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 2020
| ☐ | 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.) | |||||||
| ||||||||
166 North Roadrunner Parkway, Suite 1C Las Cruces, New Mexico | 88011 | |||||||
| (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 | |||||||||
| PART I | |||||||||
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.
INC. The of $460.2 million. The Company current liabilities approximate fair value because of the short maturity of these instruments. The following employees’ elected contributions. The Company prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures 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 condensed financial statements.
terms the “Company,” “Virgin Galactic,” “we,” “our,” “us” and similar terms used herein refer collectively to Virgin Galactic Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries, unless otherwise stated.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 partunauditedPrivate 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 “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “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:September 30, 2020 December 31, 2019 (Unaudited) Assets Current assets Cash and cash equivalents $ 741,575 $ 480,443 Restricted cash 13,268 12,278 Inventories 25,147 26,817 Prepaid expenses and other current assets 9,871 17,133 Total current assets 789,861 536,671 Property, plant, and equipment, net 57,255 49,333 Other non-current assets 18,930 19,542 Total assets $ 866,046 $ 605,546 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 8,490 $ 7,038 Accrued expenses 22,056 22,277 Customer deposits 83,190 83,362 Other current liabilities 2,300 3,168 Total current liabilities 116,036 115,845 Other long-term liabilities 23,763 22,141 Total liabilities $ 139,799 $ 137,986 Stockholders' Equity Preferred stock, $0.0001 par value; 10,000,000 authorized; 0ne issued and outstanding $ 0 0 Common stock, $0.0001 par value; 700,000,000 shares authorized; 234,021,503 and 196,001,038 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 23 20 Additional paid-in capital 1,047,246 589,158 Accumulated deficit (321,075) (121,677) Accumulated other comprehensive income 53 59 Total stockholders' equity 726,247 467,560 Total liabilities and stockholders' equity $ 866,046 $ 605,546 3SOCIAL CAPITAL HEDOSOPHIACORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONSSocial Capital HedosophiaThree Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenue $ 0 $ 832 $ 238 $ 3,252 Cost of revenue 0 406 173 1,690 Gross profit 0 426 65 1,562 Selling, general, and administrative expenses 30,936 17,814 83,738 44,719 Research and development expenses 46,243 34,528 117,675 96,119 Operating loss (77,179) (51,916) (201,348) (139,276) Interest income 322 387 2,005 1,137 Interest expense (9) 0 (26) (2) Other income, net (44) 91 5 128 Loss before income taxes (76,910) (51,438) (199,364) (138,013) Income tax (benefit) expense 40 37 34 123 Net loss (76,950) (51,475) (199,398) (138,136) Other comprehensive loss: Foreign currency translation adjustment 48 (58) (6) (79) Total comprehensive loss $ (76,902) $ (51,533) $ (199,404) $ (138,215) Net loss per share: Basic and diluted $ (0.34) $ (0.27) $ (0.94) $ (0.71) Weighted-average shares outstanding: Basic and diluted 225,253,536 193,663,150 213,193,386 193,663,150 Member's Equity Preferred Stock Common Stock Net Parent
InvestmentUnits Member's Capital # 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, 2018 $ 41,477 0 $ 0 0 $ 0 0 $ 0 $ 0 $ 0 $ 82 $ 41,559 Net loss (42,593) — — — — — — — — — (42,593) Other comprehensive loss — — — — — — — — — 10 10 Net transfer from Parent Company 47,445 — — — — — — — — — 47,445 Balance as of March 31, 2019 46,329 0 0 0 0 0 0 0 0 92 46,421 Net loss (44,068) — — — — — — — — — (44,068) Other comprehensive loss — — — — — — — — — (31) (31) Net transfer from Parent Company 53,730 — — — — — — — — — 53,730 Balance as of June 30, 2019 55,991 0 0 0 0 0 0 0 0 61 56,052 Net loss (2,597) — — — — — — — (48,878) — (51,475) Other comprehensive loss — — — — — — — — — (58) (58) Net transfer from Parent Company 4,944 — — — — — — — — — 4,944 Conversion from net parent investment to membership equity (58,338) 100 58,338 — — — — — — — 0 Contribution from Parent Company — — 40,000 — — — — — — — 40,000 Balance as of September 30, 2019 $ 0 100 $ 98,338 0 $ 0 0 $ 0 $ 0 $ (48,878) $ 3 $ 49,463 Member's Equity Preferred Stock Common Stock Net Parent
InvestmentUnits Member's Capital # 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, 2019 $ 0 0 $ 0 0 $ 0 196,001,038 $ 20 $ 589,158 $ (121,677) $ 59 $ 467,560 Net loss — — — — — — — — (59,930) — (59,930) Other comprehensive income (loss) — — — — — — — — — (54) (54) Common stock issued related to warrants exercised — — — — — 13,239,934 1 (1) — — 0 Stock-based compensation — — — — — — — 4,425 — — 4,425 Balance as of March 31, 2020 0 0 0 0 0 209,240,972 21 593,582 (181,607) 5 412,001 Net loss — — — — — — — — (62,518) — (62,518) Other comprehensive loss — — — — — — — — — — 0 Common stock issued related to warrants exercised — — — — — 1,162,884 — — — — 0 Stock-based compensation — — — — — — — 5,525 — — 5,525 Transaction costs — — — — — — — (770) — — (770) Balance as of June 30, 2020 0 0 0 0 0 210,403,856 21 598,337 (244,125) 5 354,238 Net loss — — — — — — — — (76,950) — (76,950) Other comprehensive income (loss) — — — — — — — — — 48 48 Common stock issued related to stock-based awards, net of taxes — — — — — 17,647 — (399) — — (399) Stock-based compensation — — — — — — — 8,625 — — 8,625 Issuance of common stock — — — — — 23,600,000 2 460,198 — — 460,200 Transaction costs — — — — — — — (19,515) — — (19,515) Balance as of September 30, 2020 $ 0 0 $ 0 0 $ 0 234,021,503 $ 23 $ 1,047,246 $ (321,075) $ 53 $ 726,247 Nine Months Ended September 30, 2020 2019 Cash flows from operating activities Net loss $ (199,398) $ (138,136) Stock-based compensation 18,575 0 Depreciation and amortization 7,397 4,920 Other operating activities, net 75 (375) Change in assets and liabilities Inventories 1,669 (2,310) Other current and non-current assets 6,152 (5,928) Accounts payable and accrued expenses 719 2,560 Customer deposits (172) 1,319 Other current and non-current liabilities 2,394 9,664 Net cash used in operating activities (162,589) (128,286) Cash flows from investing activity Capital expenditures (14,135) (13,680) Cash used in investing activity (14,135) (13,680) Cash flows from financing activities Payments of finance lease obligations (89) (55) Net transfer from Parent Company 0 106,119 Proceeds from Parent Company 0 40,000 Issuance of common stock 460,200 0 Transaction costs (20,866) 0 Withheld taxes paid on behalf of employees on net settled stock-based awards (399) 0 Net cash provided by financing activities 438,846 146,064 Net increase in cash and cash equivalents 262,122 4,098 Cash, cash equivalents and restricted cash at beginning of period 492,721 81,368 Cash, cash equivalents and restricted cash at end of period $ 754,843 $ 85,466 Cash and cash equivalents $ 741,575 $ 74,438 Restricted cash 13,268 11,028 Cash, cash equivalents and restricted cash $ 754,843 $ 85,466 Corp. (the “Company”Inc. and its wholly owned subsidiaries ("VGH, Inc.") is a newly incorporated blank check company incorporatedare focused on the development, manufacture and operations of spaceships and related technologies for the purpose of conducting commercial human spaceflight and flying commercial research and development payloads into space. The development and manufacturing activities are located in Mojave, California with plans to operate the commercial spaceflights out of Spaceport America located in New Mexico.and formedon May 5, 2017 under the name Social Capital Hedosophia Holdings Corp. (“SCH”). SCH was a public investment vehicle incorporated as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Businessbusinesses. On October 25, 2019, VGH, Inc. domesticated as a Delaware corporation and consummated the merger transactions contemplated by the Agreement and Plan of Merger, dated as of July 29, 2019, as amended on October 2, 2019, by and among VGH, Inc., Vieco USA, Inc. (“Vieco US”), Vieco 10 Limited (“Vieco 10”), TSC Vehicle Holdings, Inc., (“TSCV”), Virgin Galactic Vehicle Holdings, Inc., (“VGVH”), Virgin Galactic Holdings, LLC (“VGH LLC” and, collectively with TSCV and VGVH, the “VG Companies”), and the other parties thereto (the “Virgin Galactic Business Combination”).At September 30, 2017, 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.registration statements for the Company’s initial public offering were declared effective on September 13, 2017. The Company consummated a public offering 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 proceeds of $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 oneclosing of the Company’s Class A ordinary shares, par value $0.0001 per share,Virgin Galactic Business Combination occurred on October 25, 2019 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”).Inin connection with the closing, SCH re-domiciled as a Delaware corporation under the name Virgin Galactic Holdings, Inc. Upon closing, the entities comprising the VG Companies became wholly owned subsidiaries of VGH, Inc. and in exchange the OfferingVGH, Inc. common stock due to Vieco 10 as consideration was received and directly held by Vieco US. On March 16, 2020, Vieco US distributed its shares of VGH, Inc. to Vieco 10 and, in connection with such distribution, Vieco 10 executed a joinder to the Stockholders' Agreement 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 publicRegistration Rights Agreement entered into 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)connection with the consummation of the Company’s initialVirgin Galactic Business Combination. On July 30, 2020, Vieco 10 subsequently distributed its shares of our common stock to Virgin Investments Limited (“VIL”) and Aabar Space, Inc. (“Aabar”) and, in connection with such distribution, VIL and Aabar executed a joinder to the Stockholders’ Agreement and the Registration Rights Agreement.(ii)VGH, Inc. and its subsidiaries after the redemptionVirgin Galactic Business Combination. Prior to the Virgin Galactic Business Combination and prior to the series of any Public Shares properly tenderedVieco 10 reorganizational steps, Galactic Ventures, LLC ("GV"), a wholly-owned subsidiary of Vieco 10, was the direct parent of VG Companies.connectionregions throughout the world. These actions include travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.shareholder voteregular basis. However, the COVID-19 pandemic and the continued precautionary actions taken related to amendCOVID-19 have adversely impacted, and are expected to continue to adversely impact, our operations, including the Company’s Amended and Restated Memorandum and Articles of Association to modify the substance or timingcompletion of the Company’s obligationdevelopment of our spaceflight systems and our scheduled spaceflight test programs.redeem 100%be in our facilities are now back on-site, but we have experienced, and expect to continue to experience, reductions in operational efficiency due to illness from COVID-19 and precautionary actions taken related to COVID-19. For the time being, we are encouraging those employees who are able to work from home to continue doing so.Public Shares if it does notimpact on our operations necessary to complete a Business Combination within 24the development of our spaceflight systems, our scheduled spaceflight test programs and commencement of our commercial flights. In addition to existing travel restrictions, countries may continue to maintain or reimpose closed borders, impose prolonged quarantines, or further restrict travel. We believe our cash and cash equivalents on hand at September 30, 2020 and management's operating plan, will provide sufficient liquidity to fund our operations for at least the next twelve months from the Closing Date; and (iii)issuance of these financial statements. If we experience a significant delay due to our workforce getting ill or if the Company’s failure to consummate apandemic worsens, we may take additional actions, such as further reducing costs.withinand Basis of Presentationprescribed time. The remaining net proceeds (not held inacquired company for financial reporting purposes. This determination was primarily based on shareholders of 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,VG Companies having a relative majority of the interest earned onvoting power of the Trust Account balance may be releasedcombined entity, the operations of the VG Companies prior to the Company to payacquisition comprising the Company’s tax obligations. Placing funds inonly ongoing operations of the Trust Account may not protect those funds from third party claims againstcombined entity, and senior management of the Company. AlthoughVG Companies comprising the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreementsmajority of the senior management of the combined entity. Accordingly, for accounting purposes, the financial statements of the combined entity represent a continuation of the financial statements of the VG Companies with the Company waiving any claimacquisition being treated as the equivalent of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements.VG Companies issuing stock for the net assets of SCH, accompanied by a recapitalization. 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 amountnet assets 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 AccountSCH were recognized 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 initialVirgin Galactic Business Combination at a meeting called for such purposehistorical cost, with no goodwill or (2) provide shareholders with the opportunity to sell their Public Sharesother intangible assets recorded. Operations prior to the Company by means of a tender offer,Virgin Galactic Business Combination in each case where shareholders may seek to redeem their Public Shares into their pro rata sharethese financial statements are those of the aggregate amount then on deposit inVG Companies and the Trust Account, less any taxes then due but not yet paid. Ifaccumulated deficit of VG Companies has been carried forward after the Company seeks shareholder approval of aVirgin Galactic Business Combination. Earnings per share calculations for all periods prior to the Virgin Galactic Business Combination and it does not conduct redemptions in connection with ahave been retrospectively adjusted for the equivalent number of shares outstanding immediately after the Virgin Galactic Business Combination pursuant to effect 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.
reverse acquisition.4SOCIAL 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 POLICIESBasis of PresentationThe 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 withpursuant to the instructions to Form 10-Qrules and Article 10 of Regulation S-Xregulations of the SEC.U.S. Securities and Exchange Commission (“SEC”). All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation. 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 SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, theAsset Useful Life Buildings 39 years Leasehold Improvements Shorter of the estimated useful life or lease term Aircraft 20 years Machinery & equipment 5 to 7 years IT software and equipment 3 to 5 years condensedbut reflects all normal recurring adjustments that are,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 filed10-K for the year ended December 31, 2019. Interim results are not necessarily indicative of the results for a full year.SECtax basis of goodwill, the incremental approach for intraperiod tax allocation, interim period income tax accounting for year-to-date losses that exceed anticipated losses and enacted changes in tax laws in interim periods. The changes are effective for annual periods beginning after December 15, 2020. The Company is currently assessing the impact of ASU 2019-12 in its consolidated financial statements.September 22, 2017.fair value measurements. The interim resultsadoption of ASU 2018-03 did not have a material impact on the Company’s consolidated financial statements.20172020 and 2019, respectively. We paid license and royalty fees of $0.13 million and $0.06 million for the nine months ended September 30, 2020 and 2019, respectively.As of September 30, 2020 December 31, 2019 (Unaudited) (In thousands) Raw Materials $ 23,503 $ 22,578 Spare parts 1,644 4,239 Total inventory $ 25,147 $ 26,817 As of September 30, 2020 December 31, 2019 (Unaudited) (In thousands) Buildings $ 9,142 $ 9,142 Leasehold improvements 27,910 20,048 Aircraft 195 320 Machinery and equipment 36,752 33,608 IT software and equipment 21,720 17,151 Construction in progress 3,257 3,674 98,976 83,943 Less accumulated depreciation and amortization (41,721) (34,610) Property, plant, and equipment, net $ 57,255 $ 49,333 Three Months Ended September 30, 2020 2019 (Unaudited and in thousands) Lease Cost: Operating lease expense $ 1,181 $ 1,202 Short-term lease expense 126 27 Finance Lease Cost: Amortization of right-of-use assets 40 59 Interest on lease liabilities 8 8 Total finance lease cost 48 67 Variable lease cost 798 113 Total lease cost $ 2,153 $ 1,409 Nine Months Ended September 30, 2020 2019 (Unaudited and in thousands) Lease Cost: Operating lease expense $ 3,343 $ 3,017 Short-term lease expense 249 120 Finance Lease Cost: Amortization of right-of-use assets 95 115 Interest on lease liabilities 25 18 Total finance lease cost 120 133 Variable lease cost 1,573 377 Total lease cost $ 5,285 $ 3,647 Nine Months Ended September 30, 2020 2019 (In thousands, except term and rate data) Cash flow information: Operating cash flows for operating leases $ 3,763 $ 3,425 Operating cash flows for finance leases $ 25 $ 17 Financing cash flows for finance leases $ 89 $ 55 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations Operating leases $ 96 $ 16,989 Finance Leases $ 91 $ 498 Other Information: Weighted average remaining lease term: Operating leases (in years) 13.23 13.95 Finance leases (in years) 3.07 4.10 Weighted average discount rates: Operating leases 11.69 % 11.71 % Finance leases 8.48 % 8.51 % As of September 30, 2020 December 31, 2019 (Unaudited) (In thousands) Operating leases Long-term right-of-use assets $ 15,712 $ 16,632 Short-term operating lease liabilities $ 1,990 $ 2,354 Long-term operating lease liabilities 20,838 21,867 Total operating lease liabilities $ 22,828 $ 24,221 Operating Leases Finance
Leases(In thousands) 2020 (for the remaining period) $ 4,591 $ 145 2021 3,525 131 2022 3,246 97 2023 3,233 46 2024 3,233 0 Thereafter 27,664 0 Total lease payments $ 45,492 $ 419 Less: Imputed interest/present value discount (23,034) $ (49) Present value of lease liabilities $ 22,458 $ 370 As of September 30, 2020 December 31, 2019 (Unaudited) (In thousands) Prepaid expense $ 9,274 $ 16,672 Accounts receivable 363 461 Other current assets 234 0 Total other current assets $ 9,871 $ 17,133 Right-of-use assets $ 15,712 $ 16,927 Other non-current assets 3,218 2,615 Total other non-current assets $ 18,930 $ 19,542 As of September 30, 2020 December 31, 2019 (Unaudited) (In thousands) Accrued payroll $ 2,777 $ 2,027 Accrued vacation 4,308 2,797 Accrued bonus 5,195 6,502 Accrued inventory 2,063 2,235 Other accrued expenses 7,713 8,716 Total accrued expenses $ 22,056 $ 22,277 As of September 30, 2020 December 31, 2019 (Unaudited) (In thousands) Commercial loan $ 930 $ 0 930 0 Less: Current portion (310) 0 Non-current portion $ 620 $ 0 (In thousands) 2020 (for the remaining period) $ 310 2021 310 2022 310 $ 930 May 5, 2017 (inception)January 1, 2019 through September 30, 2017 are not necessarily indicativeOctober 25, 2019, we adopted the separate return approach for the purpose of presenting the condensed consolidated financial statements, including the income tax provisions and the related deferred tax assets and liabilities. The historic operating results for the periods prior to be expectedthe Virgin Galactic Business Combination reflect a separate return approach for each jurisdiction in which we had a presence and GV will file tax returns for the period from May 5, 2017 (inception)January 1, 2019 through October 25, 2019. As of December 31, 2019 and for the period from October 26, 2019 through December 31, 20172019, we will file separate standalone tax returns.anygross proceeds, before deducting underwriting discounts and commissions and other future periods.5SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Emerging Growthexpenses payable by the Company,is an “emerging growth company,”incurred $20.9 million of transaction costs.definedpart of our initial public offering in Section 2(a)2017 (the “public warrants”), which included warrants that were part of the Securities ActCompany’s then-outstanding units. As of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),both September 30, 2020 and it may take advantage of certain exemptions from various reporting requirementsDecember 31, 2019, there were also 8,000,000 warrants outstanding that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to complywere issued in a private placement simultaneously with the auditor attestation requirements of Section 404Company’s initial public offering (the “private placement warrants”).Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reportswarrant agreement (the “Warrant Agreement”) between us and proxy statements, and exemptions fromContinental Stock Transfer & Trust Company, as warrant agent, the requirements of holdingpublic warrants became exercisable on a nonbinding advisory votecashless basis on executive compensation and shareholder approval of any golden parachute payments not previously approved.Further, Section 102(b)(1) ofJanuary 27, 2020, based on 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 registeredexchange ratio as calculated 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. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standardWarrant Agreement at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of usingexercise. On March 13, 2020 and pursuant to the extended transition period difficult or impossible becauseterms of the potential differencesWarrant Agreement, we announced that all public warrants that remained unexercised immediately after 5:00 p.m. New York City time on April 13, 2020 (the “Redemption Date”) would be redeemed for $0.01 per warrant. Warrant holders could exercise their public warrants at any time from March 13, 2020 and prior to the Redemption Date on a cashless basis, and receive 0.5073 shares of common stock per public warrant surrendered for exercise. Immediately after the Redemption Date, 295,305 public warrants remained unexercised and were redeemed at a redemption price of $0.01 per public warrant in accounting standards used.Use of EstimatesThe preparation of financial statements in conformityaccordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dateterms of the condensed financial statementsWarrant Agreement. The private placement warrants were not subject to the redemption and remain outstanding.Three Months Ended September 30, Nine Months Ended
September 30,2020 2019 2020 2019 (In thousands, except for share and per share data) Basic and diluted: Net loss $ (76,950) $ (51,475) $ (199,398) $ (138,136) Weighted average shares of common stock outstanding 225,253,536 193,663,150 213,193,386 193,663,150 Basic and diluted net loss per share $ (0.34) $ (0.27) $ (0.94) $ (0.71) 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 estimatecommon stock equivalent of the effect of a condition, situation or set of circumstancesvested 1,500,000 restricted stock units ("RSUs") granted to certain directors in connection to the Virgin Galactic Business Combination 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 EquivalentsThe Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalentsremain unsettled as of September 30, 2017.Cash and Marketable Securities Held in Trust AccountAt September 30, 2017, the assets held in the Trust Account were held in cash and U.S. Treasury Bills.Ordinary Shares Subject to Possible RedemptionThe Company accounts for its ordinary shares 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 redemption upon the occurrence of uncertain events not solely within 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 considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2017, ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
2020.6SOCIAL 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 through the balance 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 periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken 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 determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. 2017, there were no unrecognized tax benefits2020, December 31, 2019 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 Company may be subject to potential examination by U.S. federal, U.S. states or foreign taxing authorities in the areas 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. 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 because the Company is organized in the Cayman Islands with no connection to any other taxable jurisdiction. As such,September 30, 2019, 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 inexcluded 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 redeemable 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 share of the Trust Account earnings. The Company has not considered thepotential effect of warrants soldto purchase shares of common stock totaling 8,000,000, 30,999,977 and 30,999,977, respectively, shares and the dilutive effect of outstanding stock options and unvested restricted stock units, as described in Note 12 of the “Notes to Consolidated Financial Statements” included in the Public Offering and Private Placement to purchase 31,000,000 Class A ordinary shares2019 Annual Report on Form 10-K, in the calculation of diluted loss per share, sinceas the effect would be anti-dilutive due to losses incurred.Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Options outstanding at December 31, 2018 0 $ 0 0 0 Granted 6,212,609 11.58 Exercised 0 0 Forfeited options (90,565) 11.79 Options outstanding at December 31, 2019 6,122,044 $ 11.58 9.83 0 Granted 1,155,734 20.34 Exercised 0 0 Forfeited options (225,242) 11.79 Options outstanding at September 30, 2020 7,052,536 $ 13.01 9.15 $ 43,866,774 Options exercisable at September 30, 2020 65,105 $ 22.98 9.75 0 __________________ warrants is contingent uponpre-tax amount that would have been received by the occurrenceoption holders, had they all exercised all their options on the period end date.future events. As a result, diluted lossRSUs activity under the 2019 Plan (dollars in thousands except per ordinary share is the same as basic loss per ordinary share for the periods.Reconciliationdata):Shares Weighted Average Fair Value Outstanding at January 1, 2019 0 $ 0 Granted 1,795,209 7.11 Vested 0 0 Forfeited (27,495) 7.11 Outstanding at December 31, 2019 1,767,714 $ 7.11 Granted 1,579,460 20.29 Vested (35,000) 22.98 Forfeited (86,976) 8.34 Outstanding at September 30, 2020 3,225,198 $ 19.30 ordinary shares subject to redemption, as these shares only participateCondensed Consolidated Financial Statementsincomecondensed consolidated statements of the Trust Accountoperations and not the losses of the Company. Accordingly, basiccomprehensive loss, related to stock options and diluted loss per ordinary shareRSUs 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 ) 7Three Months Ended September 30, Nine Months Ended
September 30,2020 2019 2020 2019 Stock option expense Selling, General & Administrative 2,582 0 6,527 0 Research & Development 1,254 0 3,310 0 Total stock option expense 3,836 0 9,837 0 RSU expense Selling, General & Administrative 2,474 0 4,945 0 Research & Development 2,315 0 3,793 0 Total RSU expense 4,789 0 8,738 0 Total stock-based compensation expense $ 8,625 $ 0 $ 18,575 $ 0 SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER2017(Unaudited)Concentration2020, the unrecognized stock-based compensation related to these options was $48.5 million and is expected to be recognized over a weighted-average period 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 $250,000.3.2 years. At September 30, 2017,2020, the Company had not experienced lossesunrecognized stock-based compensation related to RSUs was $63.7 million and is expected to be recognized over a weighted-average period of 2.1 years.As of September 30, 2020 December 31, 2019 Expected life (in years) 6.0 6.0 Volatility 75.2 % 75.0 % Risk free interest rate 1.1 % 1.7 % Dividend yield 0 % 0 % this account and management believes the Company is not exposed to significant risks on such account.Fair Value of Financial InstrumentsThedifference between the fair value of the Company’s assetsmodified award and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.Recently Issued Accounting StandardsManagement does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have 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 months 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 only in the event that the last sale pricefair value of the Class A ordinary shares isoriginal award. Given the RSUs were unvested at least $18.00 per share for any 20 trading days withinthe time of modification, the incremental stock-based compensation expense will prospectively be expensed over the remaining vesting period. Total incremental stock-based compensation expense recorded as a 30-trading day period ending 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.” In accordance 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 issuanceresult 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 exercisablemodification was $1.7 million for cash unless the Company has an effective registration statement covering the Class A ordinary shares issuable upon exercise of the Warrants and 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 PLACEMENTSimultaneously 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, subject to the terms of the underwriting agreement. The underwriters have agreed to waive their right to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination.The underwriters agreed to reimburse the Company for an amount equal to 10% of the discount paid to the underwriters for financial advisory services provided by Connaught (UK) Limited in connection with the Public Offering, of which $1,000,000 was paid at the closing of the Public Offering and up to $2,415,000 will be payable at the time 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 dated2020. Total incremental stock-based compensation expense recorded 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 a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2017, there are no preferred shares issued or outstanding.9SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Ordinary SharesThe Company is authorized to issue 500,000,000 Class A ordinary shares and 50,000,000 Class B ordinary shares, both with a 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 share of the Company, for 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, 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 result of the underwriters’ election to fully exercise their over-allotment option on September 14, 2017, no Founder Shares are subject to forfeiture.Holders ofmodification was $3.1 million for 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 vote on the election of directors prior to the initial Business Combination. Atnine months ended September 30, 2017, there were 2,818,976 Class A ordinary shares issued and outstanding (excluding 66,181,024 Class A ordinary shares subject2020.possible redemption).The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination, on a one-for-one basis, subject to adjustment for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the caseCondensed Consolidated Financial Statements 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 related to the closing of the initial Business Combination, the ratio at which the Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, 20% of the sum of all ordinary shares outstanding upon completion of the Public Offering plus all Class A ordinary shares 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, or to be issued, to any seller in the initial Business Combination. Holders 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 liabilities that 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.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 basisbasis:Fair Value Measurements as of September 30, 2020 Level 1 Level 2 Level 3 (In thousands) Assets Money Market 436,227 0 0 Certificate of Deposit 93,772 0 0 Cash Equivalents 200,404 0 0 Total assets at fair value $ 730,403 $ 0 $ 0 Fair Value Measurements as of December 31, 2019 Level 1 Level 2 Level 3 (In thousands) Assets Money Market $ 423,149 $ 0 $ 0 Certificate of Deposit 42,630 0 0 Total asset at fair value $ 465,779 $ 0 $ 0 2017,2020, 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 result, and indicatesmonetary liability or financial impact to the fair value hierarchyCompany from legal proceedings, lawsuits and other claims could differ materially from those projected.valuation inputs the Company utilized to determine such fair value:Description Level September 30,
2017 Assets: Cash and marketable securities held in Trust Account 1 $ 690,203,220 NOTE 9. SUBSEQUENT EVENTSevaluates subsequent eventswill have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized within selling, general, and transactions that occur after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosureadministrative expenses and research and development in the financial statements.
condensed consolidated statements of operations and comprehensive loss, as incurred. Defined contributions were $1.4 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively. Defined contributions were $3.4 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively.11Nine Months Ended
September 30,2020 2019 (in thousands) Supplemental disclosure Cash payments for: Income tax paid $ 26 $ 125 $ 26 $ 125 Schedule for noncash investing activities Unpaid property, plant, and equipment received $ 1,173 $ 1,767 $ 1,173 $ 1,767 Schedule for noncash financing activities Issuance of common stocks through "cashless" warrants exercised $ 360,742 $ 0 Issuance of common stocks through restricted stock units vested 804 0 Long-term debt 930 0 Unpaid deferred transaction costs 117 6,123 $ 362,593 $ 6,123 Referencesreport (the “Quarterly Report”)section to the “Company,” “we,” “us”“us,” or the “Company”“our” refer to Social Capital Hedosophiathe business of the VG Companies and their subsidiaries prior to the consummation of the Virgin Galactic Business Combination and Virgin Galactic Holdings, Corp. ReferencesInc. and its subsidiaries after consummation of the Virgin Galactic Business Combination. Prior to our “management” or our “management team” referthe Virgin Galactic Business Combination and prior to our officers and directors, and references to our “Sponsor” refer to SCH Sponsor Corp. Thethe series of Vieco 10 reorganization steps, Galactic Ventures, LLC ("GV"), a wholly-owned subsidiary of Vieco 10, was the direct parent of the VG Companies.the Company’sour financial condition and results of operations should be read in conjunctiontogether with the unaudited condensed consolidated financial statements and therelated notes thereto contained included elsewhere in this Quarterly Report. Certain information contained in theReport on Form 10-Q. This discussion and analysis set forth below includescontains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties.Special As a result of many factors, such as those set forth under the “Thisincludes “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 causeon Form 10-Q, our actual results tomay differ materially from those anticipated in these forward-looking statements.projected. Alldeveloping new products and technologies to grow our company. We are in the early planning stage to develop and build a second carrier aircraft for SpaceShipTwo. other than statements of historical fact included in this Quarterly Report on Form 10-Q. If we experience a significant delay due to our workforce getting ill or if the pandemic worsens, we may take additional actions, such as further reducing costs.Three Months Ended September 30, Nine Months Ended
September 30,2020 2019 2020 2019 (In thousands) Revenue $ — $ 832 $ 238 $ 3,252 Cost of revenue — 406 173 1,690 Gross profit — 426 65 1,562 Operating expenses: Selling, general and administrative expenses 30,936 17,814 83,738 44,719 Research and development expenses 46,243 34,528 117,675 96,119 Operating loss (77,179) (51,916) (201,348) (139,276) Interest income 322 387 2,005 1,137 Interest expense (9) — (26) (2) Other income (44) 91 5 128 Loss before income taxes (76,910) (51,438) (199,364) (138,013) Income tax (benefit) expense 40 37 34 123 Net loss $ (76,950) $ (51,475) $ (199,398) $ (138,136) Three Months Ended September 30, $
Change%
ChangeNine Months Ended September 30, $
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Change2020 2019 2020 2019 (In thousands, except %) Revenue $ — $ 832 $ (832) (100) % $ 238 $ 3,252 $ (3,014) (93) % Three Months Ended September 30, $
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ChangeNine Months Ended September 30, $
Change%
Change2020 2019 2020 2019 (In thousands, except %) Cost of revenue $ — $ 406 $ (406) (100) % 173 1,690 $ (1,517) (90) % Gross profit — 426 $ (426) (100) % 65 1,562 $ (1,497) (96) % Gross margin — % 51 % 27 % 48 % Three Months Ended September 30, $
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ChangeNine Months Ended September 30, $
Change%
Change2020 2019 2020 2019 (In thousands, except %) Selling, general and administrative expenses $ 30,936 $ 17,814 $ 13,122 74 % $ 83,738 $ 44,719 $ 39,019 87 % Three Months Ended September 30, $
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ChangeNine Months Ended September 30, $
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Change2020 2019 2020 2019 (In thousands, except %) Research and development expenses $ 46,243 $ 34,528 $ 11,715 34 % $ 117,675 $ 96,119 $ 21,556 22 % Three Months Ended September 30, $
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ChangeNine Months Ended September 30, $
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Change2020 2019 2020 2019 (In thousands, except %) Interest income $ 322 $ 387 $ (65) (17) % $ 2,005 $ 1,137 $ 868 76 % Nine Months Ended
September 30,2020 2019 (In thousands) Net cash (used in) provided by Operating activities $ (162,589) $ (128,286) Investing activities (14,135) (13,680) Financing activities 438,846 146,064 Net change in cash and cash equivalents and restricted cash $ 262,122 $ 4,098 including, without limitation, statementsthere have been no material changes outside the ordinary course of business to our contractual obligations and commitments as described in this “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,Operations” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “seek” and variations thereof 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, basedin our Annual 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 cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by 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 formedForm 10-K for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our initial Business Combination using cash from the proceeds of the Public Offering, the sale of warrants in a private placement that occurred simultaneously with the consummation of the Public Offering, our shares, debt or a combination of these as 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 conversion 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;
year ended December 31, 2019.12●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.Results of OperationsWe have neither engaged in any operations nor generated any revenues to date. Our only activities from May 5, 2017 (inception) to September 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 of our Business Combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held after the Public Offering. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.For the three months ended September 30, 2017, we had net loss of $62,130, which consists of operating costs of $265,350 and an unrealized loss on marketable securities held in our Trust Account of $2,244, offset by interest income on marketable securities held in the Trust Account of $205,464.For the period from May 5, 2017 (inception) through September 30, 2017, we had net loss of $67,536, which consists of operating costs of $270,756 and an unrealized loss on marketable securities held in our Trust Account $2,244, offset by interest income on marketable securities held in the Trust Account $205,464.Liquidity and Capital ResourcesOn September 18, 2017, we consummated the Public Offering of 69,000,000 Units, which includes the full exercise by the underwriters’ of their over-allotment option in the amount of 9,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds 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.In connection with the Public Offering and the Private Placement, a total of $690,000,000 was placed in the Trust Account. We incurred $34,952,301 in Public Offering related costs, including $10,000,000 of underwriting fees, $24,150,000 of deferred underwriting fees and $802,301 of other costs.For the period from May 5, 2017 (inception) through September 30, 2017, cash used in operating activities was $504,907, consisting primarily of net loss of $67,536 and interest earned on cash and marketable securities held in the Trust Account of $205,464, offset by 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 all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable and excluding deferred underwriting commissions) to 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 debt in connection with such Business Combination.In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. In the event that our initial Business Combination does not close, 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. 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 funds and provide a waiver againstengage in 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 obtain additional financing in order to meet our obligations.Off-balance sheet financing arrangementsWe have no obligations, assets or liabilities which would be considered off-balance sheet activities or have any arrangements as of September 30, 2017. We do not participate in transactions that createor relationships with unconsolidated entities, or financial partnerships, often referred tosuch as variable interest, entities,special purpose, and structured finance entities. would have been established for 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 affiliate of our Sponsor a monthly fee of $10,000 for office space, 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 earlier of the completion of the Business Combination and the Company’s liquidation.Critical Accounting Policiesin 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,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 effect 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 atin the ordinary course of our business, including the effects of interest rate changes and fluctuations in foreign currency exchange rates. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.2017.2020, we had $755 million deposits held primarily in cash, cash equivalents and restricted cash, which includes $730.4 million in cash equivalents. Cash equivalents are short term investments and would not be significantly impacted by changes in the interest rates. We believe that a 10% increase or decrease in interest rates would not have a material effect on our interest income or expense.ITEMCONTROLS AND PROCEDURESDisclosure controlsControls and procedures are controlsProceduresother procedures that are designed to ensure that information required to be disclosedRemediation of Material Weaknessreports filedinternal control over financial reporting. A material weakness is a deficiency, or submitted undera combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.Exchange Act is recorded, processed, summarizedlack of a sufficient number of personnel to execute, review and reported withinapprove all aspects of the time periods specified infinancial statement close and reporting process. This material weakness may not allow for us to have proper segregation of duties and the SEC’s rulesability to close our books and forms. Disclosurerecords and report our results, including required disclosures, on a timely basis. The second material weakness arises from the need to augment our information technology and application 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 communicatedfinancial reporting.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-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness offocus on the design and operationimplementation of processes and procedures to improve our internal control over financial reporting and remediate our material weaknesses. We have already expanded our governance and risk management leadership by hiring an executive in charge of our disclosureefforts to comply with the Sarbanes-Oxley Act. Our additional planned activities include:proceduresbusiness process application controls in our financial systems to support our information processing objectives;September 30, 2017. Based upon their evaluation, our Co-Chief Executive Officersoverall controls environment.Chief Financial Officer concluded thatProcedures13a-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,ITEMLEGAL PROCEEDINGS.None.ITEMRISK FACTORS. that could causeactual results to differ materially from those in this Quarterly Report are any of thepotential 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, there have been no material changes toand uncertainties, see the risk factors previously disclosed in Part II, Item 1A. "Risk Factors" of our prospectus dated September 13, 2017 filed withQuarterly Report on Form 10-Q for 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.quarterly period ended June 30, 2020, which risk factor section is incorporated herein by reference.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 4.1 8-K 001-38202 4.2 10/29/2019 10.1 8-K 001-38202 99.1 07/31/2020 10.2 8-K 001-38202 99.2 07/31/2020 31.1 * (1) Incorporated by reference to our Current Report on Form 8-K filed on September 18, 2017.* Filed herewith.** Furnished herewith.104 17Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* SIGNATURESSocial Capital Hedosophia Holdings Corp.Virgin Galactic Holdings, Inc. Date: November 14, 20175, 2020/s/ Chamath PalihapitiyaMichael ColglazierName: Chamath PalihapitiyaMichael ColglazierTitle:
(Principal Executive Officer)Date: November 14, 20175, 2020/s/ Sachin SoodJonathan CampagnaName: Sachin SoodJonathan CampagnaTitle: 18