Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements under this Item regarding our financial position, business strategy and the plans and objectives of Management for future operations, are forward-looking statements. When used in this Report, words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to us or our Management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our Management, as well as assumptions made by, and information currently available to, our Management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto included in this Report under "Item 1. Interim Financial Statements".

Overview and History

Virtuix pioneers movement in AI-generated worlds, whether imaginary or real, through the development of omni-directional treadmills that enable natural locomotion within VR games, digital twins, and other applications. Since our founding in 2013, we have introduced three generations of products to market, generating over $20 million in cumulative sales. Our flagship product, Omni One, represents a breakthrough in home entertainment, combining full-body movement with immersive VR gaming and fitness. We operate a vertically integrated business across product design, game development, manufacturing, and distribution, with a focus on three key markets: consumer, enterprise, and defense.

Our earlier products, Omni Pro and Omni Arena, established our footprint in commercial VR. We've sold more than 4,000 Omni Pro systems for enterprise, installed 80 Omni Arena systems at entertainment venues in the U.S., and built an Omni Arena player base of over 500,000 players who signed up with an email address to play. Omni One, our most recent product, is designed for the home consumer and supports full freedom of movement, including crouching, kneeling, and jumping, within popular VR games. In addition, we sell a version of Omni One for enterprise markets and, in parallel, we are developing VTW, a multi-user mission planning system targeted at the defense market.

We derive revenue through a combination of hardware sales and recurring software and service income. These include:

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Omni One and Omni One Core hardware sales, with pricing ranging from $2,595 to $3,495.

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Omni Online subscription service ($14/month or $140/year), offering multiplayer access, esports leaderboards, and free games.

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Game sales via Omni One's proprietary game store.

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Enterprise solutions, including Omni One Enterprise and Omni Arena systems.

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Accessory and replacement parts sales for Omni One and Omni Arena systems.

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Omni Care maintenance subscriptions for Omni Arena.

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Omniverse Credits for Omni Pro and Omni Arena gameplay (per-minute usage fees).

We target a gross margin of 40% on hardware sales of Omni One, Omni One Core, and second-hand Omni Arena systems, and 70% gross margin on Omni One Enterprise hardware sales. Recurring revenue from Omni Online, game sales, Omni Care, and Omniverse Credits provide high-margin, predictable cash flows that recur after initial hardware sales.

Since inception, we have operated at a loss, with revenues of $2,980,765 and $2,110,889 for the nine months ended December 31, 2025 and 2024, respectively, and $963,817 and $1,264,122 for the three months ended December 31, 2025 and 2024, respectively. Our net losses were $(6,892,302) and $(12,024,068) for the nine months ended December 31, 2025 and 2024, respectively, and $(2,730,944) and $(1,970,613) for the three months ended December 31, 2025 and 2024, respectively. We anticipate continued operating losses as we pursue market penetration and revenue growth in 2026.

Key milestones for achieving sustainable profitability include:

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Scaling Omni One consumer sales through increased marketing.

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Supplementing potentially high-volume Omni One consumer sales with potentially high-value defense contracts for VTW. We believe a "dual-use" strategy of building consumer sales plus defense contracts can position us for achieving revenue growth and sustainable profitability.

VTW is still in development. We presented a proof-of-concept of VTW to potential customers at the I/ITSEC conference in Orlando, Florida, in December 2025, and we already sold Omni One test units to the U.S. Air Force Academy, YokoWERX (the innovation cell at Yokota Air Force Base), and the U.S. Military Academy at West Point. However, we expect that meaningful sales of VTW in the defense sector may not materialize until fiscal year 2027 at the earliest. Despite the long sales cycle for penetrating the defense market, we believe that VTW will retain a strong competitive moat because of our expansive omni-directional treadmill patent portfolio, our position as a U.S. company, and the inherent barriers to entry for defense applications that competitors will face, including multi-year procurement cycles and high switching costs. To sell VTW, we will need to comply with certain requirements and regulations to qualify for government contracts or awards, depending on the type of contract or award, including but not limited to compliance with the FAR and DFARS, Export Administration Regulations, cybersecurity regulations, and requirements and restrictions related to the secure sourcing of components, including the Buy American Act and Berry Amendment. For additional information, see "Risk Factors - Our business with governmental entities will be subject to the policies, priorities, regulations, mandates and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto" of our Prospectus dated January 26, 2026. The development of VTW is part of our already ongoing R&D efforts and expenditures, and we do not foresee a meaningful increase in operational costs resulting from VTW.

Following our shift in R&D and marketing efforts to Omni One, and the shift in demand for entertainment attractions from staffed VR attractions such as Omni Arena to unstaffed, lower-tech offerings, we consider the Omni Arena business to be in sustaining mode. We no longer produce new systems or invest in new games or software upgrades for the system, but we continue to support our existing Omni Arena operators and earn recurring revenues from Omni Care maintenance contracts, Omniverse Credits sales, and the sale of repair and replacement parts. We also facilitate secondary market sales of Omni Arena systems and earn a target gross margin of approximately 40% on revenues earned from reselling second-hand systems and disassembling, moving, and installing such systems.

Our path to profitability relies on scaling Omni One sales at an acceptable CAC and on gaining adoption of VTW for immersive mission planning in the defense sector. Although we believe that our plans are realistic, there is no guarantee that we will be able to scale Omni One sales or find product-market fit in the defense sector.

We believe Virtuix is well placed at the intersection of immersive gaming, fitness, and enterprise VR, and at the leading edge of the development of hyper-realistic digital twins of the real world through Gaussian splatting and other AI-driven 3D reconstruction technologies. In a world where AI is used to rapidly generate realistic virtual environments, whether imaginary game worlds or digital twins of the real world, we pioneer the technology and products for physically moving around in these virtual environments. We believe we are positioned to help define the next decade of VR advancements and be a leader in immersive gaming and simulation.

Factors Affecting our Business and Results of Operations

This section includes a summary of our historical results of operations, including detailed comparisons of our results for the three and nine months ended December 31, 2025 and 2024. We have derived the three and nine month data from our financial statements included elsewhere in this Report.

Results of Operations

Comparison of the Nine Months Ended December 31, 2025 and 2024

Net Revenues

Net sales for the nine months ended December 31, 2025, were $2,980,765, a 41% increase from sales of $2,110,889 for the nine months ended December 31, 2024. This increase is primarily attributable to new sales of Omni One, including resulting from a strong 2025 holiday season, and the fulfillment of legacy Omni One preorders that were placed during our preorder period that ended in September 2024. In the nine months ended December 31, 2025, net revenues of $405,656 were attributable to the fulfilment of outstanding Omni One preorders, with $264,990 of those net preorder revenues resulting from sales to investors who used an investor discount.

The following table summarizes our revenue by product line:

		Nine Months Ended December 31, 2025				Nine Months Ended December 31, 2024
SALES
Omni Pro units and accessories, net of discounts		$	154,958			$	127,412
Omniverse Credits			109,163				167,387
Omni Care program			130,667				126,323
Omni Arena			458,992				334,127
Omni One, net of discounts			2,126,985				1,355,640
TOTAL NET SALES		$	2,980,765			$	2,110,889

Cost of Goods Sold

Cost of goods sold primarily consists of material costs and shipping costs of Omni One and Omni Arena.

Cost of goods sold in the nine months ended December 31, 2025 was $2,107,718, a decrease of $358,774 from cost of goods sold of $2,466,492 in the nine months ended December 31, 2024. The decrease was primarily attributable to lower per-unit overhead costs recognized in the 2025 period compared to the 2024 period. Since shipments of Omni One only started ramping up in late 2024, manufacturing overhead incurred during the production ramp-up period in 2024 was absorbed into a relatively lower volume of units shipped during the 2024 period, resulting in a higher per-unit manufacturing cost. In contrast, manufacturing and shipment activity during the 2025 period was consistently higher, resulting in lower manufacturing overhead applied per unit.

Gross profit in the nine months ended December 31, 2025 increased by $1,228,650 compared to gross loss in the nine months ended December 31, 2024, and gross margin as a percentage of revenues increased from -17% in the nine months ended December 31, 2024 to 29% in the nine months ended December 31, 2025. This increase in gross margin was the result of an increase in the selling price of the complete Omni One system from $2,595 to $3,495 plus shipping, effective since November 2024, a reduction in the per-unit manufacturing overhead cost, and the completion of the delivery of nearly all discounted units to equity crowdfunding investors. In the nine months ended December 31, 2025, net revenues of $1,137,066 resulted from the delivery of discounted units, and the aggregate value of all discounts totaled $224,994 for the same period.

Operating Expenses

Operating expenses consist of general and administrative expenses, which are primarily salaries, professional fees, and expenses related to the administrative functions of the Company, research and development expenses, which consist primarily of product development costs and salaries, and sales and marketing expenses, which represent advertising and other marketing costs, as well as the associated personnel costs.

		Nine Months Ended December 31, 2025				Nine Months Ended December 31, 2024
Selling Expenses		$	2,129,111			$	1,151,749
General & Administrative			3,538,778				8,199,206
Research & Development			624,759				2,006,822
Total Operating Expenses		$	6,292,648			$	11,357,777

Total operating expenses decreased to $6,292,648 in the nine months ended December 31, 2025 from $11,357,777 in the nine months ended December 31, 2024.

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Selling Expenses: For the nine months ended December 31, 2025 compared to the same period in 2024, Selling Expenses increased to $2,129,111 from $1,151,749, with the increase in the 2025 period largely driven by the significant digital ad spend for our Regulation Crowdfunding ("Reg CF") investment campaign with StartEngine that ended around the end of June 2025, as well as increased ad spend for Omni One during the 2025 holiday season.

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General and Administrative Expenses: For the nine months ended December 31, 2025 compared to the same period in 2024, General and Administrative Expenses decreased to $3,538,778 from $8,199,206, primarily because the expenses in the nine months ended December 31, 2024 included a one-time non-cash stock-based compensation expense of approximately $4.7 million for the issuance of an incentive stock award to an advisor and Board member. Additionally, during the nine months ended December 31, 2025, the Company experienced a decrease in salary expenditures and an increase in legal and professional fees, primarily attributable to costs associated with the Nasdaq uplisting process.

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Research and Development: For the nine months ended December 31, 2025 compared to the same period in 2024, Research and Development expenses decreased to $624,759 from $2,006,822. This drop was due to a decrease in R&D spend and staffing following the completion of Omni One.

Net Loss

As a result of the foregoing, net loss for the nine months ended December 31, 2025 was $(6,892,302) compared to $(12,024,068) for the nine months ended December 31, 2024, representing a decrease in net loss of $5,131,766. The net loss for the nine months ended December 31, 2024 included a one-time non-cash stock-based compensation expense of approximately $4.7 million, compared to non-cash stock-based compensation expense of approximately $270,000 for the nine months ended December 31, 2025.

Results of Operations

Comparison of the Three Months Ended December 31, 2025 and 2024

Net Revenues

Net sales for the three months ended December 31, 2025, were $963,817, a 24% decrease from sales of $1,264,122 for the three months ended December 31, 2024. This decrease is primarily attributable to the fulfillment of a large backlog of Omni One preorders, accumulated since the start of the preorder period in August 2023, during the three months ended December 31, 2024, whereas revenues in the three months ended December 31, 2025 result from sales to newly acquired customers, including resulting from a strong 2025 holiday season. New orders for Omni One and Omni One Core systems increased 60% in December 2025 compared to unit orders placed in December 2024.

Omni Arena revenue decreased during the three months ended December 31, 2025, as we transition the Omni Arena business to "maintenance mode", supporting our existing customers and earning recurring revenues from the sale of parts, Omniverse Credits, and Omni Care maintenance program fees.

The following table summarizes our revenue by product line:

		Three Months Ended December 31, 2025				Three Months Ended December 31, 2024
SALES
Omni Pro units and accessories, net of discounts		$	118,387			$	64,591
Omniverse Credits			24,710				43,420
Omni Care program			36,000				31,333
Omni Arena			22,171				193,320
Omni One, net of discounts			762,549				931,458
TOTAL NET SALES		$	963,817			$	1,264,122

Cost of Goods Sold

Cost of goods sold primarily consists of material costs and shipping costs of Omni One and Omni Arena.

Cost of goods sold in the three months ended December 31, 2025 was $674,396, a decrease of $609,144 from cost of goods sold of $1,283,540 in the three months ended December 31, 2024. The decrease was primarily attributable to lower revenues during the current period compared to the prior period that included shipments of a large backlog of Omni One preorders. Additionally, the manufacturing overhead costs allocated per unit were lower in the 2025 period due to consistently higher production in the 2025 period compared to the production ramp-up period in 2024.

Gross profit in the three months ended December 31, 2025 increased by $308,839 compared to gross loss in the three months ended December 31, 2024, and gross margin as a percentage of revenues increased to 30% in the three months ended December 31, 2025 from -2% in the three months ended December 31, 2024. This increase in gross margin was the result of an increase in the selling price of the complete Omni One system from $2,595 to $3,495 plus shipping, effective since November 2024. The majority of Omni One revenue in the three months ended December 31, 2024 were for prepaid units sold at the lower price point, as well as delivery of discounted units to equity crowdfunding investors.

Operating Expenses

Operating expenses consist of general and administrative expenses, which are primarily salaries, professional fees, and expenses related to the administrative functions of the Company, research and development expenses, which consist primarily of product development costs and salaries, and sales and marketing expenses, which represent advertising and other marketing costs, as well as the associated personnel costs.

		Three Months Ended December 31, 2025				Three Months Ended December 31, 2024
Selling Expenses		$	733,662			$	245,512
General & Administrative			1,172,329				1,263,290
Research & Development			226,574				306,738
Total Operating Expenses		$	2,132,565			$	1,815,540

Total operating expenses increased to $2,132,565 in the three months ended December 31, 2025, from $1,815,540 in the three months ended December 31, 2024.

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Selling Expenses: For the three months ended December 31, 2025 compared to the same period in 2024, Selling Expenses increased to $733,662 from $245,512, with the increase in the 2025 period largely driven by increased ad spend during the 2025 holiday season.

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General and Administrative Expenses: For the three months ended December 31, 2025 compared to the same period in 2024, General and Administrative Expenses decreased to $1,172,329 from $1,263,290. The decrease was primarily attributable to lower general and administrative costs associated with our overseas operations, while being partially offset by an increase in U.S. salaries resulting from an increased team size in the three months ended December 31, 2025.

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Research and Development: For the three months ended December 31, 2025 compared to the same period in 2024, Research and Development expenses decreased to $226,574 from $306,738. This drop was due to a decrease in R&D spend and staffing following the completion of Omni One.

Net Loss

As a result of the foregoing, net loss for the three months ended December 31, 2025 was $(2,730,944) compared to $(1,970,613) for the three months ended December 31, 2024, representing an increase in net loss of $760,331. Although gross profit increased significantly during the 2025 period, the improvement in gross profit was offset by higher interest expense and amortization of debt discount associated primarily with the Streeterville notes, and higher advertising expenditures, resulting in a higher net loss despite underlying improvement in gross profitability.

Non-GAAP Financial Measures

Management reviews a variety of operational and financial metrics to assess the Company's performance, allocate resources, and inform strategic decision-making. In addition to net sales, net loss, and other measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), this report includes certain operating metrics and non-GAAP financial measures that management considers meaningful in evaluating the Company's operating performance.

These measures are used by management and the Board of Directors to assess trends in the business, evaluate the effectiveness of operational initiatives, and support decisions regarding investment and cost management. Management believes that the presentation of these non-GAAP financial measures provides investors with additional insight into the Company's operating results and facilitates period-to-period comparisons.

Adjusted EBITDA

		For the Three Months Ended December 31,								For the Nine Months Ended December 31,
		2025				2024				2025				2024
		(Unaudited)								(Unaudited)
Reconciliation of GAAP net loss to Adjusted EBITDA
NET LOSS		$	(2,730,944	)		$	(1,970,613	)		$	(6,892,302	)		$	(12,024,068	)
Plus:
Taxes			22,630				10,063				46,801				52,366
Interest expense, net(1)			870,717				128,116				1,308,982				243,738
Depreciation and amortization			160,676				189,871				467,087				329,840
EBITDA		$	(1,676,921	)		$	(1,642,563	)		$	(5,069,432	)		$	(11,398,124	)
Plus:
Stock-based compensation			52,107				9,714				268,591				4,683,969
Loss on extinguishment of debt			0				0				122,864				0
ADJUSTED EBITDA		$	(1,624,814	)		$	(1,632,849	)		$	(4,677,977	)		$	(6,714,155	)

1.

Interest expense for the three and nine months ended December 31, 2025, respectively includes $662,496 and $882,183 of non-cash amortization of debt discount related to secured promissory notes issued to Streeterville Capital, LLC (see Note 8 - Notes Payable to the Consolidated Financial Statements). The debt discount results from the issuance of warrants as well as original issue discount and related closing costs, which are being amortized to interest expense over the term of the notes.

Adjusted EBITDA is a non-GAAP financial measure that we use to evaluate our operating performance. Adjusted EBITDA represents net income (loss), adjusted to exclude: (i) provision for (benefit from) income taxes, (ii) interest expense, net, (iii) depreciation and amortization, (iv) stock-based compensation expense, and (v) loss on extinguishment of debt.

We believe Adjusted EBITDA is useful to investors because it provides a supplemental measure of our operating cash flow by excluding non-cash expenses and other items that may not be indicative of our core operating results or that may vary significantly from period to period. For the periods presented, such non-cash items include amortization of debt discount, depreciation and amortization, and stock-based compensation expense, which can significantly impact reported net loss but does not impact our cash flow. However, Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for financial information prepared in accordance with GAAP. These limitations include the following:

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Stock-based compensation has been, and is expected to continue to be, a significant recurring expense and an important component of our compensation strategy.

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Depreciation and amortization relate to assets that may require replacement in the future, and Adjusted EBITDA does not reflect the cash requirements for capital expenditures.

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Adjusted EBITDA does not reflect changes in working capital or the cash requirements necessary to service our debt.

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Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently, limiting their usefulness as comparative measures.

Accordingly, Adjusted EBITDA should be considered only as a supplement to, and not as a substitute for, net income (loss) and other measures prepared in accordance with GAAP.

Liquidity and Capital Resources

We continue to experience negative cash flows from operations as we expand our business. Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as sales and marketing, product development, and general and administrative. Our operating cash flows are also affected by our working capital needs to support the scaling of manufacturing and inventories.

As of December 31, 2025 and March 31, 2025, the Company had cash on hand of $1,074,638 and $477,908, respectively. Since its inception, the Company has incurred net losses and funded its operations primarily through the issuance of equity securities. As of December 31, 2025 and March 31, 2025, the Company had a total stockholders' deficit of $(2,952,826) and $(794,035), respectively. The Company has incurred recurring losses from operations, and as of December 31, 2025 and March 31, 2025, had an accumulated deficit of $(69,384,892) and $(62,492,590), respectively.

The Company's continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. The Company has developed plans to raise funds and continues to pursue sources of funding that management believes, if successful, would be sufficient to support the Company's operation and growth. As discussed in the Subsequent Events section of the Notes to the Consolidated Financial Statements, the Company has successfully executed several sources of funding in January and February 2026. On January 27, 2026, in connection with the August 25, 2025 Securities Purchase Agreement with Streeterville, the initial advance of $8,000,000 (net of original issue discount) was funded at the closing of the Company's direct listing. Streeterville has also exercised 257,500 warrants during this period, resulting in proceeds to the Company of $2,253,125, and Western Technologies Investments has exercised 334,961 warrants, resulting in proceeds to the Company of $300,002. Additionally, certain holders of the Second 2025 Notes have exercised their conversion right, resulting in a principal reduction of approximately $715,000.

During the nine months ended December 31, 2024, the Company raised the following proceeds from financing activities:

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$3,598,805 through issuances of SAFE notes to accredited investors under Regulation D of the Securities Act.

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$2,389,680 through issuances of Series B preferred stock pursuant to a Reg CF campaign with StartEngine, an online equity crowdfunding platform, and to accredited investors under Regulation D of the Securities Act.

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$2,485,000 through issuances of unsecured promissory notes to accredited investors. Subsequently, outstanding notes with a principal amount of $117,500 were converted to Series B preferred stock during the nine months ended December 31, 2024, and outstanding notes with a principal amount of $400,000 were converted to Series B preferred stock during the nine months ended December 31, 2025. As of December 31, 2025, notes with a principal amount of $1,967,500 remain outstanding.

During the nine months ended December 31, 2025, the Company raised the following additional proceeds from financing activities:

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$1,832,362 (net of investor and issuer fees) through issuances of Series B preferred stock pursuant to a Reg CF campaign with StartEngine, an online equity crowdfunding platform.

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$112,990 through issuances of Series B preferred stock to accredited investors under Regulation D of the Securities Act.

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$217,678 through issuances of unsecured promissory notes to two related parties, which was subsequently paid back in the same period. For additional information, see "Certain Relationships and Related-Party Transactions - Related-Party Promissory Notes."

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$2,000,000 through the First Note Purchase Agreement with Streeterville, pursuant to which Virtuix issued the First Note in the principal amount of $2,220,000.

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$500,000 through the Second Note Purchase Agreement with Streeterville, pursuant to which Virtuix issued the Second Note in the principal amount of $560,000.

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$500,000 through the Third Note Purchase Agreement with Streeterville, pursuant to which Virtuix issued the Third Note in the principal amount of $560,000.

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$1,500,000 through issuances of subordinated promissory notes (the "Second 2025 Notes"), pursuant to which Virtuix issued notes totaling $1,650,000.

As an additional inducement for certain investors to participate in our Series B preferred stock financing, we issued warrants to purchase shares of our common stock. At the time of issuance, these warrants were exercisable for an aggregate of 313,153 shares of common stock of Virtuix at an exercise price of $0.01 per share. As of December 31, 2025, all 313,153 common stock warrants had been exercised.

In association with various agreements to obtain financing with Western Technology Investment between September 2014 and April 2022, the Company has granted warrants to Western Technology Investment to purchase stock in Virtuix. As of December 31, 2025, these warrants were exercisable for an aggregate of 178,712 shares of common stock of Virtuix, of which 128,646 at an exercise price of $2.332 per share and 50,066 at an exercise price of $2.996 per share.

On August 25, 2025, we entered into a Securities Purchase Agreement with Streeterville, pursuant to which Virtuix issued the First Note in the principal amount of $2,220,000. The First Note includes an original issue discount of $200,000 and additional closing costs of $20,000. The First Note bears interest at a rate of 6% per annum, is secured by all assets of the Company, and matures nine months from the funding date. The Company received $2,000,000 in gross proceeds at closing. In addition, Streeterville received the Debt Financing Warrant. On October 30, 2025, we entered into a Securities Purchase Agreement with Streeterville, pursuant to which we issued (i) the Second Note in the principal amount of $560,000, bearing interest at 6% per annum and secured by substantially all of our assets and (ii) a common stock purchase warrant to purchase a number of shares of our Class A common stock equal to $1,000,000 divided by the reference price established in connection with our direct listing. The Second Note includes an original issue discount of $50,000 and additional closing costs of $10,000. The Company received $500,000 in gross proceeds at closing of the Second Note. On December 19, 2025, we entered into a Securities Purchase Agreement with Streeterville, pursuant to which we issued (i) the Third Note in the principal amount of $560,000, bearing interest at 6% per annum and secured by substantially all of our assets and (ii) a common stock purchase warrant to purchase a number of shares of our Class A common stock equal to $1,000,000 divided by the reference price established in connection with our direct listing. The Third Note includes an original issue discount of $50,000 and additional closing costs of $10,000. The Company received $500,000 in gross proceeds at closing of the Third Note.

The Streeterville Notes are convertible into shares of common stock at a price equal to 85% of the reference price established in connection with the Company's direct listing. The Streeterville Notes are our only secured debt. They contain customary events of default, including failure to make payments or deliver shares, and provide for increased interest and penalties in the event of default. The Streeterville Notes may be prepaid at a premium, subject to certain conditions, and are subject to ownership and selling limitations. The shares underlying the Streeterville Notes and warrants will be registered for resale in connection with our direct listing. Ten days following the date on which the Resale Registration Statement providing for the registration of shares issuable pursuant to the Equity Purchase Agreement is declared effective, the Streeterville Notes will automatically be exchanged for and applied to the purchase price of a pre-paid purchase under the Equity Purchase Agreement in an aggregate principal amount equal to the outstanding balance then due under the Streeterville Notes.

Under applicable rules of the Nasdaq Stock Market, in no event may the Company issue more than the number of shares of its common stock which equals 19.99% of the pre-transaction common stock outstanding in a private transaction (the "Exchange Cap") at a price less than the "Minimum Price" (as defined in the Nasdaq 5600 Series listing rules), unless the Company first obtains stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable Nasdaq listing rules. Furthermore, pursuant to the Debt Financing transaction documents, the Company must seek stockholder approval to exceed the Exchange Cap at its next annual or special meeting of stockholders. Accordingly, on January 21, 2026, the Company obtained stockholder approval to issue common stock, including the issuance of common stock upon conversion, exercise, or settlement of warrants, in an amount that may exceed 19.99% of the Company's issued and outstanding common stock where the issue price is less than the Minimum Price.

Proceeds from the Debt Financing were used to pay off existing indebtedness, including but not limited to retiring the Company's only secured indebtedness outstanding prior to the Debt Financing, with the remaining proceeds used or to be used for working capital and general corporate purposes.

On August 25, 2025, we entered into the Equity Purchase Agreement with Streeterville, pursuant to which Streeterville committed to purchase up to $50,000,000 of Class A common stock through one or more prepaid advances over a 24-month period. The initial advance of $8,000,000 (net of original issue discount) was funded at the closing of our direct listing, with subsequent advances subject to certain conditions, including minimum market capitalization, trading volume, and compliance with Nasdaq listing standards. Each advance includes an 8% original issue discount and bears interest at 6% per annum. Streeterville will also receive the Equity Financing Warrant. The conversion price for the advances is set at 120% of the reference price, with, subject to certain triggers, an alternate conversion price based on 90% of the lowest volume-weighted average price during the ten trading days prior to conversion, subject to a $2.00 price floor. The Equity Purchase Agreement includes customary events of default, selling and ownership limitations, Company covenants, and a prepayment option for the Company. The shares underlying the advances will be registered for resale following our direct listing. The shares underlying the warrants will be registered for resale in connection with our direct listing.

We may request advances up to an aggregate of $50,000,000 over the term of the Equity Purchase Agreement; however, Streeterville's obligation to fund advances is not solely at the discretion of the Company. Each advance is subject to a number of conditions, including that our market capitalization is at least $95,000,000 and both our 20-day and 60-day median and average daily trading volumes are at least $350,000 at the time of any request for a subsequent advance. Additional requirements include compliance with continued listing standards and an effective registration statement for the resale of shares issuable pursuant to the outstanding advances. If we fail to meet any of these conditions at the time of a request, Streeterville may decline to provide the requested funds. As a result, there is no assurance that we will be able to access the full $50,000,000 or any specific amount under the Equity Purchase Agreement, and our ability to request subsequent advances may be limited by market conditions, our performance, or other factors outside our control.

In October and November 2025, we issued unsecured promissory notes (the "Second 2025 Notes") to investors in a transaction exempt from registration under Section 4(a)(2) of the Securities Act, and Rule 506(b) promulgated under Regulation D for total proceeds of $1,500,000. The Second 2025 Notes bear principal equal to 110% of each investor's cash investment, accrue simple interest at 6.0% per annum, and mature on March 31, 2026 (as extended by the Company, in its sole discretion, from December 31, 2025). At or before maturity, the Company may repay the full outstanding principal and interest in cash or convert that amount into Common Stock at a price equal to 85% of the NASDAQ valuation price of $8.75; beginning on the date of our direct listing and continuing until full repayment, the noteholder may likewise elect to convert outstanding indebtedness at the same conversion price. As of December 31, 2025, the principal amount of $1,650,000 remains outstanding.

As of December 31, 2025, our current obligations include unsecured promissory notes due March 31, 2026, with an outstanding principal balance of $1,967,500 and accrued interest of approximately $400,000, an EIDL loan with a carrying amount of approximately $24,500 maturing in August 2050, secured promissory notes issued to Streeterville Capital, LLC, convertible into shares of our Class A common stock, with an outstanding principal balance of $3,340,000 and accrued interest of approximately $53,433, subordinated convertible promissory notes due March 31, 2026, with an outstanding principal balance of $1,650,000 (convertible into shares of our Class A common stock), current operating lease obligations totaling approximately $175,000, and outstanding gift card liabilities of approximately $448,000.

We anticipate incurring additional losses for the foreseeable future, and we may never become profitable. Furthermore, while we have decreased our operating expenses by reducing our personnel following the launch of Omni One, we nevertheless expect expenses to increase in connection with scaling sales, marketing, and production of Omni One, and in connection with being a public company. As of the date of this filing, following (i) the funding of the initial $8,000,000 advance from Streeterville related to our direct listing, (ii) proceeds of $3,138,125 from Streeterville warrant exercises, (iii) proceeds of $300,002 from Western Technology Investments warrant exercises, and (iv) a reduction of debt principal of $715,000 resulting from the conversion by certain holders of the Second 2025 Notes, and assuming a refinancing of the 2024 Notes and the payoff of the Second 2025 Notes due March 31, 2026, we estimate we'll have the resources to conduct our planned operations for at least 9 months. To continue as a going concern and execute our operating plan for the next 12 months, we estimate we'll require additional funding of approximately $2,000,000. We are evaluating financing alternatives for the 2024 Notes, which may include exchanges of a portion of the outstanding notes for equity or equity-linked securities. We have not entered into any definitive agreements, and there can be no assurance that any such transaction will be completed on favorable terms, or at all. Any such transaction could result in dilution to existing stockholders.

Our operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, our ability to continue to raise additional financing and the state of the general economic environment in which we operate. There can be no assurance that these assumptions will prove accurate in all material respects, or that we will be able to successfully execute our operating plan. In the absence of additional appropriate financing, we may have to modify our plan or slow down the pace of development and commercialization.

Notwithstanding the foregoing, we believe that by pursuing a public listing, we will gain access to additional funding in the public capital markets, allowing us to scale marketing and production of Omni One and accelerate our revenue growth.

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended December 31, 2025 and December 31, 2024:

		Nine Months Ended December 31, 2025				Nine Months Ended December 31, 2024
Net cash used in operating activities		$	(5,535,794	)		$	(6,342,683	)
Net cash used by investing activities		$	(87,234	)		$	(464,366	)
Net cash provided by financing activities		$	6,219,758			$	8,023,827

Tariffs

Our products are currently manufactured primarily in China and imported into the United States. U.S. import tariff rates, which under the two Trump administrations fluctuated widely, have potential to materially impact our financial results by reducing our profit margins or forcing us to raise selling prices to the consumer, which could in turn depress demand. We consider the materiality threshold to be any tariff level that exceeds 30% and remains elevated for a sustained period. For additional information, see "Risk Factors - Unfavorable global economic and political conditions, including tariffs and trade barriers, could adversely affect our business, financial condition or results of operations" of our Prospectus dated January 26, 2026.

On February 20, 2026, the U.S. Supreme Court ruled against the tariffs the Trump administration had imposed under the International Emergency Economic Powers Act (IEEPA). In response, the Trump administration signaled its intention to seek alternative mechanisms for imposing tariffs. Although we expect the U.S. government to maintain tariff rates at a higher level than was typical in the pre-Trump era, these recent developments indicate a trend toward downward pressure on tariff rates.

As we detailed in our Prospectus, we have mitigated the potential impact of high tariffs on China-made goods by developing Taiwan as an alternative manufacturing location. We expect Taiwan and the U.S. to maintain friendly trade relations. Taiwan has earned favorable tariff treatment by increasing purchases of U.S. commodities and scaling up investments in America's manufacturing sector. On January 15, 2026, the U.S. and Taiwan signed a new trade agreement lowering tariffs on Taiwan-made goods to 15%.

In January 2023, we opened a wholly owned Taiwan subsidiary named Virtuix Manufacturing Taiwan Ltd. and began outsourcing some Omni One materials to Taiwanese factories. If import tariffs on goods from China were to exceed the materiality threshold for a sustained period, we can expand our Taiwan manufacturing program by assembling the entire Omni One product in Taiwan.

Emerging Growth Company

We are an "emerging growth company," as defined in the Jump Start Our Business Startups Act of 2012 ("JOBS Act"). The status of "emerging growth company" enables us to invest more in research & development and customer acquisition rather than compliance overhead. As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies, and we have elected to take advantage of those exemptions. For so long as we remain an emerging growth company, we will not be required to:

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have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");

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submit certain executive compensation matters to shareholder advisory votes pursuant to the "say on frequency" and "say on pay" provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute" provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; or

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disclose certain executive compensation related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation.

In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. We have elected to take advantage of the extended transition period. Since we will not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to subsequently elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

We will remain an emerging growth company for up to five years, or until the earliest of: (i) the last date of the fiscal year during which we had total annual gross revenues of $1.07 billion or more; (ii) the date on which we have, during the previous three-year period, issued more than $1.07 billion in non-convertible debt; or (iii) the date on which we are deemed to be a "large accelerated filer" as defined under Rule 12b-2 under the Exchange Act.

We do not believe that being an emerging growth company will have a significant impact on our business. Also, even once we are no longer an emerging growth company, we still may not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we meet the definition of a large accelerated filer.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions. While there are a number of significant accounting policies affecting our consolidated financial statements, management believes the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments.

Emerging Growth Company Status

We are an "emerging growth company," as defined in the Jump Start Our Business Startups Act of 2012 ("JOBS Act"). Under Section 107 of the JOBS Act, emerging growth companies are permitted to use an extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards that have different effective dates for public and private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates.

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 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.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has not generated profits since inception and has incurred net losses of $6,892,302 and $12,024,068 for the nine months ended December 31, 2025 and 2024, respectively, and has accumulated deficits of $69,384,892 and $62,492,590 as of December 31, 2025 and March 31, 2025, respectively. These factors, when considered in conjunction with the Company's working capital and liquid assets as of December 31, 2025, raise substantial doubt about the Company's ability to continue as a going concern within one year after the date these financial statements are issued. Subsequent to December 31, 2025, the Company raised additional capital that has improved liquidity and is expected to mitigate the conditions that gave rise to this substantial doubt.

Management has taken several actions to ensure that the Company will continue as a going concern for the next twelve months from the date the consolidated financial statements are available to be issued:

1.

Continuing to ramp up marketing and sales of Omni One; with anticipated significant revenues from this product line; and

2.

Raising capital from existing and new shareholders as necessary to fund operations.

No assurance can be given that these efforts will be successful. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, which provides a five-step model to determine when and how revenue is recognized. Under this model, revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring control of goods or services to a customer.

The Company applies the following five steps to all revenue-generating arrangements:

1.

Identify the contract with a customer;

2.

Identify the performance obligations in the contract;

3.

Determine the transaction price;

4.

Allocate the transaction price to the performance obligations; and

5.

Recognize revenue when or as each performance obligation is satisfied.

The Company's contracts typically consist of product sales, installation services, support programs, or the sale of digital playtime credits. Each of these is evaluated to determine whether it represents a separate performance obligation.

The majority of revenue arrangements involve a single performance obligation to transfer or install physical goods. Revenue is recognized when control is transferred to the customer, which occurs as follows:

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Omni Pro units and related accessories - Revenue is recognized upon shipment to the customer, which is when control transfers and title passes.

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Omni One units - Revenue is recognized upon shipment, consistent with the Company's shipping terms.

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Omni Arena systems - Revenue is recognized upon installation at the customer's location, which is when control transfers.

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Omni Care service program - treated as a separate performance obligation included with each Omni Arena contract. The transaction price is allocated to this performance obligation on a relative standalone selling price basis, using observable standalone pricing of $2,000 per quarter. Accordingly, $8,000 associated with Omni Care is included in the initial contract transaction price and is recognized ratably over the first 12 months of the contract term, as the services are provided evenly over time. Following the initial 12-month period, customers are billed $2,000 per quarter for continued Omni Care services. Fees billed after the first year are recognized ratably over the applicable quarterly service period.

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Omniverse Credits - These credits grant access to virtual content or gameplay tied to Omni Pro and Omni Arena units. Revenue is recognized over the period during which access is expected to be consumed, typically two months from purchase based on usage patterns.

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Omni Online - Revenue is recognized over time, ratably over the subscription period.

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Omni One extended warranty - Sold separately from the Omni One unit and represents a service-type warranty. The transaction price is allocated to the extended warranty on a relative standalone selling price basis, with an observable standalone selling price of $295. Revenue is recognized ratably over the 3-year warranty term.

Contracts may include multiple performance obligations. In such cases, the Company allocates the transaction price to each obligation based on relative standalone selling prices. Payment terms are generally fixed and do not include significant financing components.

Amounts received in advance of satisfying performance obligations are recorded as contract liabilities and recognized as revenue when the related obligation is fulfilled. The Company's contracts do not typically include variable consideration, material rights, or warranties that give rise to separate performance obligations. Additionally, the Company has evaluated its role in the sale of digital content and has concluded that it acts as the principal, as it controls the content prior to transfer to the customer.

Cash and Cash Equivalents

The Company considers deposits that can be redeemed on demand and investments with original maturities of three months or less, when purchased, to be cash equivalents. As of December 31, 2025 and March 31, 2025, the Company's cash and cash equivalents were deposited primarily in five financial institutions. Deposits with these institutions may exceed federally insured limits. Management believes that the financial institutions holding the Company's cash are financially sound and, accordingly, the Company does not believe it is exposed to any significant credit risk related to its cash and cash equivalents.

All of a depositor's accounts at an insured depository institution, including all non-interest bearing accounts, are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000 in total. Balances in excess of this coverage are uninsured and subject to loss should the institution fail, with a possible offset against outstanding loans. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk related to cash. Cash and cash equivalents in the amount of $111,802 and $196,962, representing foreign deposits at financial institutions, are not insured by the FDIC at December 31, 2025 and March 31, 2025, respectively.

Accounts Receivable

Terms of payment are generally thirty days from the invoice date. Receivables are recorded net of an allowance for credit losses, which is established based on management's best estimate of probable credit losses after considering factors such as previous loss history, customers' ability to pay their obligations, and the condition of the general economy and industry as a whole.

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 weighted average cost at one subsidiary and specific identification cost at the remaining subsidiaries. There is no material impact on the comparability of the financial results as a result of these differing methods. 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.

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. Leasehold improvements are amortized over the shorter of the term of the respective operating lease or the estimated economic life of the asset. 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:

Computer Equipment		5 years
Furniture and Fixtures		7 years
Machinery and Equipment		3 - 7 years
Office Equipment		5 - 7 years
Leasehold Improvements		3 - 5 years

Fair Value Measurements

The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses, notes payable, and lease liability. 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:

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Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

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Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).

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Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

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

Intangibles

The Company's intangible assets include software, trademarks, customer lists, and a website, which are amortized on a straight-line basis over their estimated useful lives. The costs of developing intangible assets for internal use are expensed as incurred.

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

Software		3 - 5 years
Trademarks		Indefinite
Customer Lists		3 years
Website		3 years

Software and Website Development Costs

The Company accounts for software development costs in accordance with several accounting pronouncements, including Topic 730, Research and Development, Topic 985-20, Costs of Computer Software to be Sold, Leased, or Marketed and Topic 330-10, Inventory.

Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for internal and external use, 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, and the software has been released for sale, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. These capitalized costs are amortized over their estimated useful lives and reviewed for impairment in accordance with Topic 330 when indicators of impairment exist.

Website development costs are accounted for separately under Topic 350-50, Website Development Costs.

Deferred Revenue

Deferred revenue represents cash received from customers for which the related revenue has not yet been earned. This primarily includes unfilled orders of Omni One units and Omni Pro units that have not yet been delivered or refunded by the end of the reporting period. Deferred revenue also includes amounts billed but not yet recognized for Omni Arenas installations and parts, as well as deferred revenue related to Omniverse Credits and Omni Care subscriptions associated with installed Omni Arena units for which revenue recognition criteria have not been met.

Deferred revenue as of December 31, 2025 and March 31, 2025 consists of the following:

		December 31, 2025				March 31, 2025
Omni One		$	45,421			$	936,821
Omni One Extended Warranty			16,553				-
Omni Pro			449,635				451,545
Omni Arena			137,391				290,169
Omni Online			35,898				44,104
Omniverse Credits			27,701				37,584
Omni Care subscriptions			14,667				9,333
Total		$	727,266			$	1,769,556

Revenue recognized during the nine months ended December 31, 2025 and 2024 that was included in deferred revenue at the beginning of the respective periods was $2,517,806 and $1,617,995, respectively.

Payments received from customers during the nine months ended December 31, 2025 and 2024 that increased deferred revenue were $1,705,810 and $2,639,261, respectively.

Deferred revenue includes legacy preorders for Omni Pro units that we have not been able to refund to customers due to an inability to get in touch with these customers. We no longer produce or sell Omni Pro. As of December 31, 2025, the value of unrefunded Omni Pro preorders totaled $449,635. We plan to report these preorders as unclaimed (escheated) property to the State of Texas and submit these funds to the Texas Comptroller of Public Accounts. The related balance will be reclassified from deferred revenue to an escheatment liability account, both of which are presented within current liabilities. The liability will be relieved when the funds are remitted to the State. There will be no impact to the Company's Consolidated Statement of Operations because we will not recognize revenues or expenses on these preorders. Upon remittance, both cash and current liabilities will be decreased on the Consolidated Balance Sheet, and the remittance will be reflected as a cash outflow within cash used in operating activities in our Consolidated Statement of Cash Flows.

Deferred revenue previously included outstanding Omni One preorder deposits of $200 each from customers who placed a preorder for Omni One but have not yet completed their purchase. However, during the nine months ended December 31, 2025, the Company issued customers gift cards as a replacement for their preorder deposit, and thus, reclassified preorder purchases totaling $241,646 from Deferred Revenue to a separate liability account. We expect most of these gift cards to be applied by the customers to a future purchase of Omni One, or otherwise to expire unclaimed.

Advertising Costs

Advertising costs are expensed as incurred, and are included in selling expenses in the accompanying consolidated statements of operations. Total advertising expense for the nine months ended December 31, 2025 and 2024, was $1,270,723 and $130,170, respectively.

Federal Income Taxes

Topic 740, Income Taxes, clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Topic 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. No uncertain tax positions were identified. The Company recognizes tax related interest and penalties, if any, as a component of income tax expense. The Company has never incurred any federal income tax liability and has not paid any federal income taxes since its inception.

The U.S. federal tax returns are subject to examination by the Internal Revenue Service, generally for three years after they are filed. State tax returns are subject to examination generally for five years after they are filed.

Net Loss Per Share

Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The Company presents both basic and diluted net loss per share. Basic net loss per share includes only the weighted-average common shares outstanding during the period.

Potentially dilutive securities that were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive, include stock options, RSUs, warrants, and convertible preferred stock. The total number of potentially dilutive shares excluded from the computation was 5,210,145 and 22,815,211 at December 31, 2025 and 2024, respectively.

Foreign Currency Remeasurements

The Company's non-U.S. subsidiaries, VML and its wholly-owned subsidiary VML_ZH, along with VMT, operate using the U.S. dollar as the functional currency. The effect of foreign currency exchange rate fluctuations on consolidated balance sheet accounts were not material for the nine months ended December 31, 2025 and 2024.

Quantitative and Qualitative Disclosures About Market Risk

We have not utilized any derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. We believe that adequate controls are in place to monitor any hedging activities, if they were to occur in the future. We do not intend to hedge any existing or future borrowings and, consequently, we do not expect to be affected by changes in market interest rates. We do currently have sales and own assets and operate facilities in countries outside the United States and, consequently, we may be affected by foreign currency fluctuations or exchange rate changes.

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326), which significantly changed the allowance for credit losses model by requiring recognition of expected credit losses over the life of the financial asset. The FASB subsequently issued ASU 2019-10, delaying the effective date of Topic 326. For smaller reporting companies subject to SEC regulations, the effective date was delayed from fiscal years beginning after December 15, 2020, to fiscal years beginning after December 15, 2022. For nonpublic companies, the effective date was similarly delayed to fiscal years beginning after December 15, 2022. The Company adopted Topic 326 using a modified retrospective approach effective April 1, 2023, resulting in a decrease to receivables and a cumulative-effect adjustment to retained earnings of $22,483 as of that date.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), which simplified the goodwill impairment test by eliminating Step 2 (hypothetical purchase price allocation) and requiring an impairment loss be measured as the excess of a reporting unit's carrying amount over its fair value, not exceeding the carrying amount of goodwill. The ASU also addressed accounting for internally generated intangible assets and improved related financial statement presentation and disclosures. ASU 2017-04 is effective for public entities for fiscal years beginning after December 15, 2019, and for all other entities for fiscal years beginning after December 15, 2022. The Company adopted ASU 2017-04 effective April 1, 2023 and concluded that the adoption did not have a material impact on its consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. This ASU provides guidance requiring a joint venture (or corporate joint venture) to recognize and initially measure its assets and liabilities at fair value upon formation. ASU 2023-05 is effective for joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. The amendments are to be applied prospectively. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requiring public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. The Company adopted ASU 2023-07 on April 1, 2024. As of December 31, 2025, the Company operates as a single segment.

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which enhances transparency regarding reconciling items and income taxes paid by jurisdiction. Key new disclosure requirements include qualitative disclosures about reconciling items, disaggregated income (loss) and income tax expense by jurisdiction, and income taxes paid disaggregated by federal, state, and foreign jurisdictions where taxes paid exceed 5% of total. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods therein, with early adoption permitted. For the Company, the earliest fiscal year affected will begin April 1, 2026. The amendments require a cumulative-effect adjustment to retained earnings at the adoption date. The Company is currently evaluating the impact of ASU 2023-09.

In March 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. The ASU requires public business entities to disclose in a tabular format significant expense categories that are included in each relevant income statement line item. The standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements and related disclosures.

Management has reviewed other recently issued but not yet effective accounting standards and believes they will not have a material impact on the Company's consolidated financial statements. The Company will adopt applicable standards as required.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

Internal Control Over Financial Reporting

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States, or GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

In preparation for our direct listing, we identified the following material weaknesses in our internal control over financial reporting: (i) we have insufficient written policies and procedures to ensure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements; (ii) due to the Company's size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible, resulting in control gaps where the initiation of transactions, the custody of assets, and the recording of transactions are not always performed by separate individuals; and (iii) our controls are not adequate to ensure that all material related-party transactions and developments will be properly identified, approved and reported.

To address these material weaknesses, we have implemented measures designed to improve our internal controls over financial reporting. Specifically, we have: (i) formalized and documented policies and procedures to ensure the correct and consistent application of accounting and financial reporting requirements of GAAP and SEC disclosures; (ii) implemented appropriate segregation of duties where possible, and enhanced compensating controls in areas where full segregation is not economically feasible, to ensure the initiation, custody, and recording of transactions are adequately controlled; and (iii) enhanced our controls and procedures for the proper identification, approval, and reporting of all material related-party transactions and developments. These measures included expanding our accounting and finance team to add additional qualified accounting and finance resources, which may include third party consultants, and implementing new financial processes.

The process of designing and implementing an effective accounting and financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain an accounting and financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses.