that allows users to move freely and naturally in video games and virtual worlds, and in February 2019, the VR ARENA, subsequently renamed the Omni Arena, a four-player esports attraction that includes four Omni motion platforms. On June 24, 2015, the Company acquired 10,000 shares of common stock of Virtuix Manufacturing, Limited (“VML”), a wholly-owned subsidiary. VML 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.

In July 2016, the Company announced that it had 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”), is a Sino-foreign equity joint venture company established under the laws of the People's Republic of China and registered in Shanghai. VML has 49% ownership and does not have control over the Joint Venture, therefore, the investment is accounted for using the equity method. In October 2016, the Joint Venture began operations.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Virtuix Holdings, Inc. as well as its subsidiaries required to be consolidated under accounting principles generally accepted in the United States of America (“GAAP”). Significant intercompany accounts and transactions have been eliminated upon consolidation.

Basis of Presentation

The consolidated financial statements are presented using the accrual basis of accounting, in U.S. dollars which is the Company’s functional currency. Therefore, revenues are recognized when earned and expenses are recognized when incurred.

The Company has adopted a fiscal year ending March 31^st of each year.

Management's Estimates

Preparing the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations.

See Independent Auditor's Report

Virtuix Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2. Summary of Significant Accounting Policies (continued)

On April 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), which creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets. ASC 606 is applied using the full retrospective method, which requires a restatement of each prior reporting period presented. The majority of the Company's revenue arrangements generally consist of a single performance obligation to either transfer or install the promised goods, which is when an individual Omni and/or related accessories is shipped, or when an Omni Arena is installed at a customer location, at which time the title transfers to the customer. In conjunction with the Omni Arena contract, each customer is obligated to be enrolled in the Omni Care program, which is separate performance obligation. Such revenue is recognized over the life of the program. Based on the Company’s evaluation process and review of its contracts with customers, the timing and amount of revenue recognized previously for individual Omni units and their related accessories is consistent with how revenue is recognized under the new standard. For Omni Arenas, revenue recognition should occur upon installation at a customer’s location. As revenue recognized for Omni Arenas first occurred in June 2019, there is no additional impact to the Company’s consolidated financial statements for the year ended March 31, 2019 as a result of the adoption of ASC 606.

Revenue recognition under ASC 605 Multiple-Deliverable Revenue Arrangements applies to the sale of virtual goods in gaming industries. The Company began selling Omniverse credits in late fiscal year 2018, which are credits sold to customers for play time on the Omni units and Omni Arenas. The Company recognizes revenue over the period during which the operator is expected to be able to access and consume the benefits, which has been determined to be two months.

Cash and Cash Equivalents

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of March 31, 2020 and March 31, 2019, the Company’s cash and cash equivalents were deposited primarily in three financial institutions, which at times exceed the federally insured limits. At March 31, 2020, a bank overdraft in the amount of $66,321 is classified as a current liability. Cash and cash equivalents in the amount of $152,376 and $682,842 which includes foreign deposits at financial institutions, are not insured by the Federal Deposit Insurance Corporation at March 31, 2020 and 2019, respectively.

Accounts Receivable

Terms of payment are generally thirty days from the invoice date. The collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. This process consists of a thorough review of historical collection experience, current aging status of the customer accounts, and financial condition of the Company's customers. The Company considers its receivables to be fully collectible, accordingly no allowance for doubtful accounts has been recorded. Accounts are charged to bad debt expense as they are determined to be uncollectible.

Inventory Valuation

Inventory is stated at the lower of cost (first-in, first-out) or net realizable value in accordance with Topic 330, Inventory. Cost is computed using standard cost, which approximates actual cost. The Company applies net realizable value and obsolescence to the gross value of the inventory. The Company estimates net realizable value based on estimated selling price less further costs to completion and disposal. The Company impairs slow-moving products by comparing inventories on hand to projected demand. When impairments are established, a new cost basis of the inventory is created.

See Independent Auditor's Report

Virtuix Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2. Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate.

The estimated useful lives for significant property and equipment categories are as follows:

Fair Value Measurements

The Company’s financial instruments consist primarily of cash, accounts receivable, prepaids, accounts payable, accrued expenses, notes payable, and common stock warrants issued to lenders. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

The carrying amounts reported in the consolidated balance sheets approximate their fair value.

See Independent Auditor's Report

Virtuix Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2. Summary of Significant Accounting Policies (continued)

Intangibles

The Company’s intangible assets represent software, trademarks, customer lists, and a website, which are amortized on a straight-line basis over the years expected to be benefited. The costs of developing any intangibles for internal use are expensed as incurred.

The estimated useful lives for significant intangible asset categories are as follows:

Software Development Costs

The Company accounts for software development costs in accordance with several accounting pronouncements, including Topic 730, Research and Development, Topic 350-40, Internal-Use Software, Topic 985-20, Costs of Computer Software to be Sold, Leased, or Marketed and Topic 350-50, Website Development Costs.

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, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been 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 was determined and prior to marketing and initial sales. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products.

Website development costs have been capitalized, under the same criteria as marketed software.

Deferred Revenue

Deferred revenue represents revenues collected but not earned as of March 31, 2020 and 2019. This is primarily composed of pre-orders of the Omni that have not been completed by the end of the financial reporting period. Deferred revenue also includes pre-orders of Omni Arenas not yet installed, as well as Omniverse Credits and Omni Care pertaining to Omni Arena units installed as of March 31, 2020 and 2019, but for which revenue cannot yet be recognized. For the years ended March 31, 2020 and 2019, changes in deferred revenue were due to the following:

See Independent Auditor's Report

Virtuix Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 2. Summary of Significant Accounting Policies (continued)

Deferred revenue as of March 31, 2020 and 2019 consists of the following: