Virtuix Exchanges Secured Notes for Dilutive Streeterville Equity-Purchase Facility
Distressed
Company Background
Virtuix Holdings makes full-body virtual reality treadmills — its flagship Omni One lets users walk in 360 degrees inside VR games and simulations — and is pursuing a dual strategy of consumer hardware sales and high-value defense training contracts. The company listed on Nasdaq on January 27, 2026, roughly four months before this disclosure. At approximately $121M in market capitalization, it trades at a significant premium to its operating fundamentals.
The financial picture is lean. Net sales for the nine months ended December 31, 2025 were $3.0 million, against a net loss of $6.9 million for the same period. Cash stood at $1.1 million at December 31, 2025, and net cash used in operating activities was $5.5 million over that nine-month span. Interest expense alone in the three months ended December 31, 2025 was $870,717 — nearly matching quarterly net sales of $963,817 — reflecting the cost of a growing pile of structured notes issued to finance operations.
Virtuix has been active on the corporate development front: in May 2026 it announced that its board formed a special committee to evaluate acquisitions in the defense training sector, targeting companies with recurring defense revenues in the $10M–$50M range. The company has also signed agreements with the Naval Postgraduate School, the U.S. Marine Corps, and several Air Force and Army installations, and in May 2026 was selected for an AFWERX SBIR Phase I contract to develop its Virtual Terrain Walk platform.
What Was Disclosed
On May 22, 2026, Virtuix exchanged three outstanding secured convertible promissory notes held by Streeterville Capital, LLC for a new instrument called a Pre-Paid Purchase, with an original principal amount of $3,471,923. The three notes retired were each issued pursuant to a Securities Purchase Agreement dated August 25, 2025: a note dated August 25, 2025 with original principal of $2,200,000; a note dated October 30, 2025 with original principal of $560,000; and a note dated December 19, 2025 with original principal of $560,000. Streeterville provided no cash consideration beyond the exchange itself.
The Pre-Paid Purchase bears interest at 6% per annum, compounded daily. Beginning on the exchange date, Streeterville has the right, at its sole discretion, to purchase shares of Virtuix's Class A common stock by delivering purchase notices to the company, with each purchase amount offsetting the outstanding balance of the instrument. The purchase price is set at a Fixed Price, but following the occurrence of a Trigger Event — as defined in the instrument — the price adjusts to the lower of the Fixed Price and the prevailing Market Price, introducing a variable-rate dilution mechanism. Streeterville is capped at 9.99% beneficial ownership at any time. If Virtuix wishes to prepay, it faces premiums of 120% within six months of the exchange date, 115% between six and twelve months, and 105% thereafter. An event of default triggers acceleration, a 7.5% increase in the outstanding balance, and default interest at 15% per annum.
The new instrument is unsecured; the three prior notes it replaced were secured. For Rule 144 resale purposes, the Pre-Paid Purchase is deemed to have been issued on December 19, 2025, meaning Streeterville's holding period — and eligibility to resell any shares received — runs from that earlier date, not May 22, 2026. The same 8-K also announced a Rutgers University collaboration to deploy the Omni One platform for AI-assisted neurodivergent therapy research and the U.S. Air Force AFWERX SBIR Phase I selection.
Why It Matters
The May 22 exchange is the third substantive restructuring Virtuix has executed with Streeterville since February 2026. On February 9, the company amended four existing Streeterville warrants to temporarily reduce their exercise price to $6.00 per share; on March 11, it extended that reduced-price window for an additional 90 days through June 10, 2026. Then on March 31, it exchanged a separate set of 2024 subordinated notes — acquired by Streeterville from prior investors — for a new promissory note of $2,681,718.42 bearing 6% interest and maturing July 1, 2027, with Streeterville holding the right to require monthly cash redemptions of up to $111,738.27 beginning July 1, 2026. That March note remains outstanding. Taken together, Virtuix now carries two live Streeterville instruments — the March Exchange Note and the May Pre-Paid Purchase — totaling over $6.1 million in principal, against a company generating roughly $1 million per quarter in revenue.
The structure of the Pre-Paid Purchase is what distinguishes it from conventional refinancing. Rather than setting a schedule of cash repayments, it gives the lender unilateral discretion to convert its credit into equity at any time, at a price that can reset downward after a Trigger Event. This mechanism transfers pricing risk to existing shareholders: if Virtuix's stock declines and a Trigger Event is met, Streeterville can purchase shares at a discount to the Fixed Price and offset a larger number of shares against a given dollar of outstanding balance. Management stated the exchange was executed under Section 3(a)(9) of the Securities Act — the same exemption used in the March exchange — which requires no new registration and permits Streeterville to rely on its accumulated holding period from the original note issuance dates.
The positive disclosures in the same filing — the Rutgers University therapy research collaboration and the Air Force SBIR Phase I award — are genuine business developments. The SBIR Phase I award, in particular, management noted provides a pathway to Phase II funding that typically exceeds $1 million. However, SBIR Phase I grants are exploratory and do not represent contracted revenue. The Rutgers and Florida Gulf Coast University deployments represent hardware placements into research settings where Virtuix's primary focus, by its own description, remains consumer entertainment and defense. Neither item changes the near-term cash equation for a company that burned $5.5 million in operating cash over nine months while holding $1.1 million at the period's close.