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THE VIRTUAL REALITY MEGATREND Virtual Reality is poised to become the next “mega-trend.” But is now the time to invest in it? “VR” has the potential to change everything—from how we experience entertainment, to how we protect our country and our health. In our new report below, we explore what this phenomenon might mean for investors, and we review a specific investment opportunity that all investors can take advantage of right now. crowdability

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Page 1: THE VIRTUAL REALITY MEGATREND - Crowdabilityassets.crowdability.com/pdfs/VirtualRealityMegatrend.pdf · The Virtual Reality Industy At-a-Glance Virtual reality first appeared in the

THE VIRTUAL REALITY MEGATRENDVirtual Reality is poised to become the next “mega-trend.” But is now the time to invest in it?

“VR” has the potential to change everything—from how we experience entertainment, to how we protect our country and our health. In our new report below, we explore what this phenomenon might mean for investors, and we review a specific investment opportunity that all investors can take advantage of right now.

crowdability

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OUR NATIONAL DEFENSE

After a high-profile security breach at the White House last year, Secret Service Director Joseph Clancy stood before Congress and made an impassioned request:

To make sure that his team was adequately prepared to protect the President, he needed millions of dollars to build a full-scale replica of 1600 Pennsylvania Avenue.

As Clancy explained:

Right now, we train on a parking lot... We don’t have the bushes, we don’t have the fountains, we don’t get a realistic look at the White House... There are no structures, vehicle gates, lighting or other aids to enhance the training simulations… It’s important to have a true replica of the White House so we can do a better job…

The technical term for what Clancy sought to build is a “MOUT,” which stands for “Military Operation in Urban Terrain.”

Clancy also requested funding for several other MOUTs, including a “live-fire shoot house” and a “tactical village” that would replicate typical city streets.

These requests reflect a new reality: we live in a world filled with terrorists, a world where every arm of our military needs to prepare for nearly unthinkable scenarios. As high-stakes missions like the Bin Laden raid have proven (more on that later), when failure is not an option, it’s highly-trained people—not machines or drones—who are sent in to get the job done.

The Virtual Reality Industy

At-a-Glance

Virtual reality first appeared in the early

1990s. However, due to technological

and cost limitations it never gained

widespread adoption. From 2000 to

2012 there was almost zero activity in

the space.

However, thanks to advances in

computing power, virtual reality

technology is far superior to what was

available 20 years ago. Furthermore,

it’s much more affordable. Systems that

used to cost $15,000 to $250,000 now

cost just $10.

This is why industry research firm, BI

Intelligence, projects that virtual reality

hardware shipments will grow from

less than one million units today, to

over 25 million units per year within the

next five years. And market research

firm, TrendForce, forecasts the market

growing from just $5 billion today to

over $70 billion in the same timeframe.

That is why we believe that right now is

the absolute best time to invest in this

sector. However, there’s one problem:

there are no publicly-traded virtual

reality companies to invest in.

But in this report, you’ll discover a tiny,

private virtual reality start-up that you

can invest in right now.

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To ensure that these soldiers can help protect our country, they need to be provided with access to simulated environments where they can train and prepare.

This helps explain why the market for military training and simulations like MOUTs has reached an all-time high of $137 billion.

But recently, there’s been a major development in this market:

Because of a groundbreaking new technology—a technology we’ll introduce you to in this research report—MOUTs are becoming obsolete.

In fact, experts say this futuristic technology could soon change the face of the entire military industry. Although it’s still in its earliest stages, the world’s biggest defense contractors like Lockheed Martin have already gotten their hands on it. So have the U.S. Navy, West Point, and many others.

But as it turns out, leveraging this innovation for military purposes is just the tip of the iceberg: it can also be used to great effect for a number of non-military purposes. As you’ll soon see, it could be used to disrupt and conquer several multi-billion dollar markets, from Entertainment to Healthcare.

In the following report, we’ll provide an overview of this technology, explore the “mega-trend” behind it, and review a specific investment opportunity that investors like you can take advantage of right now.

THE NEXT MEGA TREND: VIRTUAL REALITY

What we’re talking about here is “Virtual Reality,” or “VR.”

VR is a computer-generated environment that you can interact with. Simply place an electronic headset over your eyes, and you magically enter a new world that feels real.

Virtual Reality is one of the most exciting sectors in technology today. We’ve been telling our subscribers at Crowdability about its potential for the past two years, but now this sector is on the cusp of exploding.

As we’ve written about, VR is poised to disrupt entire sectors—from higher education, to tourism, to how we communicate over the Internet and save peoples’ lives.

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We believe we’re at the beginning of a virtual reality “mega trend” that will impact a huge number of industries over the next 20 to 30 years—and we’re not alone:

According to financial analysts at investment bank Piper Jaffray, the virtual reality market will soon be worth more than $60 billion.

That helps explain why the world’s biggest technology players like Google, Facebook, Apple and Microsoft are already spending billions preparing for it…

And if you’re looking to earn massive profits, this might be the cue for you to get in at the “ground floor.” (As always, it’s those who get in early who make the fortunes.)

Mark Zuckerberg, Facebook’s chief executive, believes that virtual reality is the “next big thing.” And he’s putting his money where his mouth is. Two years ago, to get his foot in the door of this emerging industry, he bought Oculus Rift, the maker of virtual reality goggles, for $2 billion. Here’s what the Oculus Rift look like:

As Zuckerberg noted in a blog post, “Imagine enjoying a courtside seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face—just by putting on goggles in your home.”

But Facebook isn’t alone in its aspirations:

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As it started dedicating serious effort and capital to this emerging sector, its competitor Google stayed close behind. But now, as 2016 steams ahead, Google has become dead serious about this sector, too.

The search giant recently formed a new division that’s 100% dedicated to virtual reality, and it put a key deputy—the senior executive who had previously run key business units such as Gmail, Drive and Docs—to run it.

Cardboard has already gotten significant traction—including a deal with The New York Times that earned it some mainstream press, and an integration with GoPro that brings virtual reality video to YouTube.

But to ensure that it’s staked out a strong enough position in this new world, Google isn’t content to rely on Cardboard. For example, it’s already invested more than half a billion dollars into a stealthy augmented reality start-up called Magic Leap. Riding the wave of this new mega trend, Magic Leap is years from having a commercial product, and it’s already valued at $4.5 billion.

In fact, as The New York Times reported early in 2016, there’s currently a race going on “to discover and create the next breakout platform for consumers, which many of the world’s largest tech companies think will be some form of virtual reality.”

Facebook has Oculus; Google has Cardboard and Magic Leap; Microsoft is working on a VR technology called “Hololens,” and as The Financial Times just reported, Apple has built a “secret team” to kick-start its efforts in virtual reality.

So to be clear, the “ground floor” for Virtual Reality is being constructed right now:

According to a recent report from consulting giant Deloitte Global, 2016 will be VR’s first billion-dollar year, with about $700 million in hardware sales, and the remainder from content.

But those numbers are just the start:

As the Deloitte report goes on to say, massive growth and global adoption is on the horizon. And Deloitte explicitly identified what will trigger this global adoption:

A virtual world that’s able to provide a “total immersive experience.”

What it means by an immersive experience is that users could move around in a virtual world just like they do in real life.

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So, in just a moment, we’re going to tell you exactly how such an immersive experience could be created. And then we’ll tell you how you can profit from it.

GET IN EARLY

To reap the near-term rewards of the virtual reality megatrend, you need to get involved with VR-focused companies at their earliest stages.

Unfortunately, many of those companies are privately-held. And not only are private companies exceedingly challenging to identify and get access to, but at the moment, ordinary investors aren’t even legally allowed to invest in 99% of them. (More on that later in this report).

However, Wayne and I, along with our Research and Emerging Technologies Team, recently discovered a way for you to invest in one of the most promising virtual reality companies in the market.

It doesn’t matter who you are, where you live, or how much you’re worth.

And you can do it right now.

MEET VIRTUIX

In 2013, Jan Goetgeluk, a former Investment Banker from JP Morgan, started a company called Virtuix.

As a trained engineer, Jan was fascinated by technology. And as he looked into the future, he became thrilled about the potential for virtual reality.

But he thought the existing technologies—strapping on a headset so you could “see” things in a VR world, like with the Oculus Rift—weren’t going far enough.

To make a virtual world feel authentic and realistic, Jan came to believe, just like Deloitte, that you needed to be immersed in it. And to be immersed, you needed the ability to move naturally inside that world.

In other words, instead of sitting on a couch and pretending to run and move around, Jan thought the key to making virtual reality feel real was to enable you to actually stand up and spin around. He thought you needed the ability to respond physically, in real-time, to the virtual

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world around you.

So, after every long day at JP Morgan, Jan went home and started tinkering.

And eventually, he built a prototype for a new type of device…

This device allowed you to walk, run, jump, or turn around in a virtual world—all while being safely held in place by a harness.

Through its incredibly precise sensors, the device could map your movements and translate them to a virtual world—a world you could view through your headset. Physically move on the device, and you could instantly experience that exact movement inside the virtual world. It was magic.

Jan decided to call his device the “Omni” because it’s omni-directional—meaning, after putting on Omni footwear and harnessing yourself in, you can move in any direction. In fact, you can walk and run on the Omni just like you would on a regular treadmill, but you can do it in 360 degrees.

Here’s what it looks like:

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And here’s a video of it in action, as recorded at “CES,” the International Consumer Electronics Show, in January 2016.

Jan had built a prototype, but to start building the Omni commercially, he needed capital. So he set up a “crowdfunding” campaign on the website, Kickstarter.

As he told the world about his dream and showed videos of his Omni, his excitement and vision became contagious. In the blink of an eye, Virtuix “pre-sold” about 2,300 Omnis, bringing in about $1.1 million. It became one of Kickstarter’s top-ten technology campaigns of all time.

But “pre-selling” the Omni meant that people had ordered units for delivery before Jan had figured out how to manufacture them….

How was Jan going to get thousands of Omnis built?

OPERATIONS AND TECHNOLOGY

When Virtuix launched its Kickstarter campaign, it only had a prototype of the Omni.

But it’s no small task to go from a prototype to a commercial product. This was a complex mechanical device, and it needed to be reproduced thousands of times.

Not only that, but the Omni is a new type of machine, with new technology. It has hundreds of different components and sensors, many of which needed to be pre-engineered, custom made, and patented. (In fact, during the engineering process, the company filed for 12 patents.)

For example, based on your movement, the Omni knows whether you’re running straight, moving sideways, or jumping—and it can communicate that motion with incredible precision to its controller.

To build this capability, Virtuix had to develop its own hardware and software to track every tiny movement of your feet and body. It even developed special footwear for the Omni that has “inertial trackers” built into its soles.

Because of these innovative technologies, it takes the Omni just a fraction of a second (two-tenths of a second, to be exact) to translate any physical motion into the virtual world. With that low level of “latency,” users don’t notice any lag time. So whether you’re a Navy SEAL preparing for a life-or-death combat mission, or you’re playing a video game at home, the Omni creates a lifelike experience.

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Virtuix also figured out how to “de-couple” your movement from your eyeline. With traditional simulators, you have to look in the same direction as you’re moving—in other words, if you want to see something to the left, you have to move left; if you want to see something behind you, you have to turn around.

But with the Omni, you can look around independently from your movement, just like you do in real life. In fact, the Omni is the very first controller that can track sight, movement, and hand motion independently. (Given its future potential for a military customer base, the company is also developing technology for “gun tracking,” so you can aim your gun independently from where you’re looking. If you’ve seen the new Star Wars movie, you know this technique was effective for Han Solo.)

The Virtuix is the first company to bring an active motion product to the market, but given the size of this opportunity, it shouldn’t be surprising that competitors are nipping at its heels. One such competitor is the Cyberith Virtualizer, based in Austria. The Virtualizer aims to differentiate itself by allowing users to crouch, but that capability makes its hardware larger and far more expensive than the Omni.

Despite Cyberith and other small competitors, Virtuix is well positioned. It’s first to market, it has the lowest price point, and to date, it’s received the most backing from investors. (Its significant financial backing is a big advantage considering how expensive it is to manufacture such a device at scale.)

To ramp up its manufacturing process, Jan relied on his business partner, David Allan. David was born in Canada, but he’s lived in China for the last 20 years working in contract manufacturing. He previously worked for Flextronics (NASDAQ: FLEX), the multi-billion dollar “supply chain solutions company.” He speaks fluent Mandarin, and has relationships with industrial and electronics manufacturers all across East Asia.

Thanks to David’s knowledge and experience, Virtuix was able to build a sophisticated, cost effective and scalable supply chain for the Omni in Southern China. And he was able to do it in a way so Virtuix could sell the Omni for $699, with a target gross margin of 50% to 60%.

But as you may have realized by now, all this progress didn’t come cheap—it took far more than the $1.1 million the company raised from its Kickstarter campaign.

Where did the necessary funds come from?

Let’s take a look.

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MARK CUBAN HOPS ON BOARD THE OMNI

If you’re one of the 7.9 million people who tune into ABC’s hit show, “Shark Tank,” Mark Cuban needs no introduction.

But in case you’re not familiar with Mark, here are a few relevant facts:

He made most of his $3 billion fortune by starting and selling technology companies, including his sale of Broadcast.com to Yahoo! for $5.6 billion.

And he’s diversified his investments by getting into professional sports (for example, he owns the Dallas Mavericks NBA franchise) and entertainment (he owns the Landmark Theatre movie chain as well as movie production company Magnolia Pictures.)

But mainly, he focuses on what he knows best: early-stage technology. Over the years, Mark’s invested in hundreds of start-ups—many of which have gone on to generate sizable returns.

In 2008, for example, he invested with some other “angels” in a start-up called SlideShare. A few years later, SlideShare was acquired by LinkedIn (NYSE: LNKD) for $119 million, netting Cuban an estimated gain of 59.5 times his original investment.

But Mark’s success as an investor doesn’t come from “following the crowd.”

He identifies game-changing trends, then aggressively gets in early.

One such trend is Virtual Reality.

After being introduced to Virtuix through its Kickstarter campaign, Cuban soon invested. And then, based on their own due diligence and belief in Virtuix’s financial potential, several other top-tier professional investors joined him.

One such investor was Maveron Capital, the venture firm founded by Howard Schultz, the CEO and Chairman of Starbucks. Maveron is perhaps the top venture group in the U.S. that focuses on consumer-facing start-ups. Its investments include eBay, Everlane and Pinkberry.

Another investor was Queensbridge Venture Partners, a prominent venture firm whose investments include Dropbox and Lyft.

In total, these and other professional investors put $8 million into Virtuix.

With their capital, Jan was able to set up his manufacturing facilities—and in December of 2015,

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he actually starting delivering his devices to ecstatic users.

So now that Virtuix is off to the races, let’s look at its future roadmap—and look at how you can profit.

THE VIRTUIX ROADMAP

As you understand now, the Omni provides the physical elements to virtual reality that make it feel real.

Being on the Omni places your mind and body inside of any environment. Instead of sitting down at a keyboard and pushing a few buttons, with the Omni, you’re standing up and walking around in another world.

And Virtuix’s engineers made sure that the Omni is easy to get used to. As Jan has said, it’s like riding a bike: the first time requires a few minutes, then it becomes second nature. Your brain adapts to the feeling quickly, and then it’s just like running on a treadmill. Your brain actually thinks you’re running, jumping, and walking in a virtual world.

Jan believes that this phenomenon—so-called Active VR—is the “killer experience” that’s needed to make VR a global phenomenon.

And given Jan’s belief, he’s made Virtuix’s mission a simple one:

Become the leading platform for Active VR.

That means Virtuix plans to support a huge range of sectors and markets. In addition to the gaming and military markets, it might tackle healthcare, virtual tourism, virtual real estate “walkthroughs,” fitness, architecture, and education.

The treadmill market for fitness, for example, is an estimated $5 billion market. It’s the single largest fitness category, with conventional treadmills costing at least $600 per unit. Picture yourself, instead of running on a normal treadmill, being able to run through your favorite scenery, or on a trail in Hawaii. (And, of course, the Omni is actually safer than a regular treadmill because of its safety harness.)

Virtuix also gets frequent interest from architecture and real estate firms that want to use the Omni for virtual walkthroughs of their plans and designs. Imagine being able to walk through and explore your new house in 3D before construction begins.

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As you can see, the applications for this technology are limitless… but to stay focused, Virtuix had to choose an initial “battleground.”

So now lets see where the initial battle will take place.

GAME ON

When a new technology is just emerging, there’s a certain set of users that tend to try it out first. This group is called early adopters.

Maybe you have an early adopter in your family or at work. You can recognize them because they were the first to use “personal digital assistants” like the Palm Pilot, and the first to use iPods, iPhones, and internet-connected TVs.

Often, this group consists of a younger demographic—a demographic that loves video games.

So, after analyzing the potential entry points for its Active VR technology, Virtuix decided to focus its initial efforts on early adopters and Gaming.

Gaming is a shockingly large phenomenon. The gaming hardware and accessories market is worth $10 billion in the U.S. alone. And it’s estimated that, by 2017, the global market for the entire gaming sector will exceed $100 billion. To put that in perspective, in 2014, the global box office for all films around the world was just $36.4 billion.

The most popular games include “Call of Duty,” “Battlefield,” and “Grand Theft Auto.” “Grand Theft Auto” alone is responsible for more than $2.3 billion in sales. “Call of Duty” is responsible for more than $11 billion in sales.

Each of these popular games involves a first-person perspective (meaning, you’re the one in charge) and a main character that moves around in the game.

The experiential and financial potential to translate these games into virtual reality is enormous—but not if you’re obliged to stay seated in a chair and are limited to pushing a few buttons. What you need is a device that allows you to stand up, rotate your body naturally, walk and run naturally in the virtual world, and become that character in the game.

The fact is, virtual reality combines vision, hearing, and motion. The Oculus Rift and others have mastered the first two elements; but only Virtuix has completed the virtual reality experience through natural motion.

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Keep in mind that gamers tend to spend $500 to $600 on their game consoles, and PC gamers spend at least $2,000 on their machines. Virtuix believes these gamers will be more than willing to spend $699 for a fully immersive experience—and it’s now proven this assumption by “pre-selling” more than 4,000 of its units.

But gaming is just where Virtuix is starting… that’s its first battleground. As we’ve alluded to throughout this report, Virtuix has already started expanding its focus.

One of its key expansion areas is a big one:

Training and simulation products for military and law enforcement.

Let’s take a deeper look now at this market, and see why it could catapult Virtuix to enormous success.

TIME FOR ACTION

The Black Hawk helicopters lifted off from Ghazi Air Base in Pakistan. Under the cover of night, they tracked a course northeast to a small city called Abbottabad.

Strapped into these killing machines were two dozen Navy SEALs from the U.S. Naval Special Warfare Development Group.

Two years beforehand, this Special Ops team—also known as SEAL Team Six—had hunted down and assassinated a band of Somali pirates in order to rescue a merchant marine captain.

Tonight they were equipped with HK416 military assault rifles, Mark 48 machine guns, night-vision goggles and body armor. Their Belgian Malinois tracking dog, Cairo, sniffed the air madly, desperate to go to work.

Originally, their covert operation had been planned for the night before, when the moonlight had been dim. But cloudy weather had pushed the mission back by 24 hours. Now, finally, it was time for action.

SEAL Team Six launched themselves out of the helicopters and started moving as soon as they hit the ground. There was no time to think. As they swept in, they were guided by muscle memory and adrenaline.

Twenty-two hundred seconds later, they had killed or captured twenty-two people. One of them, a high-value target, had been shot twice in the left side of his face in a highly-practiced

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killing tactic called a “double tap.”

In news around the world, the target’s name was soon released:

Osama Bin Laden.

ULTRA-TRAINED HUMAN WARRIORS

Eight months prior to this historic mission, the U.S. Joint Special Operations Command (JSOC) started reviewing their strategic options for capturing Bin Laden.

First they explored bombing his entire compound—the so-called “Waziristan Mansion”—with B2s.

But this option posed too great a threat to civilians: the mansion was situated close to a health clinic for women and children, and it was even closer to a prestigious military academy. President Obama was also concerned that a successful bombing mission would leave no proof of Bin Laden’s death.

Instead, JSOC decided to bring in ultra-trained human warriors: SEAL Team Six.

Once the decision had been made, preparations began immediately:

Using satellite imagery, reconnaissance photos from drones, and ground surveillance from CIA operatives, U.S. intelligence agencies used computer modeling to build a detailed map of the Bin Laden compound.

Then they got to work building not one, not two, but three full-scale replicas of the compound. These replicas are where the SEALs would train for their mission: after hundreds of simulations, they would become intimately familiar with every stairwell, shadow and door.

One of these replicas was built at the Harvey Point Defense Testing Activity facility in

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Perquimans County, North Carolina.

Another was built in Nevada, where the 4,000-foot elevation could be used to test the effects of altitude on the Black Hawks.

And the final replica was built in a restricted area at Bagram, Afghanistan, a U.S. airbase on the outskirts of Kabul. This one-acre simulation was called “Camp Alpha.”

The SEALs used Camp Alpha repeatedly for practice missions. In fact, they used it until the place was burned into their memories; until every possible scenario had been rehearsed and perfected.

Building these replicas required an absolutely momentous amount of work—

But as JSOC determined, there was simply no other way to assure the success of the mission.

MORE ON “MOUTS”: MILITARY OPERATIONS IN URBAN TERRAIN

Every year, the U.S. Military spends several billion dollars creating replicas of buildings, towns and cities so its soldiers can train for high-stakes missions like the one on Bin Laden’s compound.

These are the so-called MOUTs that we mentioned earlier.

Some MOUTs are quickly and crudely erected. Others, like the replicas of the Waziristan Mansion, are built to exacting specifications: they’re filled, for example, with ultra-realistic automated targets, lighting and sound effects, and high-tech monitoring systems that “keep score” to provide data for detailed debriefs.

After the 1993 Black Hawk Down incident in Somalia, MOUTs became a key military training tactic. Their use became ever more widespread as the “Global War on Terror” reached into challenging geographies like Iraq and Afghanistan.

But as we’ve described today, the need for these simulated environments just keeps expanding—not just for missions like the raid on Bin Laden, but for the Secret Service, and for all of our other armed forces.

Simply put, this need opens up an enormous opportunity for Virtuix.

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THE OMNI PRO

Virtuix’s military machine is called the Omni Pro. It’s a larger and more complex version of the Omni, and its already attracted major interest. As mentioned earlier, current customers include Lockheed Martin, the U.S. Navy and West Point. But other customers are close behind: several military branches, US intelligence agencies, and other contractors like Northrup Grumman and BAE Systems are exploring it right now.

Remember, for the Osama Bin Laden mission, the Navy constructed three full-scale replicas of his compound so SEAL Team Six could conduct virtual training missions.

With the Omni, those training missions could be created far more efficiently and effectively—including the ability to adjust hundreds of different variables. Critically, as compared to MOUTs, the Omni avoids issues of safety and physical constraints.

As Virtuix has written: “The Omni is becoming the holy grail of ground combat simulation. There has never been anything like this for law enforcement or military training. Organizations are contacting us in disbelief because they never thought it possible what we’re doing.”

And again, this is a $137 billion market.

If Virtuix is able to enter this market successfully, it could become a highly valuable company. In fact, it could potentially become the target of a transaction similar in scope to Facebook’s $2 billion acquisition of Oculus.

Now that you’re aware of the potential, let’s review the deal itself.

A DEAL THAT ALL CITIZENS CAN INVEST IN

When Virtuix first posted its deal on crowdfunding site Kickstarter, many people who were interested in buying an Omni device asked if they could also invest in the company itself.

Unfortunately, because of securities laws that go back to the Great Depression in 1933, only wealthy investors known as “Accredited” investors had the legal ability to invest in privately-held businesses like Virtuix. (An accredited investor is someone who has an annual income of at least $200,000, or a net worth of at least $1 million, excluding their primary residence.)

But in 2012, new legislation called The JOBS Act was passed by Congress and President Obama. This new legislation started to remove the restrictions about who could invest in small businesses and private start-ups.

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And last summer—on June 19, 2015, to be exact—a part of the JOBS ACT called “Reg A+” went into effect.

Reg A+, which is also known as Title IV, allows all U.S. citizens—regardless of their income or net worth—to invest in certain start-ups.

And one such start-up is Virtuix.

As Jan explained: “Each week we receive requests from supporters who want to participate in the financial future of our company and, because of regulation, we’ve had to turn them away. It felt counter to our company’s culture. Now, with [Reg A+], our customers and supporters may have a chance to buy shares in Virtuix alongside Silicon Valley venture capitalists and global institutional investors.”

The Reg A+ offer comes just as Virtuix has started shipping its product to consumers. And critically, the Omni is coming to market at the exact same time as when Facebook’s Oculus Rift headset is about to start shipping its product on March 28, 2016.

This is why it’s so important that you explore investing in Virtuix now.

Virtuix is aiming to raise $15 million from investors like you. But before it starts selling any securities, it’s leveraging a powerful provision of Reg A+ that lets it gauge investor interest beforehand. This provision helps it ensure that there’s adequate demand for its offering, helps it decide on a final price for its stock, and helps protect potential investors.

This process of gauging interest is called “Testing the Waters.” To test the waters, Virtuix has already posted a detailed description of its business online so investors like you can take a look.

To be clear, you can’t actually buy shares quite yet—but if you like what you see, you can “reserve” shares to buy in the future. This is a non-binding commitment. It allows you to reserve shares now without creating any obligation. If you want to, you can simply back out later.

Assuming that Virtuix gets a high level of interest for its offering, it will seek approval from the U.S. Securities and Exchange Commission (the “SEC”) to actually start selling shares. And once the offering is approved (it might take a couple of months or so), Virtuix will get back in touch with you and see if you’re still interested in investing.

It’s as simple as that…

And to be clear, investors like you are already diving in:

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Within 48 hours of revealing its fundraising plans, Virtuix had gathered more than $5 million in interest. So if you’re interested, we urge you to act quickly. (And keep in mind: Crowdability has zero financial interest in Virtuix. Remember, we’re an independent provider of research about start-ups and other alternative investments.)

If you’re interested, here’s what you’ll do next…

THE INVESTMENT PROCESS

According to SEC security laws, in each Reg A+ offering you choose to invest in, you can invest up to 10% of your annual income or 10% of your net worth, whichever is greater. (Note that your net worth calculation excludes your primary residence).

So for example, if you earn $80,000 and have a net worth of $100,000, you could invest up to $10,000. (In other words, 10% of $100,000.)

The minimum reservation is $1,000. You’d make your reservation on a website called SeedInvest. We’ll link to it below.

SeedInvest is a “crowdfunding” site like Kickstarter: it helps connect start-up projects with people like you who are interested in supporting those projects. But there’s one critical difference: on websites like SeedInvest, you’ll get an actual ownership stake in the company you invest in—an actually “equity stake.” Which is why sites like SeedInvest are called “Equity Crowdfunding” sites.

These sites are heavily regulated by the SEC and by FINRA, and SeedInvest is one of the highest-quality equity crowdfunding sites in the market.

So let’s say you decide to invest $10,000…

Let’s look at what sort of return you might be able to earn.

RETURN PROFILE

But before we explore the financial upside, we should remind you to protect your downside—because remember, start-ups are risky.

A standard technique to protect yourself financially is through asset allocation.

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You see, professional investors know that for every Facebook, Twitter or Oculus they invest in—the type of investment that provides a massive financial return—they’ll invest in 5 to 10 other companies that don’t do as well as they’d expected.

That’s why we recommend that individuals allocate only a small amount (in general, no more than 5% or 10% of your investable assets) to early-stage companies. And that’s why we recommend building a diversified portfolio of investments.

To make this point about diversification clear, let’s say you have total investable assets of $100,000. If you allocate 10% to early-stage investments, you’d have $10,000 to allocate. (You can re-do the math based on the actual size of your own portfolio.) If you invested in 20 different companies, you’d be allocating $500 to each one.

For early-stage investments as an asset class, data has shown that you should aim to build a portfolio of at least a couple of dozen different investments. That would allow you to be “diversified.” That might sound like a lot of investments, but you can do it over several years, and the minimums can be quite low—in some cases, just a few hundred dollars. (Keep in mind, too, that Crowdability has automated tools that can help make the process of building a portfolio very quick and easy.)

The point is, you can start doing early-stage investing with a small amount of capital and gradually build a diversified portfolio… all without being a mega-millionaire.

To illustrate this point, let’s run the math on potential returns assuming that you invest $10,000 into Virtuix. (Again, you can re-do the math based on the actual size of your investment.)

To do this calculation, we need to know what the price of Virtuix is now, and what the price might be in the future. Ideally, you’ll be “buying low and selling high.”

You’ll be buying into Virtuix when it’s valued at about $40 million. (Virtuix will determine the exact price after it has completed the Testing the Waters phase.) To use some simple math to illustrate our point, if you buy shares in the company when it’s valued at $40 million, and you sell your shares in the future when it’s valued at $400 million, you’d make 10 times your money.

To do our return calculations, we’ll also assume that Virtuix raises one more round of financing after this one. A company raising additional rounds of financing is a promising signal; it generally means that it’s growing and increasing its value. That being said, each additional funding round will decrease your overall ownership stake. This phenomenon is called dilution. The thing is, since the new investors will typically be buying shares at a higher price, the value of your existing stake is increasing. Long story short: you shouldn’t worry about dilution.

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If you invested $10,000 now, you’d own roughly 0.025% of the company (in other words, $10,000 divided by $40 million). And let’s say that after an additional round of financing, your stake would be reduced 20%, to about .02%. .02% might sound like a small percentage of ownership, but let’s look at the approximate returns if things play out well for Virtuix:

Acquisition Valuation

$200 million $400 million $1 billion $2 billion

Return on Investment of $10,000

$40,000 $80,000 $200,000 $400,000

Net % Return on Investment

300% 600% 1,500% 3,000%

These are the types of returns you aim for with venture investing. You hope that 20% to 30% of your investments will produce results like these—so when the other 70% to 80% don’t work out as well as you’d hoped, you’re still left with a double-digit annualized return.

Keep in mind: Virtuix has already been “de-risked” in some critical ways:

First of all, you know that the technology works. It’s been tested and vetted and approved by experts—and just look at the reaction of people at CES: they’re thrilled.

Secondly, you know that professional investors have done their due diligence, and they believe there’s big upside potential here. Remember, you’re investing alongside professional investors such as Mark Cuban and Maveron. They know that if Virtuix can have an impact in any of the markets it’s going after—from the $100 billion gaming market to the $137 billion military market—it could become an extraordinarily valuable company.

With its $40 million valuation, it’s certainly not a “cheap” investment. You’re paying a premium for the fact that it’s been de-risked. An unproven, earlier-stage investment might be valued at, say, only $5 million.

But if Virtuix is able to capture even a tiny fraction of the markets we’ve looked at today, it could create a billion-dollar revenue opportunity—and it could potentially command a takeover price in the same neighborhood as Facebook’s $2 billion acquisition of Oculus.

This is one of the most exciting things about investing in early-stage companies: you can make outsized profits if even they don’t turn into the next Google, Facebook or Microsoft. If a company like Virtuix becomes even 1% as valuable as Facebook, an investor today could still potentially earn 20 times his or her money.

Think about it: Oculus and Virtuix are both hardware companies focused on VR. They both got their start on crowdfunding sites. And they both went on to raise money from professional

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investors. (Oculus raised money from venture capitalists in June of 2013. 9 months later, it was acquired by Facebook, providing those investors with a 20x return.)

In many ways, however, Virtuix is in an even stronger position than Oculus was:

Virtuix has already started shipping its product, it’s already set up its manufacturing facilities and logistics, and it can point to a $2 billion transaction as a “precedent” in the VR space.

Oculus, on the other hand, hadn’t shipped its product or set up its manufacturing facilities, and no major transactions had taken place to establish what “fair value” might be.

And keep in mind: at the time of acquisition, the market hadn’t heated up yet…

But it sure has now.

NEXT STEPS

As you’ve learned from reading this research, we believe that VR will soon become an essential part of how we all experience the world—and that vision can’t happen without a device like the Omni.

To interact with the virtual world as if it were real, we need to walk, run, and move. That’s the essential component that Virtuix has solved.

To learn more about Virtuix’s Reg A+ deal, and make an investment, click here »

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Disclaimer:

This document is made available for general information purposes only. This report does not constitute a specific investment recommendation or advice upon which you should rely based upon, or irrespective of, your personal circumstances. Use of this document is not a substitute for obtaining proper investment advice from an authorized investment professional. Actual results may differ significantly from the results described. Potential retail investors are urged to consult their own authorized investment professional before entering into any investment agreement. Past performance of securities is not necessarily a guide to future performance and the value of securities may fall as well as rise. In particular, investments in the technology sector can involve a high degree of risk and investors may not get back the full amount invested.

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ABOUT CROWDABILITY

Crowdability provides individual investors with education, information and insight into opportunities in the crowdfunding market.

Our free website and email newsletter aggregate and organize deals from an ever-expanding universe of crowdfunding platforms. We aim to save people time and simplify the process of discovering and evaluating crowdfunding opportunities.

BENEFITS OF JOINING CROWDABILITY

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