xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
¨ TRANSITION REPORT PURSUANT TO SECTION 13 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| Virgin Galactic Holdings, Inc. | ||
| (Exact name of registrant as specified in its charter) | ||
Delaware | 85-3608069 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| ||||||||
1700 Flight Way Tustin California | 92782 | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
(575)424-2100 | ||
| (Registrant’s telephone number, including area code) | ||
| N/A | ||
| (Former name, former address and former fiscal year, if changed since last report) | ||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common stock, $0.0001 par value per share | SPCE | New York Stock Exchange | ||||||||||||
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| Large accelerated filer | Accelerated filer | ||||||||||
| Non-accelerated filer | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
SOCIAL CAPITAL HEDOSOPHIA
Quarterly Report on Form 10-Q
INC.
| Page | |||||||||
Financial Statements | |||||||||
PART I - FINANCIAL INFORMATION
SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.
CONDENSED BALANCE SHEET
SEPTEMBER 30, 2017
(Unaudited)
| ASSETS | ||||
| Current Assets | ||||
| Cash | $ | 933,763 | ||
| Prepaid expenses | 368,098 | |||
| Total Current Assets | 1,301,861 | |||
| Cash and marketable securities held in Trust Account | 690,203,220 | |||
| Total Assets | $ | 691,505,081 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| Current Liabilities | ||||
| Accounts payable and accrued expenses | $ | 133,947 | ||
| Advances from related party | 115,971 | |||
| Promissory note – related party | 100,000 | |||
| Total Current Liabilities | 349,918 | |||
| Deferred underwriting fees | 24,150,000 | |||
| Total Liabilities | 24,499,918 | |||
| Commitments | ||||
| Class A ordinary shares subject to possible redemption, 66,181,024 shares at redemption value | 662,005,162 | |||
| Shareholders’ Equity | ||||
| Preferred shares, $0.0001 par value; 5,000,000 authorized; none issued and outstanding | ||||
| Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 2,818,976 shares issued and outstanding (excluding 66,181,024 shares subject to possible redemption) | 282 | |||
| Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 17,250,000 shares issued and outstanding | 1,725 | |||
| Additional paid-in capital | 5,065,530 | |||
| Accumulated deficit | (67,536 | ) | ||
| Total Shareholders’ Equity | 5,000,001 | |||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 691,505,081 |
The accompanying notes are an integral part of the unaudited condensed financial statements.
2021) information set forth herein. The has a Transition Services Agreement ("TSA") with Virgin Orbit, LLC ("VO") based on an allocation methodology that considers our headcount, unless directly attributable to the business. The Company is Condensed Consolidated Financial Statements condensed consolidated balance sheets. The fair value of the As of June 30, 2022, and December 31, 2021, there were no public or private placement warrants outstanding. stock options as incentive compensation for certain key employees. The fair values of these stock options were estimated using a Black-Scholes model with the following assumptions: The following result, and monetary liability or financial impact to the Company from legal proceedings, lawsuits and other claims could differ materially from those projected. allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. United Kingdom, which operates on a cost-plus arrangement. each year, beginning on August 1, 2022. The 2027 Notes mature on February 1, 2027 unless earlier repurchased, redeemed or converted. In connection with the short-term liquidity requirements primarily through our cash, cash equivalents and marketable securities on hand. We believe we will have and Estimates effective at the reasonable assurance level. Risk Factors Unregistered Sales of Equity Securities Use of Proceeds Defaults Upon Senior Securities Mine Safety Disclosures Exhibits Chief Executive OfficerSOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.CONDENSED STATEMENTS OF OPERATIONS(Unaudited) Three Months
Ended
September 30, For the Period
from May 5, 2017
(inception)
through
September 30, 2017 2017 Operating costs $ 265,350 $ 270,756 Loss from operations (265,350 ) (270,756 ) Other income: Interest income 205,464 205,464 Unrealized loss on marketable securities held in Trust Account (2,244 ) (2,244 ) Other income, net 203,220 203,220 Net loss $ (62,130 ) $ (67,536 ) Weighted average shares outstanding, basic and diluted 12,066,894 11,284,826 Basic and diluted net loss per ordinary share $ (0.02 ) $ (0.02 ) The accompanying notes are an integral partunaudited condensedPrivate Securities Litigation Reform Act of 1995) concerning us and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to management. Forward-looking statements may be accompanied by words such as “achieve,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “future,” “grow,” “increase,” “intend,” “may,” “opportunity,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or similar words, phrases, or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside our control. Therefore, you should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:2SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.CONDENSED STATEMENT OF CASH FLOWSFOR THE PERIOD FROM MAY 5, 2017 (INCEPTION) THROUGH SEPTEMBER 30, 2017(Unaudited)Cash flows from operating activities: Net loss $ (67,536 ) Adjustments to reconcile net loss to net cash used in operating activities: Interest earned on marketable securities held in Trust Account (205,464 ) Unrealized loss on marketable securities held in Trust Account 2,244 Changes in operating assets and liabilities: Prepaid expenses (368,098 ) Accounts payable and accrued expenses 133,947 Net cash used in operating activities (504,907 ) Cash flows from investing activities: Investment of cash in Trust Account (690,000,000 ) Net cash used in investing activities (690,000,000 ) Cash flows from financing activities: Proceeds from sale of Units, net of underwriting discounts paid 680,000,000 Proceeds from sale of Private Placement Warrants 12,000,000 Proceeds from issuance of Class B ordinary shares 25,000 Advances from related parties 115,971 Proceeds from promissory note 100,000 Payment of offering costs (802,301 ) Net cash provided by financing activities 691,438,670 Net change in cash 933,763 Cash at beginning of period — Cash at ending of period $ 933,763 Non-cash investing and financing activities: Initial classification of ordinary shares subject to possible redemption $ 662,058,983 Change in value of ordinary shares subject to possible redemption $ (53,821 ) Deferred underwriting fee payable $ 24,150,000 The accompanying notes are an integral partunauditedmarkets for commercial human spaceflight and commercial research and development payloads;June 30, 2022 December 31, 2021 (Unaudited) Assets Current assets Cash and cash equivalents $ 329,857 $ 524,481 Restricted cash 40,207 25,549 Marketable securities, short-term 587,716 79,418 Inventories 33,804 29,668 Prepaid expenses and other current assets 18,576 19,476 Total current assets 1,010,160 678,592 Marketable securities, long-term 164,777 301,463 Property, plant, and equipment, net 49,183 47,498 Other non-current assets 44,356 41,281 Total assets $ 1,268,476 $ 1,068,834 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 12,768 $ 9,237 Accrued liabilities 36,707 28,787 Customer deposits 104,596 90,863 Other current liabilities 2,803 2,636 Total current liabilities 156,874 131,523 Non-current liabilities Convertible senior notes, net 414,563 — Other long-term liabilities 46,464 43,047 Total liabilities 617,901 174,570 0 0 Stockholders' equity Preferred stock, $0.0001 par value; 10,000,000 authorized; none issued and outstanding — — Common stock, $0.0001 par value; 700,000,000 shares authorized; 258,690,646 and 258,166,417 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively 26 26 Additional paid-in capital 1,987,614 2,019,750 Accumulated deficit (1,327,421) (1,123,643) Accumulated other comprehensive income (9,644) (1,869) Total stockholders' equity 650,575 894,264 Total liabilities and stockholders' equity $ 1,268,476 $ 1,068,834 3SOCIAL CAPITAL HEDOSOPHIACORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBERINC.Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue $ 357 $ 571 $ 676 $ 571 Operating expenses: Customer experience 122 63 147 63 Selling, general, and administrative 44,700 36,916 81,707 80,235 Research and development 62,340 34,619 114,167 69,708 Depreciation and amortization 2,915 2,871 5,767 5,740 Total operating expenses 110,077 74,469 201,788 155,746 Operating loss (109,720) (73,898) (201,112) (155,175) Interest income 1,985 220 2,803 545 Interest expense (3,157) (6) (5,631) (13) Change in fair value of warrants — (20,363) — (69,082) Other income, net 194 13 210 40 Loss before income taxes (110,698) (94,034) (203,730) (223,685) Income tax expense (23) (6) (48) (49) Net loss (110,721) (94,040) (203,778) (223,734) Other comprehensive income (loss): Foreign currency translation adjustment (108) (19) (133) 8 Unrealized loss on marketable securities (1,862) — (7,642) — Total comprehensive loss $ (112,691) $ (94,059) $ (211,553) $ (223,726) Net loss per share: Basic and diluted $ (0.43) $ (0.39) $ (0.79) $ (0.94) Weighted-average shares outstanding: Basic and diluted 258,589,270 240,733,497 258,439,051 238,774,515 2017Preferred Stock Common Stock # of Shares Par Value # of Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated
Other Comprehensive
Income (Loss)Total Balance as of December 31, 2020 — $ — 236,123,659 $ 23 $ 1,297,794 $ (770,744) $ 5 $ 527,078 Net loss — — — — — (129,694) — (129,694) Other comprehensive income — — — — — — 26 26 Stock-based compensation — — — 22,111 — — 22,111 Issuance of common stock pursuant to stock-based compensation, net of withholding taxes — — 1,150,771 — 323 — — 323 Balance as of March 31, 2021 — — 237,274,430 23 1,320,228 (900,438) 31 419,844 Net loss — — — — — (94,040) — (94,040) Other comprehensive loss — — — — — — (20) (20) Stock-based compensation — — — — 14,423 — — 14,423 Issuance of common stock pursuant to stock-based compensation, net of withholding taxes — — 275,283 — 840 — — 840 Common stock issued related to warrants exercised — — 3,387,827 — 104,176 — — 104,176 Balance as of June 30, 2021 — $ — 240,937,540 $ 23 $ 1,439,667 $ (994,478) $ 11 $ 445,223 NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONSSocial Capital HedosophiaPreferred Stock Common Stock # of Shares Par Value # of Shares Par Value Additional Paid-In Capital Accumulated Deficit Accumulated
Other Comprehensive
LossTotal Balance as of December 31, 2021 — $ — 258,166,417 $ 26 $ 2,019,750 $ (1,123,643) $ (1,869) $ 894,264 Net loss — — — — (93,057) — (93,057) Other comprehensive loss — — — — — (5,805) (5,805) Stock-based compensation — — — — 10,895 — — 10,895 Issuance of common stock pursuant to stock-based compensation, net of withholding taxes — — 307,471 — (1,882) — — (1,882) Purchase of capped calls — — — — (52,318) — — (52,318) Balance as of March 31, 2022 — — 258,473,888 26 1,976,445 (1,216,700) (7,674) 752,097 Net loss — — — (110,721) (110,721) Other comprehensive loss — — — — (1,970) (1,970) Stock-based compensation — — — 12,083 — 12,083 Issuance of common stock pursuant to stock-based compensation, net of withholding taxes — — 216,758 — (914) — (914) Balance as of June 30, 2022 — $ — 258,690,646 $ 26 $ 1,987,614 $ (1,327,421) $ (9,644) $ 650,575 Six Months Ended June 30, 2022 2021 Cash flows from operating activities Net loss $ (203,778) $ (223,734) Stock-based compensation 22,978 36,535 Depreciation and amortization 5,767 5,740 Amortization of debt issuance costs 841 — Change in fair value of warrants — 69,082 Other operating activities, net 241 (17) Change in assets and liabilities Inventories (4,136) 518 Other current and non-current assets 1,410 319 Accounts payable and accrued liabilities 10,109 (751) Customer deposits 13,733 (1,252) Other current and non-current liabilities (125) 88 Net cash used in operating activities (152,960) (113,472) Cash flows from investing activity Capital expenditures (6,293) (1,647) Purchases of marketable securities (379,254) — Cash used in investing activity (385,547) (1,647) Cash flows from financing activities Payments of lease obligations (66) (69) Proceeds from convertible senior notes 425,000 — Debt issuance costs (11,278) — Capped call premium (52,318) — Proceeds from issuance of common stock pursuant to stock options exercised 49 12,965 Transaction costs — (274) Withholding taxes paid on behalf of employees on net settled stock-based awards (2,846) (11,803) Net cash provided by financing activities 358,541 819 Net decrease in cash and cash equivalents (179,966) (114,300) Cash, cash equivalents and restricted cash at beginning of year 550,030 678,955 Cash, cash equivalents and restricted cash ending balances $ 370,064 $ 564,655 Cash and cash equivalents $ 329,857 $ 551,624 Restricted cash 40,207 13,031 Cash, cash equivalents and restricted cash $ 370,064 $ 564,655 Corp. (the “Company”Inc. and its wholly owned subsidiaries ("VGH, Inc.") is a newly incorporated blank check company incorporated, in this report as a Cayman Islands exempted company"we," "us," "our," the "Company" and formedsimilar terms, are focused on the development, manufacture and operations of spaceships and related technologies for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combinationconducting commercial human spaceflight and flying commercial research and development payloads into space. The development and manufacturing activities are located in Tustin, California and Mojave, California, with one or more businesses (a “Business Combination”).At September 30, 2017,plans to operate the Company had not yet commenced any operations. All activity from May 5, 2017 (inception) through September 30, 2017 related to the Company’s formation, the offering described below and identifying a target company for a Business Combination.The registration statements for the Company’s initial public offering were declared effective on September 13, 2017. The Company consummated a public offeringcommercial spaceflights out of 69,000,000 units on September 18, 2017 (the “Public Offering”), including 9,000,000 units subject to the underwriters’ over-allotment option, generating gross proceedsSpaceport America located in New Mexico.$690,000,000 and net proceeds of $679,197,699 after deducting $10,802,301 of transaction costs ($24,150,000 of deferred underwriting expenses may be paid upon the completion of a Business Combination), which is discussed in Note 3. The units (“Units”) sold pursuant to the Offering were sold at an offering price of $10.00 per Unit. Each Unit consists of one of the Company’s Class A ordinary shares, par value $0.0001 per share, and one-third of one warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to certain adjustments. In addition, the Company generated proceeds of $12,000,000 from the private placement (the “Private Placement”) of 8,000,000 warrants (“Private Placement Warrants”) at a price of $1.50 per warrant to SCH Sponsor Corp. (the “Sponsor”).In connection with the closing of the Offering and the Private Placement on September 18, 2017 (the “Closing Date”), an amount of $690,000,000 (or $10.00 per Class A ordinary share sold to the public in the Offering included in the Units (“Public Shares”)) from the sale of the Units and Private Placement Warrants was placed in a trust account (the “Trust Account”). Funds held in the Trust Account are invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations until the earlier of (i) the consummation of the Company’s initial Business Combination and (ii) the redemption of any Public Shares properly tendered in connection with a shareholder vote to amend the Company’s Amended and Restated Memorandum and Articles of Association to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if it does not complete a Business Combination within 24 months from the Closing Date; and (iii) the Company’s failure to consummate a Business Combination within the prescribed time. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to pay the Company’s tax obligations. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The Sponsor has agreed that it will be liable to the Company under certain circumstances if and to the extent any claims by such persons reduce the amount of funds in the Trust Account below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the indemnity of the underwriters of the Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended, (the “Securities Act”). The Company has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor’s only assets are securities of the Company. Therefore, the Sponsor may not be able to satisfy those obligations should they arise.The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and Private Placement, although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination. The Company’s Units, warrants and Class A ordinary shares are listed on the New York Stock Exchange (“NYSE”). Pursuant to the NYSE listing rules, the Company’s initial Business Combination must be with a target business or businesses whose collective fair market value is at least equal to 80% of the balance in the Trust Account (excluding deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the execution of a definitive agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. There is no assurance that the Company will be able to effect a Business Combination successfully.In connection with any proposed initial Business Combination, the Company will either (1) seek shareholder approval of such initial Business Combination at a meeting called for such purpose or (2) provide shareholders with the opportunity to sell their Public Shares to the Company by means of a tender offer, in each case where shareholders may seek to redeem their Public Shares into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. If the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions in connection with a Business Combination pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its Public Shares with respect to an aggregate of more than 15% of the Public Shares sold in the Public Offering.
Significant Accounting Policies4SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)The Company will proceed with a Business Combination only if it has net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, in the case of a shareholder vote, a majority of the issued and outstanding shares of the Company voted are voted in favor of the Business Combination. In connection with any shareholder vote required to approve any Business Combination, the Sponsor has agreed (i) to vote any of its respective shares in favor of the initial Business Combination and (ii) not to redeem any of its respective ordinary shares in connection therewith.Holders of warrants sold as part of the Units will not be entitled to vote on the proposed Business Combination and will have no conversion or liquidation rights with respect to their ordinary shares underlying such warrants.Pursuant to the Company’s Amended and Restated Memorandum and Articles of Association, if the Company is unable to complete its initial Business Combination within 24 months from the Closing Date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of ordinary shares and the Company’s board of directors, dissolve and liquidate. If the Company is unable to consummate an initial Business Combination within 24 months from the Closing Date and is forced to redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not released to the Company to pay any of its taxes payable and less up to $100,000 of interest that may be released to the Company to pay dissolution expenses. The Sponsor has entered into a letter agreement with the Company, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares (as defined in Note 7) if the Company fails to complete a Business Combination within 24 months after the Closing Date. However, if the Sponsor acquires Public Shares after the Public Offering, it will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete the Business Combination within 24 months after the Closing Date.If the Company is unable to complete its initial Business Combination within 24 months from the Closing Date and expends all of the net proceeds of the Public Offering not deposited in the Trust Account, without taking into account any interest earned on the Trust Account, the Company expects that the per-share redemption price for Class A ordinary shares will be $10.00. The proceeds deposited in the Trust Account could, however, become subject to claims of the Company’s creditors that are in preference to the claims of the Company’s shareholders. In addition, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s shareholders. Therefore, the actual per-share redemption price may be less than $10.00.NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accompanying unauditedhave beenare prepared in accordance with U.S. generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SECU.S. Securities and Exchange Commission ("SEC"). All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation.interimthe three and six month period ended June 30, 2021 have been made to the comparable prior period in the condensed consolidated statements of operations and comprehensive loss to conform to the same current period presentations. Specifically, cost of revenue has been reclassified to customer experience, and gross margin is no longer presented. Customer experience expenses related to spaceflight operations include the consumption of a rocket motor and fuel and other consumables, as well as payroll and benefits for our pilots and ground crew. Customer experience expenses related to the payload cargo services, as well as engineering services, consist of materials and human capital, such as payroll and benefits, to perform these services. Additionally, customer experience expenses include costs associated with maintaining and growing our Future Astronaut community, as well as hospitality, medical, safety, security, training, and facility costs that are for the benefit of our astronauts. Additionally, depreciation and amortization expense are presented separately instead of included in selling, general, and administrative or research and development expenses. These reclassifications had no impact on total loss as previously reported.reporting. Accordingly,statements in conformity with GAAP required us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base these estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. Significant estimates inherent in the preparation of the consolidated financial statements include, but are not limited to, accounting for revenue, contract assets, contract liabilities, useful lives of property, plant and equipment, fair value of investments, accrued liabilities, income taxes including deferred tax assets and liabilities and impairment valuation, warrants, stock-based awards and contingencies.includemeet the separation requirement of a derivative. Issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, however there was no impact during the current quarter as the convertible instruments were anti-dilutive.the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. Innormal recurring adjustments that are, in the opinion of management, necessary to fairly present the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.accompanying unaudited condensedinterim consolidated financial statements should be read in conjunction with the Company's prospectus as filed with the SEC on September 15, 2017, as well asaudited consolidated financial statements and related notes included in the Company’s CurrentAnnual Report on Form 8-K, as filed with the SEC on September 22, 2017. The interim10-K. Interim results for the three months ended September 30, 2017 and for the period from May 5, 2017 (inception) through September 30, 2017 are not necessarily indicative of the results for a full year.be expectedGAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”). See Note 2 in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on recently adopted accounting pronouncements.period from May 5, 2017 (inception) through December 31, 2017use of license are the greater of 1% of revenue or $40,000 per quarter, prior to the commercial launch date. Sponsorship royalties payable are 25% of sponsorship revenue. We paid license and royalty fees of $40,000 for any other future periods.
each of the three months ended June 30, 2022 and 2021. We paid license and royalty fees of $80,000 for each of the six months ended June 30, 2022 and 2021.5SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Emerging Growthan “emerging growthallocated operating expense from VO Holdings, Inc. and its subsidiaries (“VOH”), a majority owned company” as defined in Section 2(a) of Galactic Ventures, LLC ("GV"), a wholly-owned subsidiary of Vieco 10, was the direct parent of the Securities ActVirgin Galactic Companies. for operations-related functions based on an allocation methodology that considers our headcount, unless directly attributable to the business. Operating expense allocations include use of 1933, as amended, (the “Securities Act”), as modified bymachinery and equipment, pilot services, and other general administrative expenses. We were allocated $34,000 and $31,000 operating expenses, net, from VOH for the Jumpstart Our Business Startups Actthree months ended June 30, 2022 and 2021, respectively. We were allocated $34,000 and $71,000 of 2012 (the “JOBS Act”),operating expenses, net from VOH for the six months ended June 30, 2022 and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.2021, respectively. The Company has elected not to opt outa receivable from VOH of such extended transition period which means that when a standard is issued or revised$47,000 and it has different application dates for public or private companies, the Company,$43,000 as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparisonof June 30, 2022 and December 31, 2021, respectively.Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted outCompany's cash equivalents and marketable securities as of using the extended transition period difficult or impossible becauseJune 30, 2022 and December 31, 2021 were as follows:As of June 30, 2022 Amortized Cost Gross Unrealized Losses Fair Value (In thousands) Cash, restricted cash and cash equivalents Cash and restricted cash $ 71,797 $ — $ 71,797 Money market 206,870 — 206,870 Certificate of deposits 91,397 — 91,397 Marketable securities US treasuries 209,596 (345) 209,251 Corporate debt securities 552,541 (9,299) 543,242 Total cash, cash equivalents and marketable securities $ 1,132,201 $ (9,644) $ 1,122,557 make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from those estimates.Cash and Cash EquivalentsAs of December 31, 2021 Amortized Cost Gross Unrealized Losses Fair Value (In thousands) Cash, restricted cash and cash equivalents Cash and restricted cash $ 55,592 $ — $ 55,592 Money market 402,889 — 402,889 Certificate of deposits 91,549 — 91,549 Marketable securities Corporate debt securities 382,884 (2,003) 380,881 Total cash, cash equivalents and marketable securities $ 932,914 $ (2,003) $ 930,911 considers all short-term investments with an original maturityincluded $3.6 million and $2.3 million of interest receivable in prepaid expenses and other current assets as of June 30, 2022 and December 31, 2021, respectively.or less when purchased to be cash equivalents.ended June 30, 2022. The Company did not recognize any amortization expense for the three months ended June 30, 2021. The Company recognized $4.0 million in amortization expense for marketable securities within interest income, net for the six months ended June 30, 2022. The Company did not recognize any amortization expense for the six months ended June 30, 2021.As of June 30, 2022 Amortized Cost Estimated Fair Value (In thousands) Matures within one year $ 592,992 $ 587,716 Matures between one to two years 169,145 164,776 Total $ 762,137 $ 752,492 As of June 30, 2022 December 31, 2021 (Unaudited) (In thousands) Raw materials $ 24,651 $ 21,127 Spare parts 9,153 8,541 Total inventory $ 33,804 $ 29,668 As of June 30, 2022 December 31, 2021 (Unaudited) (In thousands) Land $ 401 $ — Buildings 9,117 9,117 Leasehold improvements 29,306 29,155 Aircraft 195 195 Machinery and equipment 39,718 37,002 IT software and equipment 26,719 23,523 Construction in progress 3,816 2,901 109,272 101,893 Less accumulated depreciation and amortization (60,089) (54,395) Property, plant, and equipment, net $ 49,183 $ 47,498 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (Unaudited) (In thousands) Customer experience $ — $ — $ — $ — Selling, general, and administrative 1,667 1,284 3,266 2,558 Research and development 1,248 1,587 2,502 3,182 $ 2,915 $ 2,871 $ 5,767 $ 5,740 Three Months Ended
June 30,2022 2021 (Unaudited and in thousands) Lease Cost: Operating lease expense $ 2,092 $ 1,254 Short-term lease expense — 8 Finance Lease Cost: Amortization of right-of-use assets 29 35 Interest on lease liabilities 4 7 Total finance lease cost 33 42 Variable lease cost 2,106 1,372 Total lease cost $ 4,231 $ 2,676 Six Months Ended
June 30,2022 2021 (Unaudited and in thousands) Lease Cost: Operating lease expense $ 4,069 $ 2,514 Short-term lease expense — 20 Finance Lease Cost: Amortization of right-of-use assets 58 69 Interest on lease liabilities 9 14 Total finance lease cost 67 83 Variable lease cost 3,316 2,710 Total lease cost $ 7,452 $ 5,327 equivalentsflow information related to leases for the period are as follows:Six Months Ended June 30, 2022 2021 (In thousands, except term and rate data) Cash flow information: Operating cash flows for operating leases $ 5,087 $ 2,712 Operating cash flows for finance leases $ 9 $ 14 Financing cash flows for finance leases $ 66 $ 69 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations Operating leases $ 4,924 $ 501 Finance Leases $ — $ 19 Other Information: Weighted average remaining lease term: Operating leases (in years) 11.18 12.37 Finance leases (in years) 1.71 2.49 Weighted average discount rates: Operating leases 11.68 % 11.65 % Finance leases 8.12 % 8.26 % As of June 30, 2022 December 31, 2021 (Unaudited) (In thousands) Operating leases Long-term right-of-use assets $ 38,776 $ 35,486 Short-term operating lease liabilities $ 2,384 $ 2,204 Long-term operating lease liabilities 43,509 39,965 Total operating lease liabilities $ 45,893 $ 42,169 SeptemberJune 30, 2017.Cash2022 are as follows:Operating Leases Finance Leases (In thousands) 2022 (for the remaining period) $ 3,580 $ 62 2023 7,079 106 2024 7,357 30 2025 7,282 — 2026 7,386 — Thereafter 52,274 — Total lease payments $ 84,958 $ 198 Less: Imputed interest/present value discount $ (39,065) $ (13) Present value of lease liabilities $ 45,893 $ 185 As of June 30, 2022 December 31, 2021 (Unaudited) (In thousands) Accrued payroll $ 3,447 $ 4,214 Accrued vacation 6,218 5,372 Accrued bonus 10,433 12,218 Accrued interest expense 4,781 — Other accrued expenses 11,828 6,983 Total accrued expenses $ 36,707 $ 28,787 As of June 30, 2022 December 31, 2021 (Unaudited) (In thousands) Commercial loan $ 310 $ 310 Less: Current portion (310) (310) Non-current portion $ — $ — Marketable Securities Heldrestricted cash has been recorded for the corresponding outstanding balance. The outstanding balance is recorded in Trust AccountAt September 30, 2017,other current-liabilities on the assets held incondensed consolidated balance sheets.Trust Account were heldCompany completed an offering of $425 million aggregate principal amount of the 2027 Notes. The 2027 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 2.50% per year. Interest is payable in cash semi-annually in arrears on February 1 and August 1 of each year, beginning on August 1, 2022. The 2027 Notes mature on February 1, 2027 unless earlier repurchased, redeemed or converted.Treasury Bills.Ordinary Shares SubjectBank National Associations, as Trustee (the "2027 Indenture"). Upon conversion by the noteholders, the 2027 Notes may be settled in cash, shares of the Company's common stock or a combination of cash and shares of common stock, par value $0.0001 per share (the “common stock”), at our election, based on the conversion rate.Possible RedemptionThe Company accounts for its ordinary sharesan initial conversion price of approximately $12.79 per share of common stock, subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemptionadjustment upon the occurrence of uncertain events not solely withincertain events. Noteholders will have the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are consideredright to be outsideconvert their notes during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on June 30, 2022, under the following circumstances:Company’s controlCompany's common stock for each of at least 20 trading days in a period of 30 consecutive trading days ending on and subject to occurrence of uncertain future events. Accordingly, at September 30, 2017, ordinary shares subject to possible redemption are presented as temporary equity, outsideincluding the last trading day of the shareholders’ equity sectionpreceding calendar quarter is more than 130% of the Company’s balance sheet.
then applicable conversion price for the Notes per share of common stock;6SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Offering CostsOffering costs consist of legal, accounting, underwriting fees and other costs incurred throughbalance sheet date that are directly related to the Public Offering. Offering costs amounting to $34,952,301 were charged to shareholders’ equity upon the completion of the Public Offering. Income TaxesThe Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods5 consecutive business days immediately after any 10 consecutive trading day period in which the differencestrading price per $1,000 principal amount of 2027 Notes for each day of that period was less than 98% of the product of the last reported sale price of our common stock and the then applicable conversion rate;expectednot otherwise convertible at such time; oraffect taxable income. Valuation allowancesholders of our common stock are established, when necessary,made or specified corporate events occur, as described in the 2027 Indenture.As of June 30, 2022 (Unaudited) Principal $ 425,000 Less: unamortized debt issuance costs (10,437) Net carrying amount $ 414,563 deferred tax assetspotential dilution to the amount expected to be realized.ASC Topic 740 prescribes a recognition threshold and a measurement attribute forCompany's common stock upon any conversion of the financial statement recognition and measurement of tax positions taken 2027 Notes and/or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determinedoffset the potential cash payments that the Cayman Islands isCompany could be required to make in excess of the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefitsprincipal amount upon any conversion of the 2027 Notes, as income tax expense. As of September 30, 2017, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position over the next twelve months.The Companycase may be, with such reduction and/or offset subject to potential examination by U.S. federal, U.S. states or foreign taxing authorities ina cap, based on the areascap price of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, U.S. state and foreign tax laws.2027 Capped Call transactions. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.The Company’s tax provision is zero because2027 Capped Calls are separate transactions, each between the Company is organized inand the Cayman Islands with no connection to any other taxable jurisdiction. As such, the Company has no deferred tax assets. The Company is considered to be an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.Net Loss per Ordinary ShareThe Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption at September 30, 2017, which are not currently redeemableapplicable option counterparty, and are not redeemable at fair value, have been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata sharepart of the Trust Account earnings. terms of the 2027 Notes and will not affect any holder's rights under the 2027 Notes or the 2027 Indenture. Holders of the 2027 Notes will not have any rights with respect to the 2027 Capped Call transactions.has not consideredpaid an aggregate amount of $52.3 million for the effect of warrants sold2027 Capped Calls. As these transactions meet certain accounting criteria, the amount paid for the 2027 Capped Calls was recorded as a reduction to additional paid-in capital in the Public Offering and Private Placement to purchase 31,000,000 Class A ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per ordinary share is the same as basic loss per ordinary share for the periods.Reconciliation of Net Loss per Ordinary ShareThe Company’s net loss is adjusted for the portion of income that is attributable to ordinary shares subject to redemption, as these shares only participate in the income of the Trust Account and not the losses of the Company. Accordingly, basic and diluted loss per ordinary share is calculated as follows: Three Months
Ended
September 30, For the Period
from May 5, 2017
(inception)
through
September 30, 2017 2017 Net loss $ (62,130 ) $ (67,536 ) Less: Income attributable to ordinary shares subject to redemption (194,908 ) (194,908 ) Adjusted net loss $ (257,038 ) $ (262,444 ) Weighted average shares outstanding, basic and diluted 12,066,894 11,284,826 Basic and diluted net loss per ordinary share $ (0.02 ) $ (0.02 ) 7SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Concentration of Credit RiskFinancial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At September 30, 2017, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.Fair Value of Financial InstrumentsCompany’s assets2027 Capped Calls is not remeasured each reporting period so long as they continue to qualify for equity classification, which they did for the current period.liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements$6,000 for the three months ended June 30, 2022 and Disclosures” (“ASC 820”), approximates2021, respectively. Income tax expense was $48,000 and $49,000 for the carrying amounts represented insix months ended June 30, 2022 and 2021, respectively. The effective income tax rate was nil for three months ended June 30, 2022 and 2021. The effective income tax rate was nil for six months ended June 30, 2022 and 2021. Our effective tax rate differs from the accompanying balance sheet,U.S. statutory rate primarily due to their short-term nature.Recently Issued Accounting StandardsManagement doesa substantially full valuation allowance against our net deferred tax assets where it is more likely than not believe that any recently issued, butsome or all of the deferred tax assets will not yet effective, accounting pronouncements, if currently adopted, wouldbe realized.a material effect on the Company’s financial statements.NOTE 3. INITIAL PUBLIC OFFERINGIn its Public Offering, the Company sold 69,000,000 Units at a price of $10.00 per Unit in the Public Offering. Each Unit consists of one Class A ordinary share and one-third of one warrant (each whole warrant, a “Warrant”). Each whole Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share. Each Warrant will become exercisable commencing on the later of 30 days after the Company’s completion of an initial Business Combination or 24 monthsbeen no significant changes from the Closing Date and expire five years from the completion of a Business Combination. The Company may redeem the outstanding Warrants at a price of $0.01 per Warrant upon a minimum of 30 days’ prior written notice of redemption, and onlyStockholders' Equity disclosed in the event that the last sale priceNote 12 of the Class A ordinary shares is at least $18.00 per share for any 20 trading days within a 30-trading day period ending“Stockholders Equity” included in our Annual Report on the third day prior to the date on which notice of redemption is given. If the Company redeems the Warrants as described above, it will have the option to require all holders that wish to exercise their Warrants to do so on a “cashless basis.” Form 10-K.accordanceconnection with the warrant agreement relating to the Warrants sold in the Public Offering, the Company is required to use its best efforts to file a registration statement covering the issuance of the shares underlying the Warrants within 15 business days after the closing of the Business Combination and to maintain the effectiveness of such registration statement. No Warrants will be exercisable for cash unlessVirgin Galactic business combination in October 2019 (the "Business Combination"), the Company has an effective registration statement covering the Class A ordinary shares issuable upon exercise of the Warrants andentered into a current prospectus relating to such shares. If the issuance of the shares issuable upon exercise of the Warrants is not registered under the Securities Act, holders will be permitted to exercise their Warrants on a cashless basis. If the Company is unable to consummate a Business Combination within 24 months from the Closing Date, the Company will redeem 100% of the Public Shares using the funds in the Trust Account as described in Note 1. In such event, the Warrants will expire worthless.NOTE 4. PRIVATE PLACEMENTSimultaneouslystockholders’ agreement with the Public Offering, the Company’s Sponsor purchased an aggregate of 8,000,000 Private Placement Warrants at $1.50 per warrant (for an aggregate purchase price of $12,000,000) from the Company. All of the proceeds received from these purchases were placed in the Trust Account.The Private Placement Warrants are identical to the Warrants included in the Units sold in the Public Offering except that the Private Placement Warrants: (i) are not redeemable by the Company, (ii) may be exercised for cash or on a cashless basis, so long as they are held by the Sponsor or any of its permitted transferees and (iii) are entitled to registration rights (including the ordinary shares issuable upon exercise of the Private Placement Warrants). Additionally, the purchasers have agreed not to transfer, assign or sell any of the Private Placement Warrants, including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants (except to certain permitted transferees), until 30 days after the completion of the Company’s initial Business Combination. 8SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants.NOTE 5. RELATED PARTY TRANSACTIONSPromissory Note — Related Party and Advance from Related PartyThe Company issued a $300,000 principal amount unsecured promissory note to the Sponsor on May 10, 2017. The note is non-interest bearing and payable on the earlier of (i) December 31, 2017 and (ii) the consummation of the Public Offering. As of September 30, 2017, $100,000 of this loan was still outstanding.A related party advanced an aggregate of $115,971 for costs associated with the formation of the Company and offering costs. The advances are non-interest bearing, unsecured and due on demand. As of September 30, 2017, $115,971 in advances were still outstanding.Administrative Services AgreementThe Company entered into an agreement whereby, commencing on September 18, 2017 through the earlier of the consummation of a Business Combination or the Company’s liquidation, the Company will pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, administrative and support services. For the three months ended September 30, 2017 and the period from May 5, 2017 (inception) through September 30, 2017, the Company incurred $10,000 in fees for these services, which is included in accounts payable and accrued expenses in the accompanying balance sheet.NOTE 6. COMMITMENTS AND CONTINGENCIESThe Company granted the underwriters a 45-day option to purchase up to 9,000,000 additional Units to cover over-allotments. On September 14, 2017, the underwriters elected to exercise their over-allotment option to purchase 9,000,000 Units at a purchase price of $10.00 per Unit. The underwriters were paid a cash underwriting discount of $10,000,000 of the gross proceeds of the Public Offering. In addition, the underwriters are entitled to a deferred fee of three and one-half percent (3.5%) of the gross proceeds of the Public Offering, or $24,150,000, payable upon the closing of a Business Combination from the amounts held in the Trust Account, subjectinvestors. Pursuant to the terms of the underwriting agreement. The underwriters have agreedStockholders’ Agreement, as long as Virgin Investments Limited ("VIL") is entitled to waive their rightdesignate two directors to the deferred underwriting commission held in the Trust Account in the eventCompany’s Board of Directors, the Company does not complete amust obtain VIL’s prior written consent to engage in certain corporate transactions and management functions such as business combinations, disposals, acquisitions, incurring indebtedness, and engagement of professional advisors, among others.underwriters agreed to reimburseCompany remeasured the Company for an amount equal to 10%fair value of the discount paid to the underwriters for financial advisory services provided by Connaught (UK) LimitedWarrants at each reporting date with changes recorded in earnings. In connection with the Public Offering, of which $1,000,000 was paid at the closingCompany's remeasurement of the PublicWarrants to fair value, the Company recorded expense of approximately $20.4 million for the three months ended June 30, 2021 and $69.1 million for the six months ended June 30, 2021.$2,415,000 will be payable at the time$500.0 million of shares of the closing of the initial Business Combination.The Sponsor, the holders of the Private Placement Warrants (or underlying Class A ordinary shares) and the holders of any warrants (or underlying Class A ordinary shares) issued upon conversion of working capital loans made by the Company’s Sponsor, officers, directors or their affiliates, if any such loans are issued, will be entitled to registration rights with respect to their securities pursuant to an agreement dated as of September 13, 2017. The holders of 30% of the registrable securities are entitled to demand that the Company register these securities. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination. However, the registration rights agreement will provide that the Company will not permit any registration statement to become effective until termination of applicable lock-up periods with respect to such securities.NOTE 7. SHAREHOLDERS’ EQUITYPreferred SharesThe Company is authorized to issue 5,000,000 preferred shares with acommon stock, par value of $0.0001 per share, with such designation, rights and preferences as may be determinedthrough an "at the market offering" program ("ATM"), from time to time by the Company through the Agents, acting as the Company’s boardsales agents, or directly to one or more of directors. Asthe Agents, acting as principal.September 30, 2017, there13,740,433 shares of common stock.Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (In thousands, except for share and per share data) Basic and diluted: Net loss $ (110,721) $ (94,040) $ (203,778) $ (223,734) Weighted average shares of common stock outstanding 258,589,270 240,733,497 258,439,051 238,774,515 Basic and diluted net loss per share $ (0.43) $ (0.39) $ (0.79) $ (0.94) As of June 30, 2022 2021 Issued and outstanding stock options 4,156 5,194 Issued and outstanding performance stock options 406 — Unvested restricted stock units issued and outstanding 4,488 4,018 Unvested performance stock units issued and outstanding 367 85 33,234 — Warrants to purchase shares of common stock — 8,000 42,651 17,297 no preferred sharesRSUs that vest based on achievement of specified performance criteria. Performance stock options ("PSOs") are stock options that vest based on achievement of specified performance criteria.or outstanding.92022 6.11 69.0 % 2.19 % — % SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Ordinary SharesCompanyexpected life is authorizedthe period of time that participants are expected to issue 500,000,000 Class A ordinary shares and 50,000,000 Class B ordinary shares, both withhold their options before exercised using the "simplified method" as described in Staff Accounting Bulletin No. 107.par value of $0.0001 per share.The Company had entered into a Securities Subscription Agreement, dated as of May 10, 2017 (the “Founder’s Purchase Agreement”), with the Sponsor pursuant to which the Sponsor subscribed for an aggregate of 14,375,000 Class B ordinary shares, par value $0.0001 per sharemeasure of the Company,amount by which a stock price is expected to fluctuate based primarily on our and our peers' historical data.an aggregate purchase price of $25,000. On May 18, 2017, the Sponsor surrendered 2,875,000 Class B ordinary shares for no value, and on August 23, 2017 and September 13, 2017,periods within the Company approved share capitalizations resulting in an aggregate of 17,250,000 Class B ordinary shares issued and outstanding and held by the Sponsor (including the Class A ordinary shares issuable upon conversion thereof, the “Founder Shares”), of which 2,250,000 were subject to forfeiture. As a resultcontractual term of the underwriters’ election to fully exercise their over-allotment option on September 14, 2017, no Founder Shares are subject to forfeiture.Holders of the Class A ordinary shares are entitled to one vote for each Class A ordinary share; provided that only holders of the Class B ordinary shares have the right to voteoptions is based on the election of directors prior to the initial Business Combination. At September 30, 2017, there were 2,818,976 Class A ordinary shares issued and outstanding (excluding 66,181,024 Class A ordinary shares subject to possible redemption).The Class B ordinary shares will automatically convert into Class A ordinary sharesU.S. Treasury yield curve in effect at the time of the initial Business Combination,grant.Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Weighted Average Grant Date Fair Value ($) Options outstanding at December 31, 2021 4,253,767 $ 14.09 7.60 6,187 — Granted 303,030 7.99 4.95 Exercised (4,182) 11.79 Forfeited options (396,160) 18.21 Options outstanding at June 30, 2022 4,156,455 $ 13.26 7.06 — — Options exercisable at June 30, 2022 2,182,805 $ 12.99 6.67 — — a one-for-one basis,the difference between our closing stock price at period end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the period end date.adjustment for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizationsearlier expiration under certain terminations of service and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Public Offering and relatedother conditions. The stock options granted have an exercise price equal to the closing stock price of our common stock on the grant date.2022 75.0 % 58.0 % 2.19 % — % initial Business Combination,period between the ratio at whichvest date and the Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majorityend of the outstanding Class B ordinary shares agreecontractual term has lapsed.waive such anti-dilution adjustment with respectfluctuate based primarily on our and our peers' historical data.any such issuance or deemed issuance) so thatbegin paying dividends.Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Weighted Average Grant Date Fair Value ($) PSOs outstanding at December 31, 2021 — $ — 0.00 — Granted 405,680 8.99 4.93 Exercised — — Forfeited options — — PSOs outstanding at June 30, 2022 405,680 $ 8.99 9.71 — PSOs exercisable at s June 30, 2022 — $ — 0.00 — Class A ordinary shares issuable upon conversionin-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the period end date.all Class B ordinary sharesthe grant date, with the remaining vesting ratably over the next three years.Shares Weighted Average Fair Value Outstanding at December 31, 2021 2,396,732 $ 27.89 Granted 3,215,868 8.75 Vested (846,876) 21.36 Forfeited (278,134) 18.59 Outstanding at June 30, 2022 4,487,590 $ 21.91 equal,vest based on the Company's common stock performance following the end of the three year performance measurement period based on the highest closing price over 20 consecutive trading days during the performance measurement period. PSUs with market-based goals cannot vest before the end of the performance measurement period, thus the requisite service period is three years.2022 95.0 % 2.13 % — % Shares Weighted Average Fair Value PSUs outstanding at December 31, 2021 89,839 $ 26.47 Granted 277,552 14.62 Forfeited — — PSUs outstanding at June 30, 2022 367,391 $ 18.19 aggregate, 20%following expense categories in the condensed consolidated statements of operations and comprehensive loss:Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (in thousands) Stock option and PSO expense Selling, general and administrative 2,192 1,870 3,917 10,856 Research and development 731 825 1,416 1,668 Total stock option and PSO expense 2,923 2,695 5,333 12,524 RSU and PSU expense Selling, general and administrative 6,458 8,556 12,025 17,609 Research and development 2,702 3,172 5,620 6,402 Total RSU and PSU expense 9,160 11,728 17,645 24,011 Total stock-based compensation expense $ 12,083 $ 14,423 $ 22,978 $ 36,535 sum of all ordinary shares outstanding upon completion of the Public Offering plus all Class A ordinary sharesunrecognized stock-based compensation related to stock options and equity-linked securities issued or deemed issued in connection with the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities issued, orPSOs was $20.3 million, and is expected to be issued,recognized over a weighted-average period of 1.9 years. At June 30, 2022, the unrecognized stock-based compensation related to any seller in the initial Business Combination. HoldersRSUs and PSUs was $93.8 million, and is expected to be recognized over a weighted-average period of Founder Shares may also elect to convert their Class B ordinary shares into an equal number of Class A ordinary shares. At September 30, 2017, 17,250,000 Class B ordinary shares were issued and outstanding.The holders of the Class B ordinary shares agreed not to transfer such shares until one year after the date of the consummation of an initial Business Combination or earlier if, subsequent to an initial Business Combination, (i) the last reported sales price of the Company’s Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions reorganizations recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (ii) the Company consummates a subsequent liquidation, merger, share exchange or other similar transaction which results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.NOTE 8. FAIR VALUE MEASUREMENTS The Company follows the guidance in ASC 820 for its financial assets and liabilities2.8 years. are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internalto the extent possible. We estimate fair value based on assumptions about howthat market participants would price assets and liabilities). Theuse in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy is used to classify assets and liabilities based on thedistinguishes between observable inputs and unobservable inputs, which is categorized in one of the following levels:order to valuewhich there is little, if any, market activity for the asset or liability at measurement date.liabilities:Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
current liabilities approximate fair value because of the short maturity of these instruments.10SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.table presents information abouttables summarize the Company’sfair value of assets that are measuredrecorded in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 at fair value on a recurring basis at September 30, 2017, and indicates thebasis:Fair Value Measurements as of June 30, 2022 Level 1 Level 2 Level 3 Total (In thousands) Assets: Money market $ 206,870 $ — $ — $ 206,870 Certificate of deposit 91,397 — — 91,397 US treasuries 209,251 — — 209,251 Corporate debt securities — 543,242 — 543,242 Total assets at fair value $ 507,518 $ 543,242 $ — $ 1,050,760 Liabilities: 2027 Notes $ — $ — $ 271,201 $ 271,201 Total liabilities at fair value $ — $ — $ 271,201 $ 271,201 hierarchy of the valuation inputs2027 Notes were determined based on the quoted bid prices of the 2027 Notes in an over-the-counter market on the last trading day of the reporting period.Fair Value Measurements as of December 31, 2021 Level 1 Level 2 Level 3 Total (In thousands) Assets: Money Market $ 402,889 $ — $ — $ 402,889 Certificate of Deposit 91,549 — — 91,549 Corporate debt securities — 380,881 — 380,881 Total assets at fair value $ 494,438 $ 380,881 $ — $ 875,319 utilizedis a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company applies accounting for contingencies to determine when and how much to accrue for and disclose related to legal and other contingencies. Accordingly, the Company discloses contingencies deemed to be reasonably possible and accrues loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably estimable. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that any monetary liability or financial impact to the Company from these matters, individually and in the aggregate, beyond that provided at June 30, 2022, would not be material to the Company’s financial position, results of operations or cash flows. However, there can be no assurance with respect to such fair value:Description Level September 30,
2017 Assets: Cash and marketable securities held in Trust Account 1 $ 690,203,220 NOTE 9. SUBSEQUENT EVENTSevaluatesintends to vigorously defend against this matter.Six Months Ended June 30, 2022 2021 (in thousands) Supplemental disclosure Cash payments and refunds for: Income tax refund $ 10 $ — Income tax paid (53) (58) $ (43) $ (58) Schedule for noncash investing activities: Unpaid property, plant, and equipment received $ 1,343 $ 270 $ 1,343 $ 270 Schedule for noncash financing activities: Issuance of common stock "cashless" warrants exercised $ — $ 104,176 Issuance of common stock through restricted stock units vested 7,440 27,320 Unpaid deferred transaction costs — 250 $ 7,440 $ 131,746 transactions that occuroperations facilities in Mesa, Arizona consisting of 2 hangars ("Hangar C" and "Hangar B").balance sheetcommencement date upapplicable to Hangar C or Hangar B, whichever is later, and is expected to commence ten months following the date thatof the financial statements were issued. Based upon this review,agreement was entered into with respect to Hangar C and fifteen months following the date of the agreement was entered into for Hangar B. The average annual base rent under the lease is approximately $3.0 million. The Company did not identify any subsequent events that would have required adjustment or disclosure inhas 4 options to extend the financial statements.
term of the lease, each for an additional five years.11Referencesreport (the “Quarterly Report”)section to the “Company,” "Virgin Galactic," “we,” “us”“us,” or the “Company”“our” refer to Social Capital HedosophiaVirgin Galactic Holdings, Corp. References to our “management” or our “management team” refer to our officersInc. and directors, and references to our “Sponsor” refer to SCH Sponsor Corp. Theits subsidiaries.the Company’sour financial condition and results of operations should be read in conjunctiontogether with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as the audited financial statements and the related notes thereto, contained elsewhere in this Quarterly Report. Certain information contained inand the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.Special Note Regarding Forward-Looking StatementsThis Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in thisunder “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the“Business” included in our Annual Report on Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates, and objectivesbeliefs that involve risks and uncertainties. As a result of management for future operations, are forward-looking statements. Wordsmany factors, such as “anticipate,those set forth under the ““believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “seek”section of our Annual Report on Form 10-K and variations thereofunder the "Cautionary Note Regarding Forward-Looking Statements" section and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, basedelsewhere in this Quarterly Report on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could causeForm 10-Q, our actual results tomay differ materially from those anticipated in these forward-looking statements.forward-looking statements, please refervanguard of a new industry, pioneering a consumer space experience using reusable spaceflight systems. We believe the commercial exploration of space represents one of the most exciting and important technological initiatives of our time. Approximately 630 humans have ever traveled above the Earth’s atmosphere into space. This industry is growing dramatically due to new products, new sources of private and government funding, and new technologies. Demand is emerging from new sectors and demographics, which we believe is broadening the total addressable market. As government space agencies have retired or reduced their capacity to send humans into space, private companies are beginning to make exciting inroads into the fields of human space exploration. We have embarked on this journey with a mission to put humans and research experiments into space and return them safely to Earth on a routine and consistent basis. We believe that opening access to space will connect the world to the Risk Factors sectionwonder and awe created by space travel, offering customers a transformative experience, and providing the foundation for a myriad of exciting new industries.Company’sinherent safety of our system.prospectusday. Each ticket purchased after our ticket sale reopening in 2021 also includes a membership in Virgin Galactic's Future Astronaut community. This membership provides access to events and experiences, including exclusive weeks 'at home' with Virgin Galactic Astronaut 001, Sir Richard Branson.Public Offering filedflight into space. Using the mothership’s air launch capability, rather than a standard ground-launch, reduces the energy requirements of our spaceflight system as the spaceship does not have to ascend through the higher density atmosphere closest to the Earth’s surface. It is also a fully reusable part of our spaceflight system. The spaceship is a vehicle with the U.S. Securitiescapacity to carry pilots and Exchange Commission (the “SEC”).private astronauts, research experiments, and researchers that travel with their experiments for human tended research flights into space and return them safely to Earth. It is powered by a hybrid rocket propulsion system, which propels the spaceship on a trajectory into space. The Company’s securities filings canhybrid rocket motor utilizes liquid oxidizer and solid fuel and is designed to be accessed ona simple, safe, reliable propulsion system for the EDGAR sectionspaceship. The spaceship’s cabin has been designed to maximize the future astronaut’s safety, experience and comfort. A dozen windows line the sides and ceiling of the SEC’s website at www.sec.gov. Exceptspaceship, offering customers the ability to view the blackness of space as expressly requiredwell as stunning views of the Earth below. applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.OverviewWe are a blank check company incorporated on May 5, 2017 as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses.researchers. This capability will enable scientific experiments as well as educational and research programs to be carried out by a broader range of individuals, organizations and institutions than ever before. Our commitment to advancing research and science has been present in all of our spaceflights to date. Most recently, in May of 2021, we carried payloads into space for research purposes through NASA's Flight Opportunities Program, and our flight in July of 2021 included research payloads from the University of Florida.effectuateexpand our initial Business Combinationfleet with our next generation vehicles, our Delta class spaceships and our next generation motherships, which will allow us to increase our annual flight rate. We believe that expanding the fleet will allow us to increase our annual flight rate once commercialization is achieved.cashour spaceflight systems and by providing engineering services. We also have generated revenues from sponsorship arrangements and fees related to our Future Astronaut community.proceedscommercial launch of our human spaceflight services, we expect the significant majority of our revenue to be derived from ticket sales to fly to space and related services. We also expect that we will continue to receive a small portion of our revenue by providing services relating to the research, design, development, manufacture and integration of advanced technology systems.Public Offering,lease with Spaceport America, and equipment; professional fees; and other general corporate costs. Human capital expenses primarily include salaries, cash bonuses, stock-based compensation and benefits. As we continue to grow as a company, we expect that our selling, general and administrative costs will increase on an absolute dollar basis.salefollowing costs for developing our spaceflight systems:a private placement that occurred simultaneously withthe fair value of warrants. Certain warrants issued as part of the Company's initial public offering in 2017 and assumed upon the consummation of the Public Offering, our shares, debt or aVirgin Galactic business combination of these asin October 2019 (the "Business Combination") were recorded at their fair value on the consideration to be paid in our initial Business Combination.The issuance of additional shares in a Business Combination:●may significantly dilute the equity interest of investors, which dilution would increase if the anti-dilution provisions in the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversiondate of the Class B ordinary shares;●may subordinate the rights of holders of ordinary shares if preferred shares are issued with rights senior to those afforded our ordinary shares;●could cause a change of control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;●may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and●may adversely affect prevailing market prices for our Class A ordinary shares and/or warrants.Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:●default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;●acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;●our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;●our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding;●our inability to pay dividends on our ordinary shares;12●using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;●limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;●increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and●limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete a Business Combination will be successful.Resultsand are remeasured as of OperationsWe have neither engaged in any operations nor generated any revenues to date. Our only activities from May 5, 2017 (inception) to Septemberwarrant exercise date and at the end of each reporting period. No warrants were outstanding during the three and six month period ended June 30, 2017 were organizational activities and those necessary to consummate the Public Offering, described below, and identifying a target company for a Business Combination. Following the Public Offering, we do not expect to generate any operating revenues until after the completion of2022. Business Combination. We expect to generate non-operating income in the form of interest income on cash and cash equivalents and marketable securities held after the Public Offering. We expect to incur increased expenses as a resultsecurities.being a public company (for legal, financial reporting, accountingamortization of debt issuance costs and auditing compliance),contractual interest expense for our 2027 Notes, as well as interest expense related to our finance lease obligations.due diligence expenses.Three Months Ended
June 30,Six Months Ended
June 30,2022 2021 2022 2021 (In thousands) Revenue $ 357 $ 571 $ 676 $ 571 Operating expenses: Customer experience 122 63 147 63 Selling, general and administrative 44,700 36,916 81,707 80,235 Research and development 62,340 34,619 114,167 69,708 Depreciation and amortization 2,915 2,871 5,767 5,740 Total operating expenses 110,077 74,469 201,788 155,746 Operating loss (109,720) (73,898) (201,112) (155,175) Interest income 1,985 220 2,803 545 Interest expense (3,157) (6) (5,631) (13) Change in fair value of warrants — (20,363) — (69,082) Other income, net 194 13 210 40 Loss before income taxes (110,698) (94,034) (203,730) (223,685) Income tax expense (23) (6) (48) (49) Net loss $ (110,721) $ (94,040) $ (203,778) $ (223,734) Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 (In thousands, except %) Revenue $ 357 $ 571 $ (214) (37) % $ 676 $ 571 $ 105 18 % SeptemberJune 30, 2017, we had net loss2022, compared to $0.6 million for the three months ended June 30, 2021. Revenue recorded for the three months ended June 30, 2022 was primarily attributable to membership fees related to our Future Astronaut community. Revenue recorded for the three months ended June 30, 2021 was attributable to the spaceflight of $62,130, which consiststwo payloads in May 2021 and revenue earned from the completion of operatingcertain technical milestones related to payload services.Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 (In thousands, except %) Customer experience $ 122 $ 63 $ 59 94 % $ 147 $ 63 $ 84 133 % $265,350payload services and labor costs provided for engineering services under long-term U.S. government contracts.Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 (In thousands, except %) Selling, general and administrative $ 44,700 $ 36,916 $ 7,784 21 % $ 81,707 $ 80,235 $ 1,472 2 % Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 (In thousands, except %) Research and development $ 62,340 $ 34,619 $ 27,721 80 % $ 114,167 $ 69,708 $ 44,459 64 % Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 ($ in thousands) (In thousands, except %) Depreciation and amortization 2,915 2,871 $ 44 2 % 5,767 5,740 $ 27 — % unrealized lossincrease of less than $0.1 million when compared to 2021.Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 ($ in thousands) (In thousands, except %) Change in fair value of warrants $ — $ (20,363) $ 20,363 (100) % $ — $ (69,082) $ 69,082 (100) % Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 (In thousands, except %) Interest income $ 1,985 $ 220 $ 1,765 802 % $ 2,803 $ 545 $ 2,258 414 % securities heldsecurities.Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 (In thousands, except %) Interest expense $ 3,157 $ 6 $ 3,151 52,517 % $ 5,631 $ 13 $ 5,618 43,215 % Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2022 2021 2022 2021 ($ in thousands) (In thousands, except %) Other income, net $ 194 $ 13 $ 181 1,392 % $ 210 $ 40 $ 170 425 % Three Months Ended June 30, $
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ChangeSix Months Ended June 30, $
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Change2022 2021 2022 2021 ($ in thousands) (In thousands, except %) Income tax expense $ 23 $ 6 $ 17 283 % $ 48 $ 49 $ (1) (2) % Trust Account of $2,244, offset by interestnet U.S. federal and state deferred tax assets. The income on marketable securities heldtax expenses shown above are primarily related to minimum state filing fees in the Trust Account of $205,464.For the period from May 5, 2017 (inception) through September 30, 2017,states where we had net loss of $67,536, which consists of operating costs of $270,756 and an unrealized loss on marketable securities held inhave operations as well as corporate income taxes for our Trust Account $2,244, offset by interest income on marketable securities heldoperations in the Trust Account $205,464.On September 18, 2017,consummatedhad cash, cash equivalents and restricted cash of $370.1 million and $752.5 million in marketable securities. Since the Public Offeringconsummation of 69,000,000 Units, which includesour business combination transaction in 2019, our principal sources of liquidity have come from our sales of our common stock and offering of convertible senior notes ("2027 Notes").full exercise by2027 Notes due on February 1, 2027, unless earlier repurchased, redeemed or converted, and received aggregate proceeds of $425 million, before deducting costs of issuance of $11.2 million. The 2027 Notes are senior, unsecured obligations of the underwriters’ of their over-allotment option in the amount of 9,000,000 Units,Company, and bear interest at a pricefixed rate of $10.002.50% per Unit, generating gross proceedsyear. Interest is payable in cash semi-annually in arrears on February 1 and August 1 of $690,000,000. Simultaneously with the closing of the Public Offering, we consummated the sale of 8,000,000 Private Placement Warrants to our Sponsor at a price of $1.50 per warrant, generating gross proceeds of $12,000,000.Public Offering and2027 Notes, we entered into capped call transactions with respect to our common stock (the "2027 Capped Calls"). We paid an aggregate amount of $52.3 million for the Private Placement, a total2027 Capped Calls. See Note 11 in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on the 2027 Capped Calls.Six Months Ended June 30, 2022 2021 (In thousands) Net cash (used in) provided by Operating activities $ (152,960) $ (113,472) Investing activities (385,547) (1,647) Financing activities 358,541 819 Net change in cash and cash equivalents and restricted cash $ (179,966) $ (114,300) $504,907, consisting$153.0 million for the six months ended June 30, 2022, which primarily consisted of $203.8 million of net losslosses, adjusted for non-cash items, which primarily included depreciation and amortization expense of $67,536$5.8 million, stock based compensation expense of $23.0 million, amortization of debt issuance costs of $0.8 million, as well as $21.0 million of cash consumed by working capital.interest earned onamortization expense of $5.7 million, stock based compensation expense of $36.5 million, and change in fair value of warrants of $69.1 million, as well as a $1.1 million increase in cash andconsumed by working capital.heldas well as $6.3 million in capital expenditures.Trust Accountsix months ended June 30, 2021, which primarily consisted of $205,464,capital expenditures.an unrealized loss on marketable securities held in our Trust Account of $2,244. Changes in operating assets and liabilities used $234,151 of cash from operating activities. As of September 30, 2017, we had cash and marketable securities held in the Trust Account of $690,203,220 (including approximately $203,000 of interest income) consisting of U.S. treasury bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2017, we did not withdraw any funds from the interest earned on the Trust Account. We intend to use substantially allpurchase of the funds held in2027 Capped Calls of $52.3 million and tax withholdings for net settled stock-based awards of $2.8 million.Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall besix months ended June 30, 2021, which primarily consisted of net cash proceeds from issuance of taxes payable and excluding deferred underwriting commissions)common stock, offset by tax withholdings for stock options exercised.complete our initial Business Combination. To the extent that our ordinary shares or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.As of September 30, 2017, we had cash of $933,763 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.13We may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debtincrease substantially in connection with such Business Combination.In orderour ongoing activities, particularly as we continue to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliateadvance the development of our Sponsor or certainspaceflight system and the commercialization of our officershuman spaceflight operations. In addition, we expect customer experience expenses to increase significantly as we commence commercial operations and directors may,add additional spaceships to our operating fleet.not obligatedsubject to loan us funds as mayfuture negotiations and cannot be required. In the eventestimated with reasonable certainty.Although we believe that our initial Business Combination does not close,current capital is adequate to sustain our operations for at least the next twelve months, changing circumstances may cause us to consume capital significantly faster than we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to our Sponsor. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such fundscurrently anticipate, and provide a waiver against any and all rights to seek access to funds in our Trust Account.If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtainspend more money than currently expected because of circumstances beyond our control. Additionally, we are in the final phases of developing our commercial spaceflight program. While we anticipate initial commercial launch with a single spaceship, we currently have additional financing in orderspaceship vehicles under construction. We anticipate the costs to manufacture additional vehicles will begin to decrease as we continue to scale up our manufacturing processes and capabilities. Until we achieve technological feasibility with our spaceflight systems, we will not capitalize expenditures incurred to construct any additional components of our spaceflight systems and we will continue to expense these costs as incurred to research and development.obligations.Off-balance sheet financing arrangementsnosufficient liquidity available to fund our business needs, commitments and contractual obligations assetsin a timely manner for the next twelve months.liabilitiesrefinance debt. We expect these resources will be adequate to fund our ongoing operating activities.would be considered off-balance sheet arrangementsare beyond our control, that may affect the timing and magnitude of these anticipated expenditures. Some of these risk and uncertainties are described in more detail in our Annual Report on Form 10-K under the heading Item 1A. “Risk Factors—Risks Related to Our Business.”September 30, 2017. We do not participatethe notes to our condensed consolidated financial statements included elsewhere in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which wouldthis Quarterly Report on Form 10-Q, there have been establishedno material changes outside the ordinary course of business to our contractual obligations and commitments as described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K. Additionally, in some cases, we have entered arrangements with third-party providers for services, such as the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.Contractual obligationsWe do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliatedesign and manufacture of our Sponsor a monthly feenext generation of $10,000 for office space,carrier aircraft. The amounts we would pay under those arrangements will be significant but are not contractually committed until we execute specific task orders with the applicable counterparty, are subject to future negotiations and administrative and support services provided to the Company. We began incurring these fees on September 18, 2017 and will continue to incur these fees monthly until the earliercannot be estimated with reasonable certainty.in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires managementus to make estimates, assumptions and assumptionsjudgments that affect the reported amounts of assets, liabilities, revenues, costs and liabilities, disclosureexpenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. Please refer to Note 2 in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of contingent assetsour other significant accounting policies.liabilities atrecently issued accounting pronouncements not yet adopted as of the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has not identified any critical accounting policies.Recent accounting pronouncementsManagement does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effectthis Quarterly Report on the Company’s condensed financial statements.ITEMQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKAll activity through September 30, 2017 relates to our formationQuantitative and our Public Offering. Qualitative Disclosures about Market Riskdid not have any financial instruments that wereoperations within the United States and the United Kingdom and as such we are exposed to market risks at Septemberin the ordinary course of our business, including the effects of interest rate changes and fluctuations in foreign currency exchange rates. We are also exposed to market risk from changes in our stock prices, which impact the fair value of our 2027 Notes. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.2017.2022, of which $0.9 billion was invested in money market funds, certificate deposits, and corporate debt securities. Our cash and cash equivalents are held for working capital purposes. Our marketable securities are held for capital preservation purposes. We do not enter into investments for trading or speculative purposes.ITEM CONTROLS AND PROCEDURESDisclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.14Evaluation of Disclosure Controls and ProceduresAs required by Rules 13a-1515d-15 under the Exchange Act, our Chief Executive OfficerProceduresChief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017. Based upon their evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded thatevaluating our disclosure controls and procedures (as defined in Rules 13a-15 (e)13a-15(e) and 15d-15 (e)15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.effective.During the most recently completed fiscal quarter, there has beenchangechanges in our internal control over financial reporting during the three months ended June 30, 2022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.ITEMLEGAL PROCEEDINGS.None.ITEMRISK FACTORS. thatdiffervary materially from thosepast, or anticipated future, operating results and financial condition. For a discussion of our potential risks and uncertainties, see the risk factors previously disclosed in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K and in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report are any of the risks described in our prospectus dated September 13, 2017 filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, thereForm 10-Q. There have been no material changes to the risk factors disclosed in our prospectus dated September 13, 2017 filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.Annual Report on Form 10-K.ITEMUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.On May 10, 2017, our sponsor, subscribed for an aggregate of 14,375,000 founder shares, for an aggregate offering price of $25,000 at an average purchase price of approximately $0.002 per share. On May 18, 2017, our sponsor surrendered 2,875,000 founder shares for no value, and on August 23, 2017 and September 13, 2017, we effected a share capitalization resulting in an increase in the total number of founder shares issued and outstanding by 5,750,000 (from 11,500,000 to 17,250,000). The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the issued and outstanding ordinary shares upon completion of the Public Offering. Such securities were issued in connection with our incorporation pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our Sponsor is an accredited investor for purposes of Rule 501 of Regulation D.Simultaneously with the consummation of the Public Offering on September 18, 2017, we consummated a private placement of 8,000,000 Private Placement Warrants at a price of $1.50 per warrant to our Sponsor, generating total proceeds of $12,000,000. The Private Placement Warrants are the same as the warrants sold in the Public Offering, except that the Private Placement Warrants (i) are not redeemable by the Company, (ii) may be exercised for cash or on a cashless basis, so long as they are held by the Sponsor or any of its permitted transferees, and (iii) are entitled to registration rights (including the ordinary shares issuable upon exercise of the Private Placement Warrants). In addition, the Private Placement Warrants and their underlying securities will not be transferable, assignable or salable until 30 days after the consummation of the Business Combination. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our Sponsor, as purchaser, is an accredited investor for purposes of Rule 501 of Regulation D.On September 18, 2017, we consummated our Public Offering of 69,000,000 units (inclusive of 9,000,000 units sold pursuant to the underwriters’ exercising their over-allotment option), with each unit consisting of one Class A ordinary share and one-third of one warrant, each whole warrant entitling the holder to purchase one Class A ordinary share at a price of $11.50. No fractional shares will be issued upon exercise of the warrants. Each warrant will become exercisable on the later of 30 days after the completion of our Business Combination or 12 months from the closing of the Public Offering. However, if we do not complete a Business Combination within the period allotted to complete the Business Combination, the warrants will expire at the end of such period. If we are unable to deliver registered Class A ordinary shares to the holder upon exercise of warrants issued in connection with the 69,000,000 units during the exercise period, there will be no net cash settlement of these warrants and the warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant agreement. The warrants will expire five years after the completion of our initial Business Combination or earlier upon redemption or liquidation. Once the warrants issued in connection with the Public Offering become exercisable, we may redeem those outstanding warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, but if, and only if, the last sale price of our Class A ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders.15The units in the Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of $690,000,000. Credit Suisse Securities (USA) LLC acted as the sole manager. The securities sold in the Public Offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-220130 and 333-220453). The SEC declared the registration statements effective on September 13, 2017.We paid a total of $10,000,000 in underwriting discounts, and commissions and $802,301 for other costs and expenses related to the Public Offering. The underwriters agreed to defer an additional $24,150,000 in underwriting discounts and commissions, payable upon consummation of the Business Combination. After deducting the underwriting discounts and commissions (excluding the deferred portion of $24,150,000 in underwriting discounts and commissions, which will be released from the Trust Account upon consummation of the Business Combination, if consummated) and the estimated offering expenses, the total net proceeds from our Public Offering and the Private Placement was $667,047,699, of which $690,000,000 (or $10.00 per unit sold in the Public Offering) was placed in the Trust Account.ITEMDEFAULTS UPON SENIOR SECURITIES.ITEMMINE SAFETY DISCLOSURES.ITEMOTHER INFORMATION.None.
Other Information16ITEMEXHIBITS.as part of,furnished or incorporated by reference into,as part of this Quarterly Report on Form 10-Q.Incorporated by Reference Exhibit No. Exhibit Description Form File No. Exhibit Filing Date Filed/Furnished Herewith 8-K/A 001-38202 2.1 07/11/2019 S-4 333-233098 2.1(a) 10/03/2019 3.1 8-K 001-38202 3.1 10/29/2019 3.2 8-K 001-38202 3.2 10/29/2019 * 31.1 * 31.2 * 32.1 ** 32.2 ** 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * IncorporatedSchedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.referenceasterisks) have been omitted pursuant to our Current Report on Form 8-K filed on September 18, 2017.* Filed herewith.** Furnished herewith.
Regulation S-K, Item 601(b)(10). Such omitted information is not material and the registrant customarily and actually treats such information as private or confidential. Additionally, schedules and attachments to this exhibit have been omitted pursuant to Regulation S-K, Items 601(a)(5).17SIGNATURESSocial Capital Hedosophia Holdings Corp.Virgin Galactic Holdings, Inc. Date: November 14, 2017/s/ Chamath PalihapitiyaDate: August 4, 2022 /s/ Michael Colglazier Name: Chamath PalihapitiyaMichael ColglazierTitle:
(Principal Executive Officer)Date: November 14, 2017/s/ Sachin SoodDate: August 4, 2022 /s/ Douglas Ahrens Name: Sachin SoodDouglas AhrensTitle: 18