THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018  

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

The accompanying notes are an integral part of the unaudited condensed financial statements.

VIRGIN GALACTIC HOLDINGS, INC.

(f/k/a SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of the unaudited condensed financial statements.

VIRGIN GALACTIC HOLDINGS, INC.

(f/k/a SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNESEPTEMBER 30, 2019

(Unaudited)

NOTE 1. ORGANIZATION AND PLAN OF BUSINESS OPERATIONS

As of September 30, 2019, Social Capital Hedosophia Holdings Corp. (the “Company”) iswas a blank check company incorporated as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”).

All activity from May 5, 2017 (inception) through JuneSeptember 30, 2019 related to the Company’s formation, the Company’s initial public offering of 69,000,000 units (the “Public Offering”), the simultaneous sale of 8,000,000 warrants (“Private Placement Warrants”) in a private placement (the “Private Placement”) at a price of $1.50 per warrant to SCH Sponsor Corp. (the “Sponsor”), identifying a target company for a Business Combination and activities in connection with the proposed Virgin Galactic Business Combination (as defined below), as more fully described in Note 8.5.

On September 9, 2019, in connection with its Extraordinary General Meeting held on September 9, 2019, the Company’s shareholders approved to extend the period of time for which the Company is required to consummate a Business Combination from September 18, 2019 to December 18, 2019. In connection therewith, the shareholders elected to redeem an aggregate of 3,771,178 shares of the Company’s Class A ordinary shares. As a result, an aggregate of approximately $39,100,000 (or approximately $10.367 per share) was removed from the Company’s Trust Account to pay such shareholders, leaving approximately $677,200,000 in the Trust Account.

On October 25, 2019, the Company filed a notice of deregistration with the Cayman Islands Registrar of Companies and concurrently filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which the Company was domesticated and continues as a Delaware corporation, changing its name to “Virgin Galactic Holdings, Inc.” (the “Domestication”). In connection with the Domestication, each issued and outstanding Class A ordinary share, par value $0.0001 per share, of the Company was converted, on a one-for-one basis, into a share of common stock, par value $0.0001 per share. Each of issued and outstanding Class B ordinary share, par value $0.0001 per share, of the Company was converted, on a one-for-one basis, into a share of common stock; provided, however, that with respect to the Class B ordinary shares of the Company held by the Sponsor, the Sponsor instead received upon the conversion of the Class B ordinary shares held by it 15,750,000 shares of common stock. In connection with the mergers of the Merger Subs (as defined below) with the VG Companies (as defined below), all outstanding shares of common stock or limited liability company interests, as applicable, of the VG Companies were cancelled in exchange for the right to receive 130,000,000 shares of the Company’s common stock for an aggregate merger consideration of $1.3 billion. Vieco US elected for the Company to repurchase 5,209,562 shares of the Company’s common stock from Vieco US at a purchase price of $10.00 per share.

NOTE 2. LIQUIDITY AND GOING CONCERN

TheAs of September 30, 2019, the Company hashad principally financed its operations from inception using proceeds from the sale of its equity securities to its shareholders prior to the Public Offering and such amount of proceeds from the Public Offering that were placed in an account outside of the Trust Account (as defined below) for working capital purposes. In connection with the closing of the Offering and the Private Placement on September 18, 2017, 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) from the sale of the Units and Private Placement Warrants was placed in a trust account (the “Trust Account”). As of JuneSeptember 30, 2019, the Company had $274,295$48,489 in its operating bank accounts, $712,534,665$677,167,505 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its ordinary shares in connection therewith and a working capital deficit of $2,871,908,$7,083,017, which includes the deferral of approximately $759,000$1,726,000 of payments until the consummation of a Business Combination.

Until the consummation of athe Virgin Galactic Business Combination, the Company will be usingused the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.

The Company may need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors or third parties. 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 (other than the Sponsor's commitment to provide the Company an aggregate of $200,000 in loans in order to finance transaction costs in connection with a Business Combination). Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through September 18, 2019, the scheduled liquidation date. The Company filed a preliminary proxy statement to, among other things, seek stockholder approval to extend the date by which the Company is required to consummate a Business Combination from September 18, 2019 to December 18, 2019 (see Note 8). These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 810 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the 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.

VIRGIN GALACTIC HOLDINGS, INC.

(f/k/a SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(Unaudited)

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC on March 18, 2019, which contains the audited financial statements and notes thereto.thereto, as well as the Company’s Current Report on Form 8-K and Current Report on Form 8-K/A, each filed on October 29, 2019, relating to the consummation of the Virgin Galactic Business Combination. The financial information as of December 31, 2018 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The interim results for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other future periods.

SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2019

(Unaudited)

Use of Estimates

The preparation 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 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.

Net Loss per Ordinary 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 JuneSeptember 30, 2019 and 2018, which arewere not currentlythen 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 the effect of warrants sold in the Public Offering and Private Placement to purchase 31,000,000 Class A ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per ordinary share is the same as basic loss per ordinary share for the periods presented.

Reconciliation of Net Loss per Ordinary Share

The Company’s net income is adjusted for the portion of income that is attributable to ordinary shares subject to possible redemption, as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted loss per ordinary share is calculated as follows:

VIRGIN GALACTIC HOLDINGS, INC.

(f/k/a SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(Unaudited)

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.

NOTE 4. RELATED PARTY TRANSACTIONS

Advance from Related Party

During the sixnine months ended JuneSeptember 30, 2019 and the year ended December 31, 2018, a related party advanced an aggregate of $377,739$1,344,138 and $381,675, respectively, for working capital purposes. The advances are non-interest bearing, unsecured and due on demand. As of JuneSeptember 30, 2019 and December 31, 2018, outstanding advances amounted to $759,414$1,725,813 and $381,675, respectively.

SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2019

(Unaudited)

The advances from related party were repaid in connection with the consummation of the Virgin Galactic Business Combination.

Administrative Services Agreement

The Company entered into an agreement whereby, commencing on September 18, 2017 through the earlier of the consummation of a Business Combination or the Company’s liquidation, the Company will pay an affiliate of the Sponsor a monthly fee of $10,000 for office space and administrative and support services. For each of the three and sixnine months ended JuneSeptember 30, 2019 and 2018, the Company incurred $30,000 and $60,000$90,000 in fees for these services. At JuneSeptember 30, 2019 and December 31, 2018, fees amounting to $215,000$245,000 and $155,000, respectively, are included in accounts payable and accrued expenses in the accompanying condensed balance sheets. The administrative services agreement terminated upon the completion of the Virgin Galactic Business Combination.

Related Party Loans

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 (other than the Sponsor's commitment to provide the Company an aggregate of $200,000 in loans in order to finance transaction costs in connection with a Business Combination). 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. All outstanding loans were repaid in connection with the consummation of the Virgin Galactic Business Combination.

NOTE 5. COMMITMENTS

The underwriters of the Company’s Public Offering arewere 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 entered into in connection with the Public Offering. The underwriters have agreed to waive their right toAt completion of the Virgin Galactic Business Combination, the Company paid the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination.commission.

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 payablewas paid at the time of the closing of the initialVirgin Galactic Business Combination.

TheAs of September 30, 2019, 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 bewere 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 arewere entitled to demand that the Company register these securities. In addition, the holders havehad certain “piggy-back” registration rights on registration statements filed after the Company’s consummation of a Business Combination. However,No working capital loans were converted to warrants in connection with the registration rights agreement will provide thatconsummation of the Virgin Galactic Business Combination.

Merger Agreement

On July 9, 2019, as amended on October 2, 2019, the Company will not permit any registration statement to become effective until terminationentered into an Agreement and Plan of applicable lock-up periodsMerger (the “Merger Agreement”) with Vieco USA, Inc., a Delaware corporation (“Vieco US”), Vieco 10 Limited, a company limited by shares under the laws of the British Virgin Islands (“V10”), Foundation Sub 1, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub A”), Foundation Sub 2, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub B”), Foundation Sub LLC, a Delaware limited liability company and a direct wholly owned subsidiary of the Company (“Merger Sub LLC” and, collectively with Merger Sub A and Merger Sub B, the “Merger Subs”), TSC Vehicle Holdings, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Vieco US (“Company A”), Virgin Galactic Vehicle Holdings, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Vieco US (“Company B”), and VGH, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Vieco US (“Company LLC” and, collectively with Company A and Company B, the “VG Companies”).

VIRGIN GALACTIC HOLDINGS, INC.

(f/k/a SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(Unaudited)

On October 25, 2019, as contemplated by the Merger Agreement and following approval by the Company’s shareholders at an extraordinary general meeting held October 23, 2019:

In connection with the consummation of the Virgin Galactic Business Combination, each issued and outstanding Class A ordinary share, par value $0.0001 per share, of the Company was converted, on a one-for-one basis, into a share of common stock, par value $0.0001 per share. Each of issued and outstanding Class B ordinary share, par value $0.0001 per share, of the Company was converted, on a one-for-one basis, into a share of common stock; provided, however, that with respect to such securities.the Class B ordinary shares of the Company held by the Sponsor, the Sponsor instead received upon the conversion of the Class B ordinary shares held by it 15,750,000 shares of common stock.

Purchase Agreement

Pursuant to the Purchase Agreement entered into on July 9, 2019, as supplemented by the Assignment, Consent and Waiver Agreement, dated as of October 2, 2019, by and among Chamath Palihapitiya, Vieco US, the Company and V10 (the “Purchase Agreement”), Chamath Palihapitiya, the chief executive officer of the Company prior to the consummation of the Virgin Galactic Business Combination, purchased (concurrently with the consummation of the Mergers) 10,000,000 shares of common stock of the Company from Vieco US at a price of $10.00 per share in cash.

NOTE 6. SHAREHOLDERS’ EQUITY

Preferred Shares

TheAs of September 30, 2019 the Company iswas authorized to issue 5,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of JuneSeptember 30, 2019 and December 31, 2018, there were no preferred shares issued or outstanding. The certificate of incorporation filed in connection with the consummation of the Virgin Galactic Business Combination authorizes 10,000,000 shares of preferred stock, par value $0.0001 per share, with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors.

Ordinary Shares

TheAs of September 30, 2019, the Company iswas authorized to issue 500,000,000 Class A ordinary shares and 50,000,000 Class B ordinary shares, both with a par value of $0.0001 per share. At JuneSeptember 30, 2019 and December 31, 2018, there were 3,100,9193,490,181 and 2,863,336 Class A ordinary shares issued and outstanding, excluding 65,899,08161,738,641 and 66,136,664 Class A ordinary shares subject to possible redemption, respectively. At JuneSeptember 30, 2019 and December 31, 2018, 17,250,000 Class B ordinary shares were issued and outstanding.

The Class B ordinary shares will automatically convert into Class A ordinary shares atcertificate of incorporation filed in connection with the timeconsummation 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, including pursuant to the Virgin Galactic Business Combination. In the case that additional Class A ordinaryCombination authorizes 700,000,000 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.common stock, par value $0.0001 per share.

VIRGIN GALACTIC HOLDINGS, INC.

(f/k/a SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNESEPTEMBER 30, 2019

(Unaudited)

NOTE 7. FAIR VALUE MEASUREMENTS 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. 

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (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:

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at JuneSeptember 30, 2019 and December 31, 2018, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

NOTE 8. SUBSEQUENT EVENTS

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the condensed financial statements were issued. Other than as described below,in Note 1, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

Merger Agreement

On July 9, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vieco 10 Limited, a company limited by shares under the laws of the British Virgin Islands (“V10”), Foundation Sub 1, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub A”), Foundation Sub 2, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub B”), Foundation Sub LLC, a Delaware limited liability company and a direct wholly owned subsidiary of the Company (“Merger Sub LLC” and, collectively with Merger Sub A and Merger Sub B, the “Merger Subs”), TSC Vehicle Holdings, Inc., a Delaware corporation and an indirect wholly owned subsidiary of V10 (“Company A”), Virgin Galactic Vehicle Holdings, Inc., a Delaware corporation and an indirect wholly owned subsidiary of V10 (“Company B”), and VGH, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of V10 (“Company LLC” and, collectively with Company A and Company B, the “VG Companies” and together with V10, “VG”).

The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following transactions will occur (together with the other agreements and transactions contemplated by the Merger Agreement, including the Purchase Agreement, the “Virgin Galactic Business Combination”):

SOCIAL CAPITAL HEDOSOPHIA HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2019

(Unaudited)

Domestication

Pursuant to the Merger Agreement, prior to the Closing, and in accordance with the Delaware General Corporation Law (the “DGCL”), Cayman Islands Companies Law (2018 Revision) (the “CICL”) and the Company’s Amended and Restated Memorandum and Articles of Association, the Company will effect a deregistration under the CICL and a domestication under Section 388 of the DGCL (by means of filing a certificate of domestication with the Secretary of State of Delaware), pursuant to which the Company’s jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware (the “Domestication”).

In connection with the Domestication, (i) each of the then issued and outstanding Class A ordinary shares, will convert automatically, on a one-for-one basis, into a share of common stock, par value $0.0001, per share of the Company (after its Domestication) (the “common stock”), (ii) each of the then issued and outstanding Class B ordinary shares will convert automatically, on a one-for-one basis, into a share of the Company’s common stock (except that, in connection with the Domestication, our Sponsor will instead receive upon the conversion of the Class B ordinary shares held by it, a number of shares of the Company’s common stock equal to (x) the number of Class B ordinary shares held by it as of immediately prior to the Domestication minus (y) after giving effect to the Domestication, the number of shares of the Company’s common stock underlying the restricted stock units granted to certain independent directors of the Company that were outstanding as of immediately prior to the Domestication), (iii) each then issued and outstanding warrant of the Company will convert automatically into a warrant to acquire one share of the Company’s common stock (the “Domesticated Warrants”), pursuant to the Warrant Agreement, dated September 13, 2017, between the Company and Continental Stock Transfer & Trust Company, as warrant agent, and (iv) each then issued and outstanding unit of the Company will convert automatically into a unit of the Company (after the Domestication) (the “Domesticated Units”), with each Domesticated Unit representing one share of the Company’s common stock and one-third of one Domesticated Warrant.

Repurchase

Pursuant to the Merger Agreement, promptly following the Close (and in no event later than ten business thereafter), if the Available SCH Cash (as defined in the Merger Agreement) is greater than $500,000,000 (the amount by which the Available SCH Cash exceeds $500,000,000, the “Remaining Cash”), then the Company will, at V10’s election (to be made within five business days after the Closing), use cash in an amount up to the lesser of $200,000,000 and the Remaining Cash to repurchase shares of the Company’s common stock from V10 at a purchase price of $10.00 per share.

Extension

In connection with the transactions contemplated by the Merger Agreement, the Company will, to the extent required under the Merger Agreement and subject to the approval of the Company’s shareholders, extend the period within which the Company must have completed a Business Combination to December 18, 2019 and, if required, to April 18, 2020. On July 22, 2019, the Company filed a preliminary proxy statement to extend the period within which the Company must have completed a Business Combination to December 18, 2019.

Purchase Agreement

On July 9, 2019, the Company entered into a Purchase Agreement (the “Purchase Agreement”), in connection with the transactions contemplated by the Merger Agreement, with Chamath Palihapitiya and V10, pursuant to which Mr. Palihapitiya has agreed to, concurrently with the consummation of the Mergers, at the option of V10, (i) purchase a number of newly issued shares of the Company’s common stock from the Company in exchange for cash to be retained by the Company, or (ii) purchase a number of shares of the Company’s common stock from V10, which will reduce the number of shares purchased directly from the Company pursuant to clause (i), in each case, subject to the terms and conditions contemplated by the Purchase Agreement; provided that the aggregate number of shares of the Company’s common stock to be purchased by Mr. Palihapitiya pursuant to the Purchase Agreement will not, in any event, exceed 10,000,000, and the aggregate price paid for such shares will be equal to $100,000,000.

The Virgin Galactic Business Combination will be consummated subject to the deliverables and provisions as further described in the Merger Agreement.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Social Capital HedosophiaVirign Galactic Holdings, Corp. References to our “management” or our “management team” refer to our officersInc. and directors, and references to our “Sponsor” refer to SCH Sponsor Corp.its consolidated subsidiaries. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements  

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (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 this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy, the Virgin Galactic Business Combination (as defined in Note 8 in Item 1 above) and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “seek” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially fromstatements, including those anticipatedincluded in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filedour filings with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaimswe disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We areAs of September 30, 2019, we were a blank check company incorporated on May 5, 2017 as a Cayman Islands exempted company and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Public Offering, the sale of warrants in a private placement that occurred simultaneously with the consummation of the Public Offering, our shares, debt or a combination of cash, shares and debt as the consideration to be paid in our initial Business Combination.

The issuance of additional shares in a Business Combination:

Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:

We have incurred, and expect 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.

Recent Developments

On July 9, 2019, as amended on October 2, 2019, we entered into thean Agreement and Plan of Merger Agreement(the “Merger Agreement”) with Vieco USA, Inc., a Delaware corporation (“Vieco US”), Vieco 10 Limited, a company limited by shares under the laws of the British Virgin Islands (“V10”), Foundation Sub 1, Inc., a Delaware corporation and aour direct wholly owned subsidiary of the Company,(“Merger Sub A”), Foundation Sub 2, Inc., a Delaware corporation and aour direct wholly owned subsidiary of the Company,(“Merger Sub B”), Foundation Sub LLC, a Delaware limited liability company and aour direct wholly owned subsidiary of(“Merger Sub LLC” and, collectively with Merger Sub A and Merger Sub B, the Company and“Merger Subs”), TSC Vehicle Holdings, Inc., a Delaware corporation and an indirect wholly owned subsidiary of V10,Vieco US (“Company A”), Virgin Galactic Vehicle Holdings, Inc., a Delaware corporation and an indirect wholly owned subsidiary of V10,Vieco US (“Company B”), and VGH, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of V10. Vieco US (“Company LLC” and, collectively with Company A and Company B, the “VG Companies”).

On October 25, 2019, as contemplated by the Merger Agreement and following approval by our shareholders at an extraordinary general meeting held October 23, 2019:

In addition,connection with the Company enteredconsummation of the Virgin Galactic Business Combination, each of our issued and outstanding Class A ordinary share, par value $0.0001 per share, was converted, on a one-for-one basis, into a share of common stock, par value $0.0001 per share. Each of our issued and outstanding Class B ordinary share, par value $0.0001 per share, was converted, on a one-for-one basis, into a share of common stock; provided, however, that with respect to our Class B ordinary shares held by SCH Sponsor Corp. (the “Sponsor”), the Sponsor instead received upon the conversion of the Class B ordinary shares held by it 15,750,000 shares of common stock.

Pursuant to the Purchase Agreement with Mr.entered into on July 9, 2019, as supplemented by the Assignment, Consent and Waiver Agreement, dated as of October 2, 2019, by and among us, Chamath Palihapitiya, Vieco US and V10. On July 22, 2019, we filed a preliminary proxy statementV10 (the “Purchase Agreement”), Chamath Palihapitiya, our chief executive officer prior to extend the period within which we must have completed aconsummation of the Virgin Galactic Business Combination, to December 18, 2019. See Note 8 in Item 1 above for a descriptionpurchased (concurrently with the consummation of the Merger Agreement, the Purchase Agreement and the transactions contemplated thereby.Mergers) 10,000,000 shares of our common stock from Vieco US at a price of $10.00 per share in cash.

Results of Operations

We haveThrough September 30, 2019 we had neither engaged in any operations nor generated any revenues to date.revenues. Our only activities from May 5, 2017 (inception) to JuneSeptember 30, 2019 were organizational activities and those necessary to consummate the Public Offering, described below, identifying a target company for a Business Combination and activities in connection with the proposed Virgin Galactic Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We have generated and expect to generate non-operating income in the form of interest income on marketable securities held after the Public Offering. We have incurred and expect to incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and transaction expenses.

For the three months ended JuneSeptember 30, 2019, we had net loss of $482,184, which consists of operating costs of $4,211,109, offset by interest income on marketable securities held in the Trust Account of $3,470,728 and an unrealized gain on marketable securities held in the Trust Account of $258,197.

For the nine months ended September 30, 2019, we had net income of $1,444,193,$5,005,004, which consists of interest income on marketable securities held in the Trust Account of $4,360,454,$12,025,143, offset by operating costs of $2,664,159$7,008,314 and an unrealized loss on marketable securities held in the Trust Account of $252,102.$11,825.

For the sixthree months ended JuneSeptember 30, 2019,2018, we had net income of $5,487,188,$3,036,916, which consists of interest income on marketable securities held in the Trust Account of $8,554,415,$3,401,636, offset by operating costs of $2,797,205$224,827 and an unrealized loss on marketable securities held in the Trust Account of $270,022.$139,893.

For the threenine months ended JuneSeptember 30, 2018, we had net income of $2,441,116,$7,236,056, which consists of interest income on marketable securities held in the Trust Account of $3,034,352,$8,757,384, offset by operating costs of $525,012$1,216,144 and an unrealized loss on marketable securities held in the Trust Account of $68,224.

For the six months ended June 30, 2018, we had net income of $4,199,140, which consists of interest income on marketable securities held in the Trust Account of $5,355,748, offset by operating costs of $991,317 and an unrealized loss on marketable securities held in the Trust Account of $165,291.$305,184.

Liquidity and Capital Resources

For the sixnine months ended JuneSeptember 30, 2019, net cash used in operating activities was $565,606.$1,757,811. Net income of $5,487,188$5,005,004 was affected by interest earned on marketable securities held in the Trust Account of $8,554,415,$12,025,143, an unrealized loss on marketable securities held in the Trust Account of $270,022$11,825 and changes in our operating assets and liabilities, which provided $2,231,599$5,250,503 of cash from operating activities.  

For the sixnine months ended JuneSeptember 30, 2018, net cash used in operating activities was $756,880.$798,376. Net income of $4,199,140$7,236,056 was impacted by interest earned on marketable securities held in the Trust Account of $5,355,748,$8,757,384, an unrealized loss on marketable securities held in our Trust Account of $165,291$305,184 and changes in our operating assets and liabilities, which provided $234,437$417,768 of cash from operating activities.  

As of JuneSeptember 30, 2019, we had marketable securities held in the Trust Account of $712,534,665$677,167,505 (including approximately $22,535,000$24,879,000 of interest income, net of unrealized losses) consisting of U.S. treasury bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through JuneSeptember 30, 2019, we did not withdraw any funds from the interest earned on the Trust Account.

We intend to useused 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 initialthe Virgin Galactic 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 JuneSeptember 30, 2019, we had cash of $274,295$48,489 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.

We may need to raise additional capital through loans or additional investments from our sponsor, stockholders, officers, directors or third parties. In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the 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 funds and provide a waiver against any and all rights to seek access to funds in the Trust Account.

We haveThrough September 30, 2019, we principally financed our operations from inception using proceeds from the sale of our equity securities to our shareholders prior to the Public Offering and such amount of proceeds from the Public Offering that were placed in an account outside of the Trust Account for working capital purposes. As of JuneSeptember 30, 2019, we had $274,295$48,489 in our operating bank accounts, $712,534,665$677,167,505 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem our ordinary shares in connection therewith and a working capital deficit of $2,871,908.$7,083,017.

Off-balance sheet financing arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of JuneSeptember 30, 2019. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which 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 obligations

We doAs of September 30, 2019, we did 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 continuebut ceased to incur these fees monthly until the earlier offollowing the completion of the Virgin Galactic Business Combination and the Company’s liquidation.Combination.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Ordinary shares subject to possible redemption

We accountPrior to the consummation of the Virgin Galactic Business Combination, we accounted for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our balance sheets.

Net loss per ordinary share

We applyPrior to the consummation of the Virgin Galactic Business Combination, we applied the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption which arewere not currently redeemable as of September 30, 2019 and arewere not redeemable at fair value, have been excluded from the calculation of basic net income (loss) per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to ordinary shares subject to redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure 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.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of JuneSeptember 30, 2019. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Virgin Galactic Business Combination was consummated in the quarter ending December 31, 2019.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are anyAs a result of the risks describedclosing of the Virgin Galactic Business Combination on October 25, 2019, the risk factors previously disclosed in Part I, Item 1A of our Annual Report onForm 10-K for the periodfiscal year ended December 31, 2018 no longer apply. For risk factors relating to our business following the Virgin Galactic Business Combination, please refer to the section “Risk Factors” in ourdefinitive proxy statementfiled with the SEC. Any of these factors could result in a significant or material adverse effectSecurities and Exchange Commission on October 10, 2019, which is incorporated by reference into 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 AnnualCurrent Report onForm 10-K for the period ended December 31, 20188-K 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.on October 29, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.¹On November 4, 2019, the Company issued 413,486 shares of its common stock to a financial advisor as partial consideration for advisory services rendered in connection with the Virgin Galactic Business Combination. The Company issued such shares of common stock in a transaction not involving an underwriter and not requiring registration under Section 5 of the Securities Act of 1933, as amended, in reliance on the exemption afforded by Section 4(a)(2) thereof.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

¹NTD: Disclosure will be need to be updated for next 10-Q.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.