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 2021
| ☐ | 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.) | |||||||
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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 | |||||||||
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.
2020) allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. United Kingdom, which operates on a cost-plus arrangement. financing transaction costs. 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 condensedPrivate Securities Litigation Reform Act of 1995) concerning us and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to management. Forward-looking statements may be accompanied by words such as "achieve," “aim,” “anticipate,” “believe,” "can," “continue,” “could,” "drive," “estimate,” “expect,” “forecast,” “future,” "grow," "improve," "increase," “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:2SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.CONDENSED STATEMENT OF CASH FLOWSFOR THE PERIOD FROM MAY 5, 2017 (INCEPTION) THROUGH SEPTEMBER 30, 2017(Unaudited)Cash flows from operating activities: Net loss $ (67,536 ) Adjustments to reconcile net loss to net cash used in operating activities: Interest earned on marketable securities held in Trust Account (205,464 ) Unrealized loss on marketable securities held in Trust Account 2,244 Changes in operating assets and liabilities: Prepaid expenses (368,098 ) Accounts payable and accrued expenses 133,947 Net cash used in operating activities (504,907 ) Cash flows from investing activities: Investment of cash in Trust Account (690,000,000 ) Net cash used in investing activities (690,000,000 ) Cash flows from financing activities: Proceeds from sale of Units, net of underwriting discounts paid 680,000,000 Proceeds from sale of Private Placement Warrants 12,000,000 Proceeds from issuance of Class B ordinary shares 25,000 Advances from related parties 115,971 Proceeds from promissory note 100,000 Payment of offering costs (802,301 ) Net cash provided by financing activities 691,438,670 Net change in cash 933,763 Cash at beginning of period — Cash at ending of period $ 933,763 Non-cash investing and financing activities: Initial classification of ordinary shares subject to possible redemption $ 662,058,983 Change in value of ordinary shares subject to possible redemption $ (53,821 ) Deferred underwriting fee payable $ 24,150,000 The accompanying notes are an integral partunauditedmarkets for commercial human spaceflight and commercial research and development payloads;June 30, 2021 December 31, 2020 (Unaudited) (As Restated) Assets Current assets Cash and cash equivalents $ 551,624 $ 665,924 Restricted cash 13,031 13,031 Inventories 29,965 30,483 Prepaid expenses and other current assets 14,990 18,489 Total current assets 609,610 727,927 Property, plant, and equipment, net 48,870 53,148 Other non-current assets 25,536 22,915 Total assets $ 684,016 $ 803,990 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 3,587 $ 5,998 Accrued liabilities 24,364 22,982 Customer deposits 81,960 83,211 Other current liabilities 2,627 2,830 Total current liabilities 112,538 115,021 Non-current liabilities: Warrant liability 100,347 135,440 Other long-term liabilities 25,908 26,451 Total liabilities $ 238,793 $ 276,912 0 0 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; 240,937,540 and 236,123,659 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 23 23 Additional paid-in capital 1,439,667 1,297,794 Accumulated deficit (994,478) (770,744) Accumulated other comprehensive income 11 5 Total stockholders' equity 445,223 527,078 Total liabilities and stockholders' equity $ 684,016 $ 803,990 3SOCIAL CAPITAL HEDOSOPHIACORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBERINC.Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (As restated) (As restated) Revenue $ 571 $ 0 $ 571 $ 238 Cost of revenue 63 0 63 173 Gross profit 508 0 508 65 Selling, general, and administrative expenses 38,503 26,047 83,417 52,802 Research and development expenses 35,903 37,009 72,266 71,201 Operating loss (73,898) (63,056) (155,175) (123,938) Change in fair value of warrants (20,363) (9,596) (69,082) (326,492) Interest income, net 214 498 532 1,666 Other income, net 13 221 40 49 Loss before income taxes (94,034) (71,933) (223,685) (448,715) Income tax (expense) benefit (6) (40) (49) 6 Net loss (94,040) (71,973) (223,734) (448,709) Other comprehensive loss: Foreign currency translation adjustment (19) 0 8 (54) Total comprehensive loss $ (94,059) $ (71,973) $ (223,726) $ (448,763) Net loss per share: Basic and diluted $ (0.39) $ (0.34) $ (0.94) $ (2.17) Weighted-average shares outstanding: Basic and diluted 240,733,497 211,784,541 238,774,515 207,097,047 2017Preferred Stock Common Stock # of Shares Par Value # of Shares Par Value Additional paid-in capital Accumulated Deficit Accumulated
Other Comprehensive
Income (Loss)Total Balance as of December 31, 2019 0 $ 0 196,001,038 $ 20 $ 469,008 $ (125,857) $ 59 $ 343,230 Net loss — — — — — (376,736) — (376,736) Other comprehensive income (loss) — — — — — — (54) (54) Common stock issued related to warrants exercised — — 13,239,934 1 341,000 — — 341,001 Stock-based compensation — — — — 4,425 — — 4,425 Balance as of March 31, 2020 0 0 209,240,972 21 814,433 (502,593) 5 311,866 Net loss — — — — — (71,973) — (71,973) Common stock issued related to warrants exercised — — 1,162,884 — 19,741 — — 19,741 Stock-based compensation — — — — 5,525 — — 5,525 Transaction costs — — — — (770) — — (770) Balance as of June 30, 2020 0 0 210,403,856 21 838,929 (574,566) 5 264,389 NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONSSocial Capital HedosophiaPreferred Stock Common Stock # of Shares Par Value # of Shares Par Value Additional paid-in capital Accumulated Deficit Accumulated
Other Comprehensive
Income (Loss)Total Balance as of December 31, 2020 0 $ 0 236,123,659 $ 23 $ 1,297,794 $ (770,744) $ 5 $ 527,078 Net loss — — — — — (129,694) — (129,694) Other comprehensive loss — — — — — — 26 26 Stock-based compensation — — — — 22,111 — — 22,111 Issuance of common stock pursuant to stock-based compensation, net of withholding taxes — — 1,150,771 — 323 — — 323 Balance as of March 31, 2021 0 0 237,274,430 23 1,320,228 (900,438) 31 419,844 — — — — — (94,040) — (94,040) Other comprehensive income (loss) — — — — — — (20) (20) Stock-based compensation — — — — 14,423 — — 14,423 Issuance of common stock pursuant to stock-based awards, net of withholding taxes — — 275,283 — 840 — — 840 Common stock issued related to warrants exercised — — 3,387,827 — 104,176 — — 104,176 0 0 240,937,540 23 1,439,667 (994,478) 11 445,223 Six Months Ended June 30, 2021 2020 (As restated) Cash flows from operating activities Net loss $ (223,734) $ (448,709) Stock-based compensation 36,535 9,950 Depreciation and amortization 5,740 4,489 Change in fair value of warrant liability 69,082 326,492 Other operating activities, net (17) 67 Change in assets and liabilities Inventories 518 (1,987) Other current and non-current assets 319 3,261 Accounts payable and accrued liabilities (751) (914) Customer deposits (1,252) (1,628) Other current and non-current liabilities 88 892 Net cash used in operating activities (113,472) (108,087) Cash flows from investing activity Capital expenditures (1,647) (9,940) Cash used in investing activity (1,647) (9,940) Cash flows from financing activities Payments of finance lease obligations (69) (49) Proceeds from issuance of common stock pursuant to stock options exercised 12,965 0 Transaction costs (274) (1,467) Withholding taxes paid on behalf of employees on net settled stock-based awards (11,803) 0 Net cash provided by (used in) financing activities 819 (1,516) Net decrease in cash and cash equivalents (114,300) (119,543) Cash, cash equivalents and restricted cash at beginning of period 678,955 492,721 Cash, cash equivalents and restricted cash at end of period $ 564,655 $ 373,178 Cash and cash equivalents $ 551,624 $ 359,912 Restricted cash 13,031 13,266 Cash, cash equivalents and restricted cash $ 564,655 $ 373,178 Corp. (the “Company”Inc. and its wholly owned subsidiaries ("VGH, Inc.") is a newly incorporated blank check company incorporated, in this report as a Cayman Islands exempted company"we," "us," "our," the "Company" and formedsimilar terms, are focused on the development, manufacture and operations of spaceships and related technologies for the purpose of effectingconducting 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.merger, share exchange, asset acquisition, share purchase, reorganizationglobal pandemic and recommended containment and mitigation measures. Since then, extraordinary actions have been taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions 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 similar business combinationcease normal operations.one or more businesses (a “Business Combination”).At September 30, 2017, the Company had not yet commenced any operations. All activityactions taken by governmental authorities, including US Federal, California, New Mexico and the United Kingdom, where most of our workforce is located, we have taken appropriately cautious steps to protect our workforce and support community efforts. As part of these efforts, and in accordance with applicable government directives, we initially reduced and then temporarily suspended on-site operations at our facilities in Mojave, California and Spaceport America, New Mexico in March 2020. Starting late March 2020, approximately two-thirds of our employees and contractors were able to complete their duties from May 5, 2017 (inception) through September 30, 2017home, which enabled much critical work to continue, including engineering analysis and drawing releases for VSS Unity, VMS Eve and the second SpaceShipTwo vehicle, process documentation updates, as well as workforce training and education. The remaining one-third of our workforce was unable to perform their normal duties from home. In April 2020, in accordance with our classification within the critical infrastructure designation, we resumed limited operations under revised operational and manufacturing plans that conformed to the COVID-19 health precautions at that time. This included universal facial covering requirements, rearranging facilities to follow social distancing protocols, conducting active daily temperature checks and undertaking regular and thorough disinfecting of surfaces and tools. We also tested employees and contractors for COVID-19 on a regular basis. As the pandemic has evolved, we have continued to follow US Federal, State and UK guidance, as applicable to our sites. However, the COVID-19 pandemic and the continued precautionary actions taken related to the Company’s formation, the offering described belowCOVID-19 have adversely impacted, and identifying a target company for a Business Combination.The registration statements for the Company’s initial public offering were declared effective on September 13, 2017. The Company consummated a public offering of 69,000,000 units on September 18, 2017 (the “Public Offering”),are expected to continue to adversely impact, our operations, 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 pricedevelopment of $10.00 per Unit. Each Unit consists of one of the Company’s Class A ordinary shares, par value $0.0001 per share,our spaceflight systems and one-third of one warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a price of $11.50 per share, subject to certain adjustments. In addition, the Company generated proceeds of $12,000,000 from the private placement (the “Private Placement”) of 8,000,000 warrants (“Private Placement Warrants”) at a price of $1.50 per warrant to SCH Sponsor Corp. (the “Sponsor”).In connection with the closing of the Offering and the Private Placement on September 18, 2017 (the “Closing Date”), an amount of $690,000,000 (or $10.00 per Class A ordinary share sold to the public in the Offering included in the Units (“Public Shares”)) from the sale of the Units and Private Placement Warrants was placed in a trust account (the “Trust Account”). Funds held in the Trust Account are invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations until the earlier of (i) the consummation of the Company’s initial Business Combination and (ii) the redemption of any Public Shares properly tendered in connection with a shareholder vote to amend the Company’s Amended and Restated Memorandum and Articles of Association to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if it does not complete a Business Combination within 24 months from the Closing Date; and (iii) the Company’s failure to consummate a Business Combination within the prescribed time. The remaining net proceeds (not held in the Trust Account) may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. Additionally, the interest earned on the Trust Account balance may be released to the Company to pay the Company’s tax obligations. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The Sponsor has agreed that it will be liable to the Company under certain circumstances if and to the extent any claims by such persons reduce the amount of funds in the Trust Account below (1) $10.00 per Public Share or (2) such lesser amount per Public Share held in the Trust Account asour scheduled spaceflight test programs.liquidationtime being, we are encouraging those employees who are able to work from home to continue doing so.Trust Account dueCOVID-19 pandemic on our business and results of operations subsequent to reductionsJune 30, 2021 will depend on future developments, such as the ultimate duration and scope of the pandemic and its impact on our operations necessary to complete the 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 June 30, 2021, and management's operating plan, will provide sufficient liquidity to fund our operations for at least the next twelve months from the issuance of these financial statements.trust assets,Company’s public and private warrant liabilities recorded on our balance sheet along with changes in each case netfair value which are recorded as other income and expense on our statement of operations and the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiverfair value 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 listedcommon stock issued 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%date of the balanceexercise, which were recorded as additional paid in the Trust Account (excluding deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the timecapital.Public Warrants Private Placement Warrants Total (In thousands) Warranty Liability at December 31, 2019 77,050 47,280 124,330 Redemption/Exercise of Warrants (341,001) 0 (341,001) Change in Fair Value 283,296 33,600 316,896 Warrant Liability at March 31, 2020 19,345 80,880 100,225 Redemption/Exercise of Warrants (19,741) 0 (19,741) Change in Fair Value 396 9,200 9,596 Warrant Liability at June 30, 2020 0 90,080 90,080 Warranty Liability at December 31, 2020 0 135,440 135,440 Change in Fair Value 0 48,719 48,719 Warrant Liability at March 31, 2021 0 184,159 184,159 Redemption/Exercise of Warrants 0 (104,175) (104,175) Change in Fair Value 0 20,363 20,363 Warrant Liability at June 30, 2021 0 100,347 100,347 the execution of a definitive agreement for such Business Combination, although this may entail simultaneous acquisitions of several target businesses. There is no assurance that the Company will be able to effect a Business Combination successfully.In connection with any proposed initial Business Combination, the Company will either (1) seek shareholder approval of such initial Business Combination at a meeting called for such purpose or (2) provide shareholders with the opportunity to sell their Public Shares to the Company by means of a tender offer, in each case where shareholders may seek to redeem their Public Shares into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. If the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions in connection with a Business Combination pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its Public Shares with respect to an aggregate of more than 15% of the Public Shares sold in the Public Offering.
Significant Accounting Policies4SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)The Company will proceed with a Business Combination only if it has net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, in the case of a shareholder vote, a majority of the issued and outstanding shares of the Company voted are voted in favor of the Business Combination. In connection with any shareholder vote required to approve any Business Combination, the Sponsor has agreed (i) to vote any of its respective shares in favor of the initial Business Combination and (ii) not to redeem any of its respective ordinary shares in connection therewith.Holders of warrants sold as part of the Units will not be entitled to vote on the proposed Business Combination and will have no conversion or liquidation rights with respect to their ordinary shares underlying such warrants.Pursuant to the Company’s Amended and Restated Memorandum and Articles of Association, if the Company is unable to complete its initial Business Combination within 24 months from the Closing Date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of ordinary shares and the Company’s board of directors, dissolve and liquidate. If the Company is unable to consummate an initial Business Combination within 24 months from the Closing Date and is forced to redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not released to the Company to pay any of its taxes payable and less up to $100,000 of interest that may be released to the Company to pay dissolution expenses. The Sponsor has entered into a letter agreement with the Company, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their Founder Shares (as defined in Note 7) if the Company fails to complete a Business Combination within 24 months after the Closing Date. However, if the Sponsor acquires Public Shares after the Public Offering, it will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete the Business Combination within 24 months after the Closing Date.If the Company is unable to complete its initial Business Combination within 24 months from the Closing Date and expends all of the net proceeds of the Public Offering not deposited in the Trust Account, without taking into account any interest earned on the Trust Account, the Company expects that the per-share redemption price for Class A ordinary shares will be $10.00. The proceeds deposited in the Trust Account could, however, become subject to claims of the Company’s creditors that are in preference to the claims of the Company’s shareholders. In addition, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s shareholders. Therefore, the actual per-share redemption price may be less than $10.00.NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accompanying unauditedhave beenare prepared in accordance with U.S. generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance 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, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.condensedbut reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim consolidated financial statements should be read in conjunction with the Company's prospectus as filed with the SEC on September 15, 2017, as well asaudited consolidated financial statements and related notes included in the Company’s Current Report onAmendment No. 2 to Form 8-K, as filed with the SEC on September 22, 2017. The interim10-K. Interim results for the three months ended September 30, 2017 and for the period from May 5, 2017 (inception) through September 30, 2017 are not necessarily indicative of the results for a full year.expectedincorporated in the calculation of Diluted EPS. The guidance under ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 to its financial statements.As of June 30, 2021 December 31, 2020 (Unaudited) (In thousands) Raw Materials $ 21,938 $ 22,963 Spare parts 8,027 7,520 Total inventory $ 29,965 $ 30,483 As of June 30, 2021 December 31, 2020 (Unaudited) (In thousands) Buildings $ 9,117 $ 9,142 Leasehold improvements 28,914 28,744 Aircraft 195 195 Machinery and equipment 35,709 34,330 IT software and equipment 23,011 22,042 Construction in progress 655 1,780 97,601 96,233 Less accumulated depreciation and amortization (48,731) (43,085) Property, plant, and equipment, net $ 48,870 $ 53,148 Three Months Ended
June 30,2021 2020 (Unaudited and in thousands) Lease Cost: Operating lease expense $ 1,254 $ 1,010 Short-term lease expense 8 26 Finance Lease Cost: Amortization of right-of-use assets 35 28 Interest on lease liabilities 7 8 Total finance lease cost 42 36 Variable lease cost 1,372 427 Total lease cost $ 2,676 $ 1,499 Six Months Ended
June 30,2021 2020 (Unaudited and in thousands) Lease Cost: Operating lease expense $ 2,514 $ 2,162 Short-term lease expense 20 123 Finance Lease Cost: Amortization of right-of-use assets 69 55 Interest on lease liabilities 14 17 Total finance lease cost 83 72 Variable lease cost 2,710 775 Total lease cost $ 5,327 $ 3,132 from May 5, 2017 (inception) through December 31, 2017 orare as follows:Six Months Ended June 30, 2021 2020 (In thousands, except term and rate data) Cash flow information: Operating cash flows for operating leases $ 2,712 $ 2,545 Operating cash flows for finance leases $ 14 $ 18 Financing cash flows for finance leases $ 69 $ 49 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations Operating leases $ 501 $ 34 Finance Leases $ 19 $ 48 Other Information: Weighted average remaining lease term: Operating leases (in years) 12.37 13.20 Finance leases (in years) 2.49 3.47 Weighted average discount rates: Operating leases 11.65 % 11.77 % Finance leases 8.26 % 8.92 % any other future periods.
the period is as follows:5As of June 30, 2021 December 31, 2020 (Unaudited) (In thousands) Operating leases Long-term right-of-use assets $ 19,055 $ 19,555 Short-term operating lease liabilities $ 2,138 $ 2,384 Long-term operating lease liabilities 23,701 24,148 Total operating lease liabilities $ 25,839 $ 26,532 SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Emerging Growth CompanyThe Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. elected notcertain non-cancelable operating leases primarily for its premises. These leases generally contain renewal options for periods ranging from 3 to opt out20 years and require the Company to pay all executory costs, such as maintenance and insurance. Certain lease arrangements have rent free periods or escalating payment provisions, and we recognize rent expense of such extended transition period which meansarrangements on a straight line basis.Operating Leases Finance
Leases(In thousands) 2021 (for the remaining period) $ 4,948 $ 157 2022 4,001 119 2023 3,969 79 2024 3,891 0 2025 3,833 0 Thereafter 28,936 0 Total lease payments $ 49,578 $ 355 Less: Imputed interest/present value discount (23,739) $ (33) Present value of lease liabilities $ 25,839 $ 322 As of June 30, 2021 December 31, 2020 (Unaudited) (In thousands) Accrued bonus 6,258 6,892 Other accrued expenses 18,106 16,090 Total accrued expenses $ 24,364 $ 22,982 As of June 30, 2021 December 31, 2020 (Unaudited) (In thousands) Commercial loan $ 620 $ 620 620 620 Less: Current portion (310) (310) Non-current portion $ 310 $ 310 (In thousands) 2021 (for the remaining period) $ 310 2022 310 $ 620 when a standard is issuedsome or revisedall of the deferred tax assets will not be realized.it has different application dates for public or private companies,redemption of warrants as noted below.an emerging growth company, can adoptlong as Virgin Investments Limited (VIL) is entitled to designate two directors to the new or revised standardCompany’s Boardprivate 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 differences in accounting standards used.UseWarrant 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 EstimatesThe preparationcommon 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 financial statements in conformity 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 date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from those estimates.Cash and Cash 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 equivalents 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$0.01 per public warrant in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary sharesterms of the Warrant Agreement. The private placement warrants were not subject to mandatorythe redemption (if any) areand remain outstanding as of June 30, 2021.instrument and are measured atin accordance with ASC 480. The Company remeasures the fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the controlvalue of the holder or subjectWarrants at each reporting date with changes recorded in earnings. In connection with the Company's remeasurement of the Warrants to redemption uponfair value, the occurrenceCompany recorded expense of uncertain events not solely withinapproximately $20.4 million and $9.6 million for the Company’s control)three months ended June 30, 2021 and 2020, respectively, and $69.1 million and $326.5 million for the six months ended June 30, 2021 and 2020, respectively. The fair value of the warrant liability is approximately $100.3 million and $135.4 million as of June 30, 2021 and December 31, 2020, respectively. The private placement warrants are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Level 3 financial instruments. See Note 14. Fair Value Measurements.Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s controlfollowing table presents net loss per share 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.
related information:6Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (As Restated) (As Restated) (In thousands, except for share and per share data) Basic and diluted: Net loss $ (94,040) $ (71,973) $ (223,734) $ (448,709) Weighted average shares of common stock outstanding 240,733,497 211,784,541 238,774,515 207,097,047 Basic and diluted net loss per share $ (0.39) $ (0.34) $ (0.94) $ (2.17) SOCIAL 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. As of SeptemberJune 30, 2017, there were no unrecognized tax benefits2021 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,June 30, 2020, 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 2,666,667 and 8,000,000, 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 Placement2020 Amendment No. 2 to purchase 31,000,000 Class A ordinary sharesForm 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, 2020 6,796,045 $ 13.59 8.64 68,888 Granted 0 0 Exercised (1,013,402) 13.01 Forfeited options (588,999) 13.93 Options outstanding at June 30, 2021 5,193,644 $ 13.67 7.53 167,604 Options exercisable at June 30, 2021 1,916,745 $ 13.49 7.34 62,305 warrantsgrant date and ratably over the next three years.Shares Weighted Average Fair Value Outstanding at December 31, 2020 4,760,784 $ 19.63 Granted 680,784 40.41 Vested (709,404) 16.20 Forfeited (713,766) 16.72 Outstanding at June 30, 2021 4,018,398 $ 24.21 contingent uponcalculated based on the occurrencemarket value of future events. the Company's common stock on the grant date. These PSUs are amortized over the requisite service period in which it is probable that the performance goal is achieved. The following table summarizes the details of the performance stock units:Shares Weighted Average Fair Value PSUs outstanding at December 31, 2020 0 $ 0 Granted 84,626 29.88 PSUs outstanding at June 30, 2021 84,626 $ 29.88 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Stock option expense Selling, General & Administrative 1,870 1,880 10,856 3,944 Research & Development 825 1,017 1,668 2,056 Total stock option expense 2,695 2,897 12,524 6,000 RSU expense Selling, General & Administrative 7,982 1,666 17,035 2,473 Research & Development 3,172 962 6,402 1,477 Total RSU expense 11,154 2,628 23,437 3,950 PSU expense Selling, General & Administrative $ 574 $ 0 $ 574 $ 0 Total PSU expense $ 574 $ 0 $ 574 $ 0 Total stock-based compensation expense $ 14,423 $ 5,525 $ 36,535 $ 9,950 result, diluted loss per ordinary shareweighted-average period of 2.7 years. At June 30, 2021, the unrecognized stock-based compensation related to RSUs was $99.5 million and is expected to be recognized over a weighted-average period of 3.1 years. As of June 30, 2021, the same as basic loss per ordinary shareunrecognized stock-based compensation related to PSUs was $2.0 million and is expected to recognized over a weighted-average period of 0.9 years.periods.Reconciliationasset or liability, either directly or indirectly, for substantially the full term of Net Loss per Ordinary ShareThe Company’s net loss is adjustedthe asset or liability; andportion of incomeasset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is attributable to ordinary shares subject to redemption, as these shares only participate inlittle, if any, market activity for the income of the Trust Account and not the losses of the Company. Accordingly, basic and diluted loss per ordinary share is calculated as follows: Three Months
Ended
September 30, For the Period
from May 5, 2017
(inception)
through
September 30, 2017 2017 Net loss $ (62,130 ) $ (67,536 ) Less: Income attributable to ordinary shares subject to redemption (194,908 ) (194,908 ) Adjusted net loss $ (257,038 ) $ (262,444 ) Weighted average shares outstanding, basic and diluted 12,066,894 11,284,826 Basic and diluted net loss per ordinary share $ (0.02 ) $ (0.02 )
asset or liability at measurement date.7SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Concentration of Credit RiskFinancial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. At September 30, 2017, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.Fair Value of Financial InstrumentsAs of June 30, 2021 Risk-free interest rate 0.53% Contractual term 3.33 years Expected volatility 85% As of December 31, 2020 Risk-free interest rate 0.25% Contractual term 3.82 years Expected volatility 80% which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), approximatesapproximate fair value because of the carrying amounts representedshort maturity of these instruments. The following tables summarize the fair value of assets that are recorded in the accompanying balance sheet, primarily dueCompany’s Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 at fair value on a recurring basis:their short-term nature.Recently Issued Accounting StandardsManagement doesCondensed Consolidated Financial StatementsFair Value Measurements as of June 30, 2021 Level 1 Level 2 Level 3 (In thousands) Assets: Money Market $ 244,657 $ 0 $ 0 Certificate of Deposit 70,838 0 0 Cash Equivalents 200,364 0 0 Total assets at fair value $ 515,859 $ 0 $ 0 Liabilities: Warrant Liability $ 0 $ 0 $ 100,347 Total Liabilities $ 0 $ 0 $ 100,347 Fair Value Measurements as of December 31, 2020 Level 1 Level 2 Level 3 (In thousands) Assets: Money Market $ 357,463 $ 0 $ 0 Certificate of Deposit 93,802 0 0 Cash Equivalents 200,364 0 0 Total asset at fair value $ 651,629 $ 0 $ 0 Liabilities: Warrant Liability $ 0 $ 0 $ 135,440 Total Liabilities $ 0 $ 0 $ 135,440 believepredictable with assurance, management believes that any recently issued, butmonetary liability or financial impact to the Company from these matters, individually and in the aggregate, beyond that provided at June 30, 2021, would not yet effective, accounting pronouncements, if currently adopted, would have abe material effect onto the Company’s financial statements.NOTE 3. INITIAL PUBLIC OFFERINGIn its Public Offering,position, results of operations or cash flows. However, there can be no assurance with respect to such result, and monetary liability or financial impact to the Company sold 69,000,000 Units atfrom legal proceedings, lawsuits and other claims could differ materially from those projected.priceformer contractor employed through a third party staffing agency, alleged on behalf of $10.00 per Unit in the Public Offering. Each Unit consists of one Class A ordinary sharehimself 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 eventother aggrieved employees that the last sale price of the Class A ordinary shares is at least $18.00 per share for any 20 trading days within a 30-trading day period ending 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 issuance of the shares underlying the Warrants within 15 business days after the closing of the Business Combination and to maintain the effectiveness of such registration statement. No Warrants will be exercisable for cash 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, unsecuredthe staffing agency, purportedly violated California statedue 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,hour laws. In March 2020, the Company will pay an affiliate of the Sponsor a monthly fee of $10,000agreed to settle this matter for office space, administrative and support services.$1.9 million. For the three months ended SeptemberJune 30, 20172021 and the period from May 5, 2017 (inception) through September 30, 2017,2020, the Company incurred $10,000did 0t record additional legal settlement expense. There was 0 additional legal settlement expense recorded for the six months ended June 30, 2021. For the six months ended June 30, 2020, the Company recorded an additional legal settlement expense of approximately $0.2 million, which was recorded in fees for these services, which is included in accounts payableselling, general and accruedadministrative expenses in the accompanying balance sheet.NOTE 6. COMMITMENTS AND CONTINGENCIESgrantedhas defined contribution plans, under which the underwritersCompany pays fixed contributions into a 45-day optionseparate entity, and additional contributions to purchasethe plans are based upon a percentage of the employees’ elected contributions. The Company will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized within selling, general, and administrative expenses and research and development in the Condensed Consolidated Statements of Operations and Comprehensive Loss, as incurred. Defined contributions were $1.5 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively. Defined contributions were $2.6 million and $2.0 million for the six months ended June 30, 2021 and 2020, respectively.Six Months Ended June 30, 2021 2020 (As Restated) (in thousands) Supplemental disclosure Cash payments for: Income tax paid $ 58 $ 34 $ 58 $ 34 Schedule for noncash investing activities: Unpaid property, plant, and equipment received $ 270 $ 1,287 $ 270 $ 1,287 Schedule for noncash financing activities: Issuance of common stock through "cashless" warrants exercised $ 104,176 $ 360,742 Issuance of common stock through restricted stock units vested 27,320 0 Long-term debt 0 930 Unpaid deferred transaction costs 250 0 $ 131,746 $ 361,672 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$500.0 million of $10.00 per Unit. The underwriters were paid a cash underwriting discount of $10,000,000shares 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 dated as of September 13, 2017. The holders of 30% of the registrable securities are entitled to demand that the Company register these securities. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination. However, the registration rights agreement will provide that the Company will not permit any registration statement to become effective until termination of applicable lock-up periods with respect to such securities.NOTE 7. SHAREHOLDERS’ EQUITYPreferred SharesThe Company is authorized to issue 5,000,000 preferred shares with acommon stock, par value of $0.0001 per share, with such designation, rights and preferences as may be determinedthrough an "at the market offering" program ("ATM"), from time to time by the Company through the Agents, acting as the Company’s board of directors. As of September 30, 2017, there are no preferred shares issuedsales agents, or outstanding.9SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.NOTES TO CONDENSED FINANCIAL STATEMENTSSEPTEMBER 30, 2017(Unaudited)Ordinary SharesThe Company is authorizeddirectly 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 shareone or more of the Company, for an aggregate purchase price of $25,000. Agents, acting as principal.May 18, 2017,July 16, 2021, we completed the Sponsor surrendered 2,875,000 Class B ordinary shares for no value,ATM, generating $500.0 million in gross proceeds, before deducting $6.2 million in underwriting discounts and on August 23, 2017commissions, and September 13, 2017,other expenses payable by 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 of the Class A ordinary shares are entitled to one vote for each Class A ordinary share; provided that only holders of the Class B ordinary shares have the right to vote on the election of directors prior to the initial Business Combination. At September 30, 2017, there were 2,818,976 Class A ordinary shares issued and outstanding (excluding 66,181,024 Class A ordinary shares subject to possible redemption).The Class B ordinary shares will automatically convert into Class A ordinary 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 case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Public Offering and 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 withthrough the sale of 13,740,433 shares of common stock We intend to use the assets or paid in connection withnet proceeds generated from the transferATM for general corporate purposes, including working capital, general and administrative matters and capital expenditures for our manufacturing capabilities, development of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assetsour spaceship fleet and liabilities,other infrastructure improvements.seekspaid the $1.9 million legal settlement related to maximize the usea former contractor employed through a third party staffing agency, as noted in 15. Commitments and Contingencies.observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and 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.
Contents10SOCIAL 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.The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2017, and indicates the fair value hierarchy of the 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 EVENTSThe Company evaluates subsequent events 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 disclosure in the financial statements.11Referencesreport (the “Quarterly Report”)section to the “Company,” “we,” “us”“us,” or the “Company”“our” refer to Social Capital Hedosophiathe business of the Virgin Galactic 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 Virgin Galactic Companies.the Company’sour financial condition and results of operations should be read in conjunctiontogether with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as the audited financial statements and the related notes thereto, contained elsewhere in this Quarterly Report. Certain information contained inand the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.Special Note Regarding Forward-Looking StatementsThis Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in thisunder “Management’sregarding the Company’s financial position, business strategy and the“Business” included in Amendment No. 2 to Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates, and objectivesbeliefs that involve risks and uncertainties. As a result of management for future operations, are forward-looking statements. Wordsmany factors, such as “anticipate,those set forth under the “Risk Factors” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “seek”section of ourvariations thereofunder the "Cautionary Note Regarding Forward-Looking Statements" section and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, basedelsewhere in this Quarterly Report on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could causeForm 10-Q, our actual results tomay differ materially from those anticipated in these forward-looking statements.forward-looking statements, please refervanguard of a new industry, pioneering a consumer space experience using reusable spaceflight systems. We believe the commercial exploration of space represents one of the most exciting and important technological initiatives of our time. Less than 600 humans have ever traveled above the Earth’s atmosphere into space to become officially recognized as astronauts, cosmonauts or taikonauts. This industry is growing dramatically due to new products, new sources of private and government funding, and new technologies. Demand is emerging from new sectors and demographics, which we believe is broadening the total addressable market. As government space agencies have retired or reduced their capacity to send humans into space, private companies are beginning to make exciting inroads into the fields of human space exploration. We have embarked on this journey with a mission to put humans into space and return them safely to Earth on a routine and consistent basis. We believe that opening access to space will connect the world to the Risk wonder and awe created by space travel, offering customers a transformative experience, and provide the foundation for a myriad of exciting new industries.Company’s final prospectusphases of developing our commercial spaceflight program. Prior to commercialization, we must complete our test flight program, which includes a rigorous series of ground and flight tests, including our baseline spaceflight metrics, flight paths and safety protocol that will be used throughout our spaceflight program. Specifically, we are working towards a third test flight later this year which will be a revenue-generating flight with the Italian Air Force. We then expect to enter a period of planned maintenance and enhancements to the vehicles before we commence commercial service. Any delays in successful completion of our test flight program, whether due to the impact of COVID-19 or otherwise, will impact our ability to generate revenue from human spaceflight.Public Offering filedimpact on our operations necessary to complete the 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, and/or further restrict travel. We believe our cash and cash equivalents on hand at June 30, 2021 and management's operating plan, will provide sufficient liquidity to fund our operations for at least the next twelve months from the issuance of the financial statements included in this Quarterly Report on Form 10-Q. If the pandemic worsens and we experience an additional delay, we may take additional actions, such as further reducing costs.Securitiesgovernment. We also have generated revenues from a sponsorship arrangement.Exchange Commission (the “SEC”). The Company’s securities filings can be accessedintegration of advanced technology systems.EDGAR sectiondifference between our revenue and cost of revenue. Gross margin is the percentage obtained by dividing gross profit by our revenue. Our gross profit and gross margin has varied historically based on the mix of revenue-generating spaceflights and engineering services. As we approach the commercialization of our spaceflights, we expect our gross profit and gross margin may continue to vary as we scale our fleet of spaceflight systems.SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligationlease with Spaceport America, and equipment; professional fees; and other general corporate costs. Humanupdate or revise any forward-looking statements whethergrow as a result of new information, future events or otherwise.OverviewWe are a blank check company, incorporatedwe expect that our selling, general and administrative costs will increase on May 5, 2017 as a Cayman Islands exempted companyan absolute dollar basis.formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intendDevelopmenteffectuatesupport activities that advance our initial Business Combination using cash from the proceedshuman spaceflight towards commercialization, including basic research, applied research, concept formulation studies, design, development, and related testing activities. Research and development costs consist primarily of the Public Offering,following costs for developing our spaceflight systems:salespaceflight system’s structure, spaceflight propulsion system, and flight profiles; anda private placement that occurred simultaneously withthe fair value of warrants. Certain warrants issued as part of the Company's initial public offering in 2017 and assumed upon the consummation of the Public Offering, our shares, debt or 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;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.Resultswere recorded at their fair value on the date of OperationsWe have neither engaged inthe Business Combination and are remeasured as of any operations nor generated any revenues to date. Our only activities from May 5, 2017 (inception) to September 30, 2017 were organizational activitieswarrant exercise date and those necessary to consummateat 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 completionend of our Business Combination. We expect to generate non-operatingeach reporting period.in the formnet consists primarily of interest incomeearned on cash and marketable securitiescash equivalents held after the Public Offering. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accountingby us in interest bearing demand deposit accounts and auditing compliance),cash equivalents, as well as interest expense related to our finance lease obligations.due diligence expenses.Three Months Ended
June 30,Six Months Ended
June 30,2021 2020 2021 2020 (In thousands) Revenue $ 571 $ — $ 571 $ 238 Cost of revenue 63 — 63 173 Gross profit 508 — 508 65 Operating expenses: Selling, general and administrative expenses 38,503 26,047 83,417 52,802 Research and development expenses 35,903 37,009 72,266 71,201 Operating loss (73,898) (63,056) (155,175) (123,938) Change in fair value of warrants (20,363) (9,596) (69,082) (326,492) Interest income, net 214 498 532 1,666 Other income 13 221 40 49 Loss before income taxes (94,034) (71,933) (223,685) (448,715) Income tax benefit (expense) (6) (40) (49) 6 Net loss $ (94,040) $ (71,973) $ (223,734) $ (448,709) Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
Change%
Change2021 2020 2021 2020 (In thousands, except %) Revenue $ 571 $ — $ 571 100 % $ 571 $ 238 $ 333 140 % SeptemberJune 30, 2021, compared to no revenue for the three months ended June 30, 2020. Revenue recorded for the three months ended June 30, 2021 was attributable to the spaceflight of two payloads in May 2021 and revenue earned from the completion of certain technical milestones related to payload services.Three Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
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Change2021 2020 2021 2020 (In thousands, except %) Cost of revenue $ 63 $ — $ 63 100 % $ 63 $ 173 $ (110) (64) % Gross profit $ 508 $ — $ 508 100 % $ 508 $ 65 $ 443 682 % Gross margin 89 % — % 89 % 27 % Three Months Ended June 30, $
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ChangeSix Months Ended June 30, $
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Change2021 2020 2021 2020 (In thousands, except %) Selling, general and administrative expenses $ 38,503 $ 26,047 $ 12,456 48 % $ 83,417 $ 52,802 $ 30,615 58 % Three Months Ended June 30, $
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ChangeSix Months Ended June 30, $
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Change2021 2020 2021 2020 (In thousands, except %) Research and development expenses $ 35,903 $ 37,009 $ (1,106) (3) % $ 72,266 $ 71,201 $ 1,065 1 % Three Months Ended June 30, $
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ChangeSix Months Ended June 30, $
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Change2021 2020 2021 2020 ($ in thousands) (In thousands, except %) Change in fair value of warrants $ (20,363) $ (9,596) $ (10,767) 112 % $ (69,082) $ (326,492) $ 257,410 (79) % we hadand assumed upon the consummation of the Business Combination were recorded at their fair value on the date of the Business Combination and are remeasured as of any warrant exercise date and at the end of each reporting period. lossThree Months Ended June 30, $
Change%
ChangeSix Months Ended June 30, $
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Change2021 2020 2021 2020 (In thousands, except %) Interest income, net $ 214 $ 498 $ (284) (57) % $ 532 $ 1,666 $ (1,134) (68) % ansix months ended June 30, 2021 from the three and six months ended June 30, 2020 were not material and were primarily attributable to the net unrealized losslosses on marketable securities held insecurities.Trust Account of $2,244, offset by interestnet U.S. federal and state deferred tax assets. The income on marketable securities heldtax expenses shown above are primarily related to minimum state filing fees in the Trust Account of $205,464.For the period from May 5, 2017 (inception) through September 30, 2017,states where we had net loss of $67,536, which consists of operating costs of $270,756 and an unrealized loss on marketable securities held inhave operations as well as corporate income taxes for our Trust Account $2,244, offset by interest income on marketable securities heldoperations in the Trust Account $205,464.On September 18, 2017, we consummatedPublic Offeringconsummation of 69,000,000 Units, which includes the full exerciseVirgin Galactic Business Combination, our operations historically participated in cash management and funding arrangements managed by the underwriters’ of their over-allotment optionVieco 10 and GV. Only cash and cash equivalents held in bank accounts legally owned by entities dedicated to us are reflected in the amountCondensed Consolidated Balance Sheets. Cash and cash equivalents held in bank accounts legally owned by Vieco 10 and GV were not directly attributable to us for any of 9,000,000 Units, atthe periods presented. Transfers of cash, both to and from Vieco 10 and GV by us have been reflected as a pricecomponent of $10.00 per Unit, generating gross proceedsnet parent investment and membership equity in the Condensed Consolidated Balance Sheets and as a financing activity on the accompanying Condensed Consolidated Statements of $690,000,000. SimultaneouslyCash Flows.closingBoeing Company and sales of our common stock.Public Offering, we consummatedATM, generating $493.7 million in net proceeds, through the sale of 8,000,000 Private Placement Warrants13,740,433 shares of common stock. We intend to use the net proceeds generated from the ATM for general corporate purposes, including working capital, general and administrative matters and capital expenditures for our Sponsor at a pricemanufacturing capabilities, development of $1.50 per warrant, generating gross proceeds of $12,000,000.In connection with the Public Offeringour spaceship fleet 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,infrastructure improvements.Six Months Ended June 30, 2021 2020 (As restated) (In thousands) Net cash (used in) provided by Operating activities (113,472) $ (108,087) Investing activities (1,647) (9,940) Financing activities 819 (1,516) Net change in cash and cash equivalents and restricted cash $ (114,300) $ (119,543) $504,907,$113.5 million for the six months ended June 30, 2021, primarily consisting of $223.7 million of net losses, adjusted for non-cash items, which primarily included depreciation and amortization expense of $5.7 million, stock based compensation expense of $36.5 million, and change in fair value of warrants of $69.1 million, as well as $1.1 million of cash consumed by working capital.losscash proceeds from issuance of $67,536 and interest earned on cash and marketable securities held in the Trust Account of $205,464,common stock, offset by an unrealized loss on marketable securities heldtax withholdings for stock options exercised.our Trust Account of $2,244. Changes in operating assets and liabilities used $234,151financing activities was $1.5 million for the six months ended June 30, 2020, consisting primarily of cash from operating activities. As of September 30, 2017, we had cashconsumed by professional 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 usother fees related to pay taxes. Through September 30, 2017, we did not withdraw any funds from the interest earned on the Trust Account. intendexpect our expenses to useincrease 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 orderour ongoing activities, particularly as we continue to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliateadvance the development of our Sponsor or certainspaceflight system and the commercialization of our officershuman spaceflight operations. In addition, we expect cost of revenue to increase significantly as we commence commercial operations and directors may, but are not obligatedadd additional spaceships to loan us fundsour operating fleet.may be required. Inwe:eventvolume of our spaceflights upon commercialization;initial Business Combination does not close,current capital is adequate to sustain our operations for a period of time, changing circumstances may cause us to consume capital significantly faster than we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants issued to our Sponsor. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such fundscurrently anticipate, and provide a waiver against any and all rights to seek access to funds in our Trust Account.If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtainspend more money than currently expected because of circumstances beyond our control. Additionally, we are in the final phases of developing our commercial spaceflight program. While we anticipate initial commercial launch with a single Spaceship, we currently have two additional financingSpaceship vehicles under construction. We anticipate the costs to manufacture additional vehicles will begin to decrease as we continue to scale up our manufacturing processes and capabilities. Until we have achieved technological feasibility with our spaceflight systems, we will not capitalize expenditures incurred to construct any additional components of our spaceflight systems and continue to expense these costs as incurred to research and development.orderNote 15, Commitments and Contingencies, of the notes to meet our obligations.Off-balance sheet financing arrangementsWecondensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes outside the ordinary course of business to our contractual obligations assets or liabilities which would be considered off-balance sheet arrangementsand commitments as described in “September 30, 2017. Financial Condition and Results of Operations” in our Amendment No. 2 to Form 10-K for the year ended December 31, 2020, filed with the SEC on May 10, 2021.participateengage in transactions that createany off-balance sheet activities or have any arrangements or 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, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. Please refer to contingent assetsour other significant accounting policies.liabilities atrecently issued accounting pronouncements not yet adopted as of the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has not identified any critical accounting policies.Recent accounting pronouncementsManagement does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material 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 at Septemberin the ordinary course of our business, including the effects of interest rate changes and fluctuations in foreign currency exchange rates. We are also exposed to market risk from changes in our stock prices, which impact the fair value of our warrant liability. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.2017.2021, we had $565 million deposits held primarily in cash, cash equivalents and restricted cash, which includes $552 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.ITEM CONTROLS AND PROCEDURESDisclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.14Evaluation of Disclosure Controls and Procedures 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 effectivenessfiling of this Quarterly Report on Form 10-Q, management has completed the implementation of our remediation efforts of the design and operationmaterial weakness related to accounting for warrants issued as part of the Virgin Galactic Business Combination as previously reported. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our disclosure controlsannual or interim financial statements will not be prevented or detected on a timely basis.procedures as of September 30, 2017. Based upon their evaluation, our Co-Chief Executive OfficersProceduresChief Financial Officer concluded thatevaluating our disclosure controls and procedures (as defined in Rules 13a-15 (e)13a-15(e) and 15d-15 (e)15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.effective.During the most recently completed fiscal quarter,ITEMLEGAL PROCEEDINGS.None.ITEMRISK FACTORS.couldwe made false and misleading statements regarding the accounting treatment of warrants to purchase shares of our common stock, which resulted in the restatement of our financial statements as of and for the years ended December 31, 2020 and 2019. This matter or other such matters may be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our actualbusiness practices, even if we believe the claims asserted against us are without merit. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure you that the results to differ materially from those in this Quarterly Report areof any of the risks described in our prospectus dated September 13, 2017 filed with the SEC. Any of these factors could result inactions will not have 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 to the risk factors disclosed in our prospectus dated September 13, 2017 filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.business.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 10-Q 001-38202 10.2 05/10/2021 10.2 10-Q 001-38202 10.4 05/10/2021 10.3 10-Q 001-38202 10.5 05/10/2021 31.1 * 31.2 * 32.1 ** 32.2 ** 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Incorporated by referenceSchedules and exhibits have been omitted pursuant to our Current Report on Form 8-K filed on September 18, 2017.* Filed herewith.** Furnished herewith.
Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.17SIGNATURESSocial Capital Hedosophia Holdings Corp.Virgin Galactic Holdings, Inc. Date: November 14, 2017/s/ Chamath PalihapitiyaDate: August 5, 2021 /s/ Michael Colglazier Name: Chamath PalihapitiyaMichael ColglazierTitle:
(Principal Executive Officer)Date: November 14, 2017/s/ Sachin SoodDate: August 5, 2021 /s/ Douglas Ahrens Name: Sachin SoodDouglas AhrensTitle: 18