vorb-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-40267

Virgin Orbit Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware						98-1576914
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

4022 E. Conant St.
Long Beach, CA						90808
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (562) 388-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.0001 par value per share

VORB

The Nasdaq Stock Market LLC

Warrants to purchase common stock, $0.0001 par value per share

VORBW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☐

As of May 7, 2022, there were approximately 334,919,914 shares of the registrant's common stock, par value $0.0001 per share, issued and outstanding.

EXPLANATORY NOTE

Virgin Orbit Holdings, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q (“Amendment No. 1”) to its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, as filed with the Securities Exchange Commission on May 12, 2022 (the “Original Form 10-Q”) solely for the purpose of filing revised certifications by the Company’s principal executive officer and principal financial officer as Exhibit 31.1 and Exhibit 31.2, respectively, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “302 Certifications”). Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment No. 1 also contains new certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the “906 Certifications”).

Except for the revisions in the Section 302 and 906 Certifications filed with this Amendment No. 1, this Amendment No. 1 speaks as of the original filing date and does not reflect events occurring after the Original Form 10-Q or modify or update disclosures that may be affected by subsequent events. No revisions are being made to the Company’s financial statements or any other disclosure contained in the Original Form 10-Q.

Table of Contents


			Page

Cautionary Note Regarding Forward-Looking Statements			2

Risk Factor Summary			3

Part I - FINANCIAL INFORMATION			4
Item 1. Financial Information			4
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Operations and Comprehensive Loss			5
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)			6
Condensed Consolidated Statements of Cash Flows			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			38

Part II - OTHER INFORMATION			40
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			67
Item 3. Defaults Upon Senior Securities			67
Item 4. Mine Safety Disclosures			67
Item 5. Other Information			67
Item 6. Exhibits			68
Signatures			69

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” We intend such forward-looking statements to be covered by the safe harbor provisions for forward- looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements, including statements regarding our future results of operations and financial position, capital requirements and ability obtain adequate financing, business strategy, growth of the space market , our planned commercial launches, our research and development costs and timing and likelihood of success of the plans and objectives of management for future operations. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or “should” or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting us. Such statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A “Risk Factors.” These risks and uncertainties include, but are not limited to:

•the impact of the ongoing COVID-19 pandemic;

•our ability to maintain an effective system of internal controls over financial reporting;

•our ability to grow market share in our existing markets or any new markets we may enter;

•our ability to respond to general economic conditions;

•our ability to manage our growth effectively;

•our ability to achieve and maintain profitability in the future;

•our ability to access sources of capital, including debt financing and other sources of capital to finance operations and growth;

•our ability to maintain and enhance our products and brand, and to attract customers; and

•our ability to execute our business model, including market acceptance of our planned products and services and achieving sufficient production volumes at acceptable quality levels and prices; the success of strategic relationships with third parties.

The foregoing list of factors is not exhaustive. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and the documents we reference herein. The forward-looking statements contained in this Quarterly Report are based on current expectations and beliefs concerning future developments and their potential effects on us and our business. We qualify all of our forward-looking statements by these cautionary statements. There can be no assurance that future developments affecting us will be those that we have anticipated. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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RISK FACTOR SUMMARY

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report. These risks include the following:

•We will require additional financing to expand our operations and grow our business, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our research and development, operations or commercialization efforts, which could have a material adverse effect on our business, financial condition, results of operations and prospects, including the possibility that a lack of funds could cause our business to fail and liquidate with little or no return to investors.

•The success of our business will be highly dependent on our ability to effectively market and sell our launch services for small low Earth orbit (“LEO”) satellites, our national security and defense services and space solutions, and to convert contracted revenues and our pipeline of potential contracts into actual revenues.

•The market for launch services for small LEO satellites and space solutions is not well established, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected.

•Our ability to grow our business depends on the successful operation and performance of our launch systems and related technology and our ability to introduce new enhancements or services in a timely manner, which are subject to many uncertainties, some of which are beyond our control.

•We may not be able to convert our contracted revenue or potential contracts into actual revenue.

•We routinely conduct hazardous operations when testing and launching our rockets, which could result in damage to property or persons. Unsatisfactory performance or failure of our rockets and related technology at launch or during operations could reduce customer confidence and have a material adverse effect on our business, financial condition and results of operations.

•If we are unable to adapt to and satisfy customer demands in a timely and cost-effective manner, or if we are unable to manufacture our rockets at a quantity and quality that our customers demand, our ability to grow our business may suffer.

•We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.

•If we commercialize outside the United States, we will be exposed to a variety of risks associated with international operations that could materially and adversely affect our business.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

VIRGIN ORBIT HOLDINGS, INC.

Condensed Consolidated Balance Sheets

As of March 31, 2022 and December 31, 2021

(In thousands, except per share data)


	As of
	March 31, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	127,440	$	194,154
Restricted cash	828		828
Accounts receivable, net	3,500		2,080

Inventory	44,728		33,927
Prepaid expenses and other current assets	10,792		7,789
Total current assets	187,288		238,778
Property, plant and equipment, net	63,503		61,425
Right-of-use assets	14,379		14,685
Investments	9,313		13,498

Other noncurrent assets	1,423		3,354
Total assets	$	275,906	$	331,740

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	8,010	$	10,334
Current portion of lease obligation	1,663		1,642
Current portion of provision for contract losses	4,750		—
Accrued liabilities and other current liabilities	22,490		23,832
Deferred revenue	19,123		12,150

Total current liabilities	56,036		47,958
Lease obligation, net of current portion	13,757		14,078
Deferred revenue, net of current portion	23,303		28,991

Public and private placement warrant liabilities	20,188		20,188
Provision for contract losses, net of current portion and other long-term liabilities	8,469		7,555
Total liabilities	121,753		118,770
Commitments and contingencies (Note 16)
Stockholders’ equity
Preferred stock, $0.0001 par value, 25,000,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.0001 par value, 2,000,000,000 shares authorized; 334,919,914 shares issued and outstanding as of March 31, 2022 and December 31, 2021.	34		34
Additional paid-in capital	1,037,207		1,033,393
Accumulated deficit	(883,024)		(820,454)
Accumulated other comprehensive loss	(64)		(3)


Total stockholders’ equity	154,153		212,970
Total liabilities and stockholders’ equity	$	275,906	$	331,740

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

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VIRGIN ORBIT HOLDINGS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except for per share data)

(Unaudited)


	Three Months Ended March 31,
	2022		2021

Revenue	$	2,111	$	5,535
Cost of revenue	17,441		2,381
Gross (loss) profit	(15,330)		3,154
Selling, general and administrative expenses	32,426		19,483
Research and development expenses	10,803		17,831
Operating loss	(58,559)		(34,160)
Other (expense) income:
Change in fair value of equity investments	(4,185)		—
Change in fair value of liability classified warrants	—		—
Interest expense, net	(28)		(7)
Other income	202		1,842
Total other (expense) income, net:	(4,011)		1,835
Loss before income taxes	(62,570)		(32,325)
Provision for income taxes	—		—
Net loss	(62,570)		(32,325)



Other comprehensive loss
Foreign currency translation adjustment	(61)		(33)
Total comprehensive loss	$	(62,631)	$	(32,358)

Net loss per share:
Basic and diluted	$	(0.19)	$	(0.12)

Weighted average shares outstanding
Basic and diluted	334,919,905		275,958,168

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

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VIRGIN ORBIT HOLDINGS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended March 31, 2022 and 2021

(In thousands, except per share data)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated other comprehensive income (loss)		Accumulated Deficit		Total
	Share	Par Value
Balance as of December 31, 2020	266,619,585	$	27	$	463,380	$	134	$	(663,164)	$	(199,623)
Net loss	—	—		—		—		(32,325)		(32,325)
Stock-based compensation	—	—		1,421		—		—		1,421
Exercise of stock options	2,789	—		21		—		—		21
Advances to stock option holders	—	—		18		—		—		18
Other comprehensive loss	—	—		—		(33)		—		(33)
Issuance of common stock due to Parent Company contributions	12,646,392	1		46,140		—		—		46,141
Conversion of long-term debt due to Parent Company to Parent Company non-cash contributions	—	—		235,108		—		—		235,108

Balance as of March 31, 2021	279,268,766	$	28	$	746,088	$	101	$	(695,489)	$	50,728


	Common Stock			Additional Paid-in Capital		Accumulated other comprehensive loss		Accumulated Deficit		Total
	Share	Par Value
Balance as of December 31, 2021	334,919,914	$	34	$	1,033,393	$	(3)	$	(820,454)	$	212,970
Net loss	—	—		—		—		(62,570)		(62,570)
Stock-based compensation	—	—		3,814		—		—		3,814



Other comprehensive loss	—	—		—		(61)		—		(61)



Balance as of March 31, 2022	334,919,914	$	34	$	1,037,207	$	(64)	$	(883,024)	$	154,153

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

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VIRGIN ORBIT HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2022 and 2021

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(62,570)	$	(32,325)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,348		3,629
Stock-based compensation	3,814		1,421
Inventory write-down	1,581		—

Non-cash investment in Sky and Space	—		(1,706)
Change in fair value of equity investments	4,185		—

Changes in operating assets and liabilities:
Accounts receivable	(1,420)		352

Inventory	(6,717)		(8,495)
Prepaid expenses and other current assets	(3,004)		(1,227)
Deferred transaction costs	—		(10)
Other noncurrent assets	1,913		88

Accounts payable	(2,327)		1,424
Other long-term liabilities	(339)		(210)
Accrued liabilities	(1,317)		(2,378)
Deferred revenue	1,285		(9)
Other, net	(59)		(21)
Net cash used in operating activities	(61,627)		(39,467)
Cash flows from investing activities:
Purchase of property and equipment	(4,996)		(5,188)


Net cash used in investing activities	(4,996)		(5,188)
Cash flows from financing activities:
Payments of finance lease obligations	(91)		(61)
Proceeds from the exercise of stock options	—		21
Advances to stock option holders	—		18
Parent Company contributions	—		46,141



Net cash (used in) provided by financing activities	(91)		46,119
Net (decrease) increase in cash and cash equivalents and restricted cash	(66,714)		1,464
Cash and cash equivalents and restricted cash at the beginning of the period	194,982		26,786
Cash and cash equivalents and restricted cash at the end of the period	$	128,268	$	28,250

Cash and cash equivalents	$	127,440	$	27,234
Restricted cash	828		1,016
Cash and cash equivalents and restricted cash	$	128,268	$	28,250

Supplemental disclosures
Schedule for non-cash investing activities and financing activities

Unpaid property, plant and equipment received	$	86	$	26

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

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(1)Organization and Business Operations

Virgin Orbit Holdings, Inc. (“Virgin Orbit”) and with its wholly owned subsidiaries (the “Company,” “we,” “us” or “our”) are focused on the development, manufacture and related technologies of rockets for the purpose of conducting launch operations to place payloads into orbit. The Company is a vertically integrated aerospace company pioneering commercial air-launch of small satellites for various industries including government, research and education. Our development and manufacturing activities are located in Long Beach, California, with a testing facility in Mojave, California. We successfully completed three orbital launches in 2021 and the first quarter of 2022 out of Mojave, California, and we have delivered 26 satellites to their desired orbits with high precision. The Company plans to conduct future commercial launches from other locations, including Cornwall in the UK.

The Business Combination

The registrant was initially formed on January 11, 2021, as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. The registrant was formed as NextGen Acquisition Corp. II (“NextGen”) and, at the time of the consummation of the transactions described in the following paragraph (the “Business Combination”), NextGen changed its name to Virgin Orbit Holdings, Inc.

On August 22, 2021, the registrant entered into a merger agreement (the “Merger Agreement”) with Pulsar Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the registrant (“Pulsar Merger Sub”), and Vieco USA, Inc. (“Vieco USA”). On December 29, 2021, as contemplated by the Merger Agreement and following approval by the registrant’s shareholders at an extraordinary general meeting held December 28, 2021, the registrant filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which the registrant was domesticated and continues as a Delaware corporation, changing its name to “Virgin Orbit Holdings, Inc.” (the “Domestication”). Virgin Investments Limited, a company limited by shares under the laws of the British Virgin Islands (“Parent Company”), is the holder of a majority of our outstanding common stock.

Upon the closing of the Business Combination (the “Transaction Close” or the “Closing”), holders of all issued and outstanding Vieco USA common stock received a total of 303,320,884 shares of common stock at a deemed value of $10.00 per share after giving effect to the Exchange Ratio (the “Exchange Ratio”) and all holders of issued and outstanding Vieco USA options received options to purchase shares of Virgin Orbit (“Virgin Orbit Options”), covering 10,704,645 shares of common stock after giving effect to the exchange ratio of approximately 1.250301 .

The Business Combination was accounted for as a reverse recapitalization in accordance with ASC 805, Business Combinations. Under this method of accounting, NextGen was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of Virgin Orbit represented a continuation of the financial statements of Vieco USA with the Business Combination treated as the equivalent of Vieco USA issuing shares for the net assets of NextGen, accompanied by a recapitalization. The net assets of NextGen are stated historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Vieco USA in future reports of Virgin Orbit.

In accordance with guidance applicable to these circumstances, the equity structure has been recast in all comparative periods up to the Closing to reflect the number of shares of Virgin Orbit’s common stock, $0.0001 par value per share, issued to Virgin Orbit’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Vieco USA common stock Vieco USA Options prior to the Business Combination have been retroactively recast as shares reflecting the Exchange Ratio.

Virgin Orbit common stock and warrants commenced trading on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “VORB” and “VORBW,” respectively, on December 29, 2021.

Liquidity and Going Concern

Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the condensed consolidated financial statements are issued and determined that substantial

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(1)Organization and Business Operations (cont.)

doubt was raised about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has not generated sufficient revenues to provide sufficient cash flows to enable the Company to finance its operations internally. The Company has incurred net operating losses and had an accumulated deficit of $883.0 million as of March 31, 2022. The Company’s cash and cash equivalents was $127.4 million and $194.2 million as of March 31, 2022 and December 31, 2021, respectively, and has not generated positive cash flows from operations.

However, through further evaluation of our strategic business plan, we identified conditions and events that alleviated substantial doubt about the Company’s ability to continue as a going concern. These conditions and events include committed cash inflow from customer signed, binding agreements, in addition to management’s plan to reduce or delay expenditures as necessary.

In addition to the $180.8 million the Company received in net cash proceeds from the reverse recapitalization on December 29, 2021, management plans to reduce or delay our expenditures and increase ownership equity through a Standby Equity Purchase Agreement (“Purchase Agreement”), as described in further detail in Note 12. Stockholders’ Equity. This agreement gives us the right, from time to time, at our option to sell to the Investor (as defined in the Purchase Agreement) up to $250.0 million of our common stock, subject to certain conditions and limitations set forth in the Purchase Agreement.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization characterized the outbreak of the coronavirus disease (“COVID-19”) as a global 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 cease normal operations.

Consistent with the actions taken by governmental authorities, including California and District of Columbia, where most of the Company’s workforce is located, the Company has taken steps to protect our workforce and support community efforts. As part of these efforts, and in accordance with applicable government directives, the Company initially reduced and then temporarily suspended on-site operations for one week at our facilities in Long Beach, California in late March 2020. Starting late March 2020, approximately two-thirds of the Company’s workforce and contractors were able to complete their duties from home. As government authorities had classified the Company’s business as part of the nation’s critical infrastructure, the remaining one-third of the Company’s workforce was able to resume on-site operations, under revised operational and manufacturing plans that conform to the latest COVID-19 health precautions.

The COVID-19 pandemic and the continuing precautionary measures taken have adversely impacted the Company’s operational efficiency and caused delays in operational activities. The ongoing impact will depend on the duration of the pandemic, which is being mitigated by advances in the treatment of the disease, prevention efforts including vaccines, broad government measures to contain the spread of the virus, and related government stimulus measures. However, should the Company experience sustained impact from the pandemic, additional actions such as cost reduction measures, may need to be implemented.

As of the date of the issuance of these condensed consolidated financial statements, all of our employees whose work requires them to be in our facilities are now back on-site, but we have experienced, and expect to continue to experience, reductions in operational efficiency due to illness from COVID-19 and precautionary actions taken related to COVID-19. While many restrictions associated with COVID-19 have more recently been relaxed, the longevity and extent of the COVID-19 pandemic remains uncertain, including due to the emergence and impact of the COVID-19 variants. These measures and challenges may continue for the duration of the pandemic and may affect our revenue growth while the pandemic continues.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(2)Summary of Significant Accounting Policies

(a)Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the regulations of the U.S. Securities and Exchange Commission. All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2022, or for any other interim period or for any other future year.

(b)Emerging Growth Company

The 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. 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. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

(c)Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. Significant estimates inherent in the preparation of the condensed consolidated financial statements include, but are not limited to, useful lives of property, plant and equipment, net, leases, income taxes including deferred tax assets and liabilities and impairment valuation, assumptions included in the valuation of the stock-based awards, assumptions included in the valuation of the Company’s common stock, contingencies, and contract losses for cost estimates-to-complete.

(d)Revenue

The Company recognizes revenue when control of the promised goods and services is transferred to our customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services. The Company’s launch service revenue contracts have been fixed-price contracts. To the extent actual costs vary from the cost upon which the price was negotiated, the Company will generate variable levels of profit or could incur a loss.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(2)Summary of Significant Accounting Policies (cont.)

For promised goods, revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Launch Services

Small satellite launch operations revenue is recognized for providing customer launch services. The Company’s launch service contracts generally consisting of multiple launches with each launch being allocated a fixed price and identified as distinct performance obligations. Revenue for each launch service is recognized at a point in time when the performance obligation is complete, which is typically at the point of launch. When the Company determines it is probable that costs to provide the services stipulated by the launch services agreement will exceed the allocated fixed price for each launch, the Company records a provision for the contract loss. Contract losses are recorded at the contract level and are recognized when known. To the extent the contract loss provision is less than the accumulated costs to fulfill the contracts, the Company records the provision net of inventory and net of contract assets in the condensed consolidated balance sheets. Launch service revenue was $1.8 million and $4.6 million for the three months ended March 31, 2022 and 2021, respectively. Of the launch service revenue for the three months ended March 31, 2021, $4.6 million was related to a single customer.

Engineering Services

Engineering services revenue contracts obligate the Company to provide primarily research and studies services that together are one distinct performance obligation; the delivery of engineering services. The Company elected to apply the “as-invoiced” practical expedient to such revenues, and as a result, will bypass estimating the variable transaction price. Revenue is recognized as control of the performance obligation is transferred over time to the customer. Engineering services revenue was $0.30 million and $0.04 million for the three months ended March 31, 2022 and 2021, respectively.

Contract Balances

Contract assets are comprised of billed accounts receivable and unbilled receivables, which is the result of timing of revenue recognition, billings and cash collections. Amounts are generally billed as work progresses in accordance with agreed-upon milestones. The Company records accounts receivable when it has an unconditional right to consideration. Contract assets are classified as current if the invoice will be delivered to the customer within the succeeding 12-month period with the remaining recorded as long-term.

In addition, the Company evaluates whether or not it should capitalize the costs of fulfilling a contract. Such costs would be capitalized when they are not within the scope of other standards and: (1) are directly related to a contract; (2) generate or enhance resources that will be used to satisfy performance obligations; and (3) are expected to be recovered.

The Company began capitalizing contract costs associated with specific launch services contracts with customers as the Company determined technological feasibility was reached upon the Company’s successful demo launch in January 2021. As of March 31, 2022 and December 31, 2021, the Company recorded $3.3 million and $3.1 million, respectively, of contract assets, included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

The Company has not incurred incremental costs for obtaining our contracts with customers.

Contract liabilities primarily relate to small satellite launch operations and are recorded when cash payments are received or due in advance of performance. Cash payments for small satellite launch services are classified as customer deposits until enforceable rights and obligations exist, when such deposits also become nonrefundable. Customer deposits become nonrefundable and are recorded as non-current deferred revenue following the Company’s delivery of the conditions of carriage to the customer and execution of an informed consent. Non-current deferred revenue was $23.3 million and $29.0 million as of March 31, 2022 and December 31, 2021, respectively. Current deferred revenue was $19.1 million and $12.2 million as of March 31, 2022 and December 31, 2021, respectively.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(2)Summary of Significant Accounting Policies (cont.)

Payment terms vary by customer and type of revenue contract. The Company generally expects that the period of time between payment and transfer of promised goods or services will be less than one year. In such instances, the Company has elected the practical expedient to not evaluate whether a significant financing component exists.

These individual contract assets and liabilities are reported in a net position on a contract-by-contract basis on the condensed consolidated balance sheets at the end of each reporting period.

Remaining Performance Obligations

Remaining performance obligations are committed and represent non-cancellable contracted revenue that has not yet been recognized and will be recognized as revenue in future periods. Some contracts allow customers to cancel the contracts without a significant penalty if the Company’s launches are delayed beyond a specified period or if the Company does not achieve certain milestones, and the cancellable amount of contract value is not included in the remaining performance obligations.

As of March 31, 2022, the Company has seven launch services and two engineering services revenue contracts for which it expects to transfer all remaining performance obligations to the customer by the fiscal year ending December 31, 2024. The Company does not disclose information about remaining performance obligations for (a) contracts with an original expected length of one year or less, (b) revenues recognized at the amount at which it has the right to invoice for services performed, or (c) variable consideration allocated to wholly unsatisfied performance obligations.

(e)Cost of Revenue

Cost of revenue related to launch services and engineering services consists of expenses related to materials and human capital, such as payroll and benefits. As the Company determined technological feasibility was reached upon the Company’s successful demo launch in January 2021, the Company began capitalizing costs for the production of the Company’s rockets for the year ended March 31, 2022, and has subsequently charged to cost of revenue the cost for rocket manufacturing including materials, labor and related mission launch costs including fuel, payroll and benefits for our launch and flight operations as well as the depreciation of the Company’s uniquely portable and reusable launch stage, Cosmic Girl (“Cosmic Girl”), facilities and equipment and other allocated overhead expenses. The costs of revenue were $17.4 million and $2.4 million for the three months ended March 31, 2022 and 2021, respectively. As described in Note 16. Commitments and Contingencies, the Company has recorded a provision for contract losses of $11.6 million, with $5.8 million as a reduction of inventory during the year ended March 31, 2022 and the provision for contract losses outstanding related to the remaining launches for these other customers of $0.6 million, with $0.2 million as a reduction of contract assets as of December 31, 2021. During the three months ended March 31, 2022 and 2021, respectively, the depreciation expense of Cosmic Girl was charged to selling, general and administrative expense upon reaching technological feasibility and the portion attributed during the launch campaign was charged to cost of revenue.

(f)Warrant Liability

The Company accounts for the warrants assumed in connection with the Business Combination in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the condensed consolidated statements of operations and comprehensive loss.

(g)Other Summary of Significant Accounting Policies

There have been no other significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” included in the Company's Annual Report on Form 10-K for the

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(2)Summary of Significant Accounting Policies (cont.)

fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021, as amended (the “2021 Annual Report on Form 10-K”).

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s 2021 Annual Report on Form 10-K. Interim results are not necessarily indicative of the results for a full year.

(3)Recently Issued and Adopted Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”), in the form of Accounting Standards Updates (“ASU”).

Section 102(b)(1) of the JOBS Act allows emerging growth companies to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As an emerging growth company, the Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s financial statements may not be comparable to the financial statements of another public company which is not an emerging growth company or an emerging growth which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Issued Accounting Standard Updates Not Yet Adopted

In May 2021, the FASB issued ASU 2021-04, Earning Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which clarified and reduced diversity in an issuer's accounting for modifications of exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This update is effective for all entities for fiscal years beginning after December 15, 2021. The Company is currently assessing the potential impact of ASU 2021-04 to our condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides an exception to fair value measurement for revenue contracts acquired in business combinations. This update is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and all other entities for fiscal years beginning after December 15, 2023. The Company is currently assessing the potential impact of ASU 2021-08 to our condensed consolidated financial statements.

(4)Related Party Transactions

The Company licenses our brand name from certain entities affiliated with Virgin Enterprise Limited (“VEL”), a company incorporated in England. VEL is an affiliate of the Parent Company. Under the trademark license agreement (“TMLA”), the Company has the exclusive and non-exclusive rights to use the brand name “Virgin Orbit” and the Virgin signature logo. The TMLA was amended and restated and novated to Virgin Orbit in order for us to continue to have these certain rights to the “Virgin Orbit” name and brand and the Virgin signature logo following consummation of the Business Combination. Pursuant to the terms of the TMLA, we are obligated to pay VEL quarterly royalties equal to the greater of (a) 1% of revenue or (b) $375 thousand for each of the first four quarters after our commercial launch. As of March 31, 2022, royalties payable for the quarter was $375 thousand due to VEL. As of December 31, 2021, royalties payable was $72 thousand, which includes a prorated fee from the amended TMLA of $12 thousand. Based on the original TMLA, royalties payable for the use of license were the greater of 1% of revenue or $60 thousand per quarter, after the Company’s first commercial launch, Tubular Bells, Part One, in June 2021. Prior to the date of the Company’s first commercial launch, royalties payable for the use of license was the greater of 1% of revenue or $20 thousand per quarter.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(4)Related Party Transactions (cont.)

On October 25, 2019, the Company entered into a transition services agreement (“TSA”) with Galactic Enterprises, LLC, f/k/a Virgin Galactic, LLC (“GEL”) primarily for certain operating and administrative services. The original agreement expired in October 2021, and on a limited form of this agreement has been extended through July 15, 2022. Under the original agreement, GEL provided pilot utilization services, finance and accounting services and insurance advisory services to the Company, and the Company provided propulsion engineering services, tank design support services, tank manufacturing services, and office space access and usage services, as well as business development and regulatory affairs services to GEL. Under the limited extension, GEL provides pilot utilization services and the use of office space, and the Company provides GEL with propulsion engineering services, tank design support services, tank manufacturing services, and office space access and usage. Costs incurred for the TSA were not material for the three months ended March 31, 2022 and March 31, 2021. In addition to the TSA, the Company records direct charges from GEL for other general administrative expenses. There were $1 thousand reimbursements for the three months ended March 31, 2022 and $98 thousand charges for the three months ended March 31, 2021, which were recorded as a reduction of selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

The Company has a payable of $17 thousand and $42 thousand as of March 31, 2022 and December 31, 2021, respectively, due to Virgin Galactic Holdings, Inc. (“VGH”), the parent of GEL.

(5) Fair Value Measurements

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, respectively, and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.


Fair Value Measurements as of March 31, 2022
	Level 1		Level 2		Level 3
Assets	(in thousands)
Money market	$	104,639	$	—	$	—
Investments	9,313		—		—
Total assets at fair value	$	113,952	$	—	$	—

Liabilities:
Derivative warrant liabilities - Public warrants	$	10,713	$	—	$	—
Derivative warrant liabilities - Private placement warrants	—		—		9,475
Total liabilities at fair value	$	10,713	$	—	$	9,475


Fair Value Measurements as of December 31, 2021
	Level 1		Level 2		Level 3
Assets	(in thousands)
Money market	$	154,630	$	—	$	—
Investments	13,498		—		—
Total assets at fair value	$	168,128	$	—	$	—

Liabilities:
Derivative warrant liabilities - Public warrants	$	10,713	$	—	$	—
Derivative warrant liabilities - Private placement warrants	—		—		9,475
Total liabilities at fair value	$	10,713	$	—	$	9,475

Level 1 assets include investments in money market funds that invest solely in U.S. government securities. The Company uses inputs such as actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of our investments.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(5) Fair Value Measurements (cont.)

The Company’s warrant liability as of March 31, 2022 includes public and private placement warrants that were originally issued by NextGen and assumed by the Company as part of the Closing of the Business Combination (the “Public Warrants” and “Private Warrants,” respectively, or together, the “Public and Private Warrants”). The Public and Private Warrants are recorded on the condensed consolidated balance sheet at fair value. The carrying amount is subject to remeasurement at each balance sheet date. With each remeasurement, the carrying amount will be adjusted to fair value, with the change in fair value recognized in the Company’s condensed consolidated statements of operations and comprehensive loss. The Public Warrants are publicly-traded under the symbol “VORBW”, and the fair value of the Public Warrants at a specific date is determined by the closing price of the Public Warrants as of that date. As such, the Public Warrants are classified within Level 1 of the fair value hierarchy.

For periods where no observable traded price is available, the fair value of the Private Placement Warrants has been estimated using a Monte-Carlo simulation model. For periods subsequent to the detachment of the Public Warrants from the Units, the fair value of the Public Warrants is based on the observable listed price for such warrants. The estimated fair value of the Public and Private Placement Warrants, prior to the Public Warrants being traded in an active market, was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to the Unit price, expected volatility, risk-free interest rate, term to expiration, and dividend yield. The Unit price is based on the publicly traded price of the Units as of the measurement date. The Company estimated the volatility for the Public and Private Placement Warrants based on an iterative approach to recalculate the implied volatility using a Monte-Carlo simulation model from the historical traded prices of the warrants. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the Public and Private Placement Warrants. The term to expiration was calculated as the contractual term of the Public and Private Placement Warrants, commencing on the later of: (i) 30 days after the Closing or (ii) twelve months from the date of the closing of NextGen’s initial public offering. Finally, the Company does not anticipate paying a dividend. Any changes in these assumptions can change the valuation significantly.

The change in the fair value of the private warrant liabilities, measured using Level 3 inputs, for the period from December 31, 2021 through March 31, 2022 is summarized as follows:





	Private Placement Warrants
	(in thousands)
Warrant liabilities at December 31, 2021	$	9,475
Change in fair value of derivative warrant liabilities	—
Warrant liabilities at March 31, 2022	$	9,475

(6) Inventory

As of March 31, 2022 and December 31, 2021, inventory is comprised of raw materials, labor, and overhead costs incurred for the production of the Company’s rockets.


	As of
	March 31, 2022		December 31, 2021
	(In thousands)
Raw materials	$	21,738	$	18,890
Work in process	29,839		27,123
Inventories, gross	51,577		46,013
Provision for contract losses	(5,796)		(11,626)
Reserve for inventory excess and obsolescence	(1,053)		(460)
Inventory	$	44,728	$	33,927

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Consolidated Financial Statements

(6) Inventory (cont.)

As of March 31, 2022, the Company determined inventory related to a certain near-term rocket build was not recoverable. As a result, in addition to $4.1 million of write-downs in previous periods, we wrote down inventory of $1.6 million during the three months ended March 31, 2022 to our estimated net realizable value.

(7) Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following as of March 31, 2022 and December 31, 2021:


	As of
	March 31, 2022		December 31, 2021
	(In thousands)
Leasehold improvements	$	23,724	$	23,501
Machinery and equipment	60,005		59,358
Aircraft	8,000		8,000
IT software and equipment	22,747		22,397
Construction in progress	26,942		23,167
	141,418		136,423

Less: accumulated depreciation and amortization	(77,915)		(74,998)

Property, plant and equipment, net	$	63,503	$	61,425

Depreciation expense recorded in the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2022 and 2021 consisted of the following:


	Three Months Ended March 31,
	2022		2021

	(In thousands)
Cost of revenue	$	249	$	—
Research and development, net	130		874
Selling, general and administrative	2,423		2,249
Total depreciation expense	$	2,802	$	3,123

The Company’s capitalized software totaled $0.7 million and $0.8 million, net of accumulated amortization of $7.5 million and $7.4 million, as of March 31, 2022 and December 31, 2021, respectively. No amortization expense is recorded until the software is ready for its intended use. For the three months ended March 31, 2022 and 2021, amortization expense related to capitalized software was $0.1 million and $0.2 million, respectively.

(8) Leases

The Company leases out offices and other facilities and certain manufacturing and office equipment under long-term, non-cancelable operating and finance leases. Some leases include options to purchase, terminate, or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company does not recognize ROU assets and lease obligations for short-term leases.

The components of lease expense related to leases for the period are as follows:

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(8) Leases (Cont.)


	Three Months Ended March 31,
	2022		2021

	(In thousands)
Lease Cost:
Operating lease expense	$	784	$	673
Short-term lease expense	$	875	$	810
Finance lease cost:
Amortization of right-of-use assets	$	79	$	64
Interest on lease obligations	7		7
Total finance lease cost	86		71
Total lease cost	$	1,745	$	1,554

The components of supplemental cash flow information related to leases for the period are as follows:


	Three Months Ended March 31,
	2022			2021

	(In thousands)
Cash flow information:
Cash paid for amounts included in the measurement of lease obligations for the period ended:
Operating cash flows for operating leases	$	731		$	638
Operating cash flows for finance leases	$	7		$	7
Financing cash flows for finance leases	$	91		$	61

Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—		$	—
Finance leases	$	—		$	—

Other information:
Weighted average remaining lease term:
Operating leases (in years)	8			9
Finance leases (in years)	1			2

Weighted average discount rates:
Operating leases	11.0		%	11.8		%
Finance leases	6.2		%	5.1		%

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(8) Leases (Cont.)

The supplemental condensed consolidated balance sheet information related to leases for the period is as follows:


	As of
	March 31, 2022		December 31, 2021
	(In thousands)
Finance leases
Long-term right-of-use assets	$	301	$	252

Short-term finance lease liabilities	$	257	$	258
Long-term finance lease liabilities	118		79
Total finance lease liabilities	$	375	$	337

Operating leases
Long-term right-of-use assets	$	14,078	$	14,433

Short-term operating lease liabilities	$	1,406	$	1,384
Long-term operating lease liabilities	13,639		13,999
Total operating lease liabilities	$	15,045	$	15,383

Lease Obligations

The Company has several non-cancelable operating leases primarily related to the lease of its manufacturing and testing facilities. These leases generally contain renewal options for periods ranging from 3 to 10 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 the Company recognizes rent expense of such arrangements on a straight-line basis.

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of March 31, 2022 are as follows:


	Operating Leases		Finance Leases

	(In thousands)
2022	$	2,278	$	217
2023	3,064		126
2024	3,121		63
2025	2,444		—
2026	2,631		—
Thereafter	9,647		—
Total payments	$	23,185	$	406
Less:
Imputed interest/present value discount	(8,140)		(31)
Present value of lease liabilities	$	15,045	$	375

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Consolidated Financial Statements

(9) Accrued Liabilities

A summary of the components of Accrued liabilities as of March 31, 2022 and December 31, 2021 is as follows:


	As of
	March 31, 2022		December 31, 2021
	(In thousands)
Accrued payroll	$	3,014	$	1,490
Accrued vacation	4,467		3,966
Accrued bonus	2,927		8,773
Other accrued expenses	12,082		9,603
Total accrued liabilities	$	22,490	$	23,832

(10) Warrants

As of March 31, 2022 and December 31, 2021, the Company’s public and private warrant liabilities includes public and private placement warrants that were originally issued by NextGen and subsequently assumed by the Company as part of the Closing of the Business Combination. The public and private placement warrants are recorded on the condensed consolidated balance sheet at fair value with the carrying amount subject to remeasurement to fair value as of any respective exercise date and as of each subsequent balance sheet date. The change in fair value upon remeasurement is recognized in the Company’s condensed consolidated statements of operations and comprehensive loss. For the three months ended March 31, 2022, there was no change in fair value in the public and private warrant liabilities, and accordingly, no gains or losses were recorded on the accompanying condensed consolidated statements of operations and comprehensive loss.

Public Warrants

Each whole warrant entitles the holder to purchase one share of Virgin Orbit common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time after March 25, 2022, except as described below. Pursuant to the warrant agreement, a public warrant holder may exercise the public warrants only for a whole number of shares of common stock. The public warrants will expire five years from completion of the Business Combination (or December 29, 2026), or earlier upon redemption or liquidation.

Redemption of warrants when the price per share of common stock equals or exceeds $18.00.

The Company may redeem the public warrants (except as described herein with respect to the private placement 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 to each warrant holder; and

•if, and only if, the last reported sale price of the common stock for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which the notice of redemption is given to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share.

Redemption of warrants when the price per share of common stock equals or exceeds $10.00.

The Company may redeem the outstanding warrants:

•in whole and not in part;

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Condensed Consolidated Financial Statements

(10) Warrants (cont.)

•at $0.10 per public warrant;

•upon a minimum of 30 days’ prior written notice of redemption to each warrant holder;

•provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” of common stock; and

• if, and only if, the Reference Value equals or exceeds $10.00 per share.

Private Placement Warrants

The private placement warrants are identical to the public warrants, except that the private placement warrants and the common shares issuable upon the exercise of the private placement warrants were not transferable, assignable or salable until 30 days after the Closing, subject to certain limited exceptions. Additionally, the private placement warrants will be exercisable on a cashless basis and be non-redeemable, except as described above under the heading “Redemption of warrants when the price per common share equals or exceeds $10.00,” so long as they are held by the initial purchasers or their permitted transferees. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.

The following table provides quantitative information regarding the Private Placement Warrants Level 3 fair value inputs for the following measurement dates:


	As of
	March 31, 2022			December 31, 2021
Exercise price	$	11.50		$	11.50
Stock price	$	7.30		$	8.04
Option term (in years)	4.75			5.00
Volatility	38.1		%	32.5		%
Risk-free interest rate	2.42		%	1.26		%

Third-Party PIPE Investor Warrant

In connection with the Closing of the Business Combination, the Company granted a third-party investor of the PIPE Investment (“Third-Party PIPE Investor”) a warrant to purchase (including via cashless exercise) 500,000 shares of Virgin Orbit common stock at an exercise price of $10.00 per share, which has been classified as equity in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, the settlement of the instruments is indexed to shares of the Company’s common stock and qualifies for classification in equity. The Third-Party PIPE Investor warrant is (a) not transferable, (b) not subject to any redemption, termination (other than upon expiration of the exercise period) or right of rescission, (c) exercisable in whole or in part and (d) has an exercise period from the date of issuance to the earlier of (i) the five-year anniversary of the issuance of the Third-Party PIPE Investor warrant (or December 29, 2026) and (ii) a change in control of Virgin Orbit. The warrant shares shall (a) be listed on the Nasdaq or such other securities exchange as Virgin Orbit’s common stock is then listed on, (b) benefit from customary registration rights and (c) be subject to the restriction on transfer as stipulated by the lock-up agreement, dated August 22, 2021, by and between NextGen and the Third-Party PIPE Investor. The Third-Party PIPE Investor warrant was measured at the relative fair value at the Closing at $2.3 million as additional paid-in-capital in the condensed consolidated balance sheets.

(11) Income Taxes

Income tax expense was $0 for the three months ended March 31, 2022 and 2021, respectively. The effective income tax rate was nil for the three months ended March 31, 2022 and 2021. The Company’s effective tax rate differs from the U.S. statutory rate primarily due to a substantially full valuation allowance against our net deferred tax assets where it is more likely than not that some or all of the deferred tax assets will not be realized.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Condensed Consolidated Financial Statements

(12) Stockholders’ Equity

Common Stock

We have authority to issue 2,000,000,000 shares of common stock, par value $0.0001 per share.

Each holder of common stock is entitled to one vote for each share of common stock held by such holder. The holders of common stock are entitled to the payment of dividends when and as declared by the Board in accordance with applicable law and to receive other distributions from the Company. Any dividends declared by the Board to the holders of the then outstanding shares of common stock will be paid to the holders thereof pro rata in accordance with the number of shares of common stock held by each such holder as of the record date of such dividend. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the funds and assets of the Company that may be legally distributed to the Company’s stockholders will be distributed among the holders of the then outstanding shares of common stock pro rata in accordance with the number of shares of common stock held by each such holder.

Preferred Stock

We have the authority to issue 25,000,000 shares of preferred stock, par value $0.0001 per share. Our Board of Directors is authorized to determine the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect to each of our class of preferred stock.

Sponsor Earnback Securities

During the period between the Closing and the five-year anniversary of the Closing, NextGen Sponsor II LLC (“NextGen Sponsor”) has subjected the 1,319,980 Sponsor Earnback Shares (the “Sponsor Earnback Securities”) of issued and outstanding common stock and 1,015,190 Sponsor Earnback Warrants (the “Sponsor Earnback Warrants”) of issued and outstanding private placement warrants to transfer restrictions and potential forfeiture to the Company for no consideration until the occurrence of each tranche’s respective earnback triggering event. The 1,319,980 Sponsor Earnback Shares are comprised of two separate tranches of 659,990 shares per tranche and the 1,015,190 Sponsor Earnback Warrants are comprised of two separate tranches of 507,595 warrants per tranche. The earnback triggering events for the two respective tranches of the Sponsor Earnback Securities will be met upon the earlier of (i) the date on which the volume-weighted average trading sale price of one share of our common stock quoted on Nasdaq is greater than or equal to $12.50 and $15.00, respectively, for any 20 trading days within any 30 consecutive trading day period. The earnback triggering events were determined to be indexed to the Company’s common stock.

As of March 31, 2022, the earnback triggering events were not satisfied and the Sponsor Earnback Securities remained subject to the transfer restrictions and contingent forfeiture provisions.

Standby Equity Purchase Agreement

On March 28, 2022 (the “Effective Date”), we entered into a Standby Equity Purchase Agreement with YA II PN, Ltd. (the “Investor”), pursuant to which we have the right from time to time at our option to sell to the Investor up to $250.0 million of our common stock, subject to certain conditions and limitations set forth in the Purchase Agreement.

Upon the initial satisfaction of the conditions to the Investor’s obligation to purchase shares of common stock set forth in the Purchase Agreement (the “Commencement”), including that a registration statement registering the resale by the Investor of the shares of common stock under the Securities Act that may be sold to Investor by us under the Purchase Agreement (the “Initial Resale Registration Statement”) is declared effective by the Securities and Exchange Commission (the “SEC”) and a final prospectus relating thereto is filed with the SEC, we will have the right, but not the obligation, from time to time at our sole discretion until the first day of the

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(12) Stockholders’ Equity (cont.)

month next following the 36-month period from and after the Effective Date, to direct the Investor to purchase up to a specified maximum amount of shares of common stock as set forth in the Purchase Agreement by delivering written notice (each, a “Notice”) to the Investor. The purchase price of the shares of common stock that we may sell to the Investor pursuant to the Purchase Agreement will be 97.5% of the average of the volume weighted average price of our common stock during each trading day in the three (3) consecutive trading days commencing on the trading day following delivery of a Notice (other than any trading days excluded pursuant to the terms of the Purchase Agreement) (such period, the “Pricing Period”). The maximum amount to be sold pursuant to each Notice may not exceed $50 million, and a Notice cannot be delivered earlier than six trading days following the Pricing Period relating to any prior Notice. Any shares of common stock that may be sold by us under the Purchase Agreement will be sold in transactions exempt from registration under the Securities Act in reliance upon the exemption afforded under Section 4(a)(2).

The Purchase Agreement prohibits us from directing the Investor to purchase any shares of common stock pursuant to the Purchase Agreement if those shares, when aggregated with all other shares of our common stock then beneficially owned by the Investor and its affiliates, would result in the Investor and its affiliates having beneficial ownership of more than the 9.99% of our then outstanding shares of common stock.

The Purchase Agreement contains customary registration rights, representations, warranties, conditions and indemnification obligations by each party. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement and as of specific dates, were solely for the benefit of the parties to such agreement and are subject to certain important limitations.

The Purchase Agreement also provides that we may request a pre-advance loan from the Investor in a principal amount not to exceed $50.0 million. As of March 31, 2022, the Investor has not purchased any of the committed amounts of up to $250.0 million of our common stock.

Subject to the terms of the Purchase Agreement, we have the right to terminate the Purchase Agreement at any time after Commencement, at no cost or penalty, upon five (5) trading days’ prior written notice. No termination of the Purchase Agreement will affect the indemnification provisions contained within the Purchase Agreement, which will survive any termination of the Purchase Agreement.

(13) Stock-Based Compensation

The Company maintains a stock-based compensation plan pursuant to which it has granted stock options to certain eligible service providers.

Prior to Closing, Virgin Orbit maintained the 2017 Stock Incentive Plan (the “2017 Plan”) to purchase “VO Holdings, Inc. (“VO Holdings”) common stock, which became Virgin Orbit common stock as part of the Business Combination. As part of the consummation of the Business Combination, the adoption of the 2021 Stock Incentive Plan (the “2021 Plan”) replaces the 2017 Plan for issuance of new awards. Upon the consummation of the Business Combination, all outstanding stock options under the 2017 Plan, whether vested or unvested, were converted into options to purchase a number of shares of common stock of Virgin Orbit based on the Exchange Ratio, with a corresponding adjustment to the exercise price such that there was no change to the aggregate exercise price for such outstanding options. The 2017 Plan will continue to govern the outstanding awards granted under this plan.

In connection with the Business Combination, we adopted the 2021 Plan in order to facilitate the grant of cash and equity incentives to directors, employees and consultants of the Company, employees of the Company’s subsidiaries and other eligible consultants and to enable us and certain of our subsidiaries and affiliates to obtain and retain services of these individuals, which is essential to our long-term success. The 2021 Plan became effective on December 28, 2021, the date immediately preceding the consummation of the Business Combination. Stock options related to this 2021 Plan were first granted in January 2022.

Compensation expense is recognized only for those options expected to vest with forfeitures estimated based on historical experience and future expectations and is adjusted for forfeitures in the period they occur. Stock-

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(13) Stock-Based Compensation (Cont.)

based compensation awards are amortized on a straight-line basis over the graded vesting period based on continued service.

The following table includes the activity during the three months ended March 31, 2022 for all stock options granted under the 2021 Plan:


	Number of shares(2)	Weighted average exercise price		Weighted average remaining contractual life	Aggregate intrinsic value(1)
	(In thousands)	(In dollars)		(In years)
Balances as of December 31, 2021	9,101	$	3.78	6.35	$	—
Granted	5,037	6.83
Exercised	—	—
Forfeited options	(168)	4.46
Expired or cancelled options	(39)	3.81
Balances as of March 31, 2022	13,931	$	4.87	7.35	$	35,014

Exercisable as of March 31, 2022	6,843	$	3.92	5.36

_______________

(1) Aggregate intrinsic value is calculated based on the difference between our closing stock price at year end and the exercise price, multiplied by the number of in-the-money options and represents the pre-tax amount that would have been received by the option holders, had they all exercised all their options on the fiscal year-end date.

(2) Shares include time-based options and exclude the CEO milestone awards, totaling 1.6 million stock options described below.

Stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2022 and 2021 consisted of the following:


	Three Months Ended March 31,
	2022		2021

	(In thousands)
Cost of revenue	$	354	$	51
Research and development	299		268
Selling, general and administrative	3,161		1,102
	$	3,814	$	1,421

As of March 31, 2022, and 2021, there was $1.3 million and $3.0 million, respectively, of total unrecognized stock-based compensation related to the unvested stock options granted under the 2017 Stock Incentive Plan and $13.1 million and $0, respectively, of total unrecognized stock-based compensation related to the unvested stock options granted under the 2021 Stock Incentive Plan. As of March 31, 2022, the total cost is expected to be recognized over a weighted average term of 3.1 years. The total fair value of shares vested during the three months ended March 31, 2022 and 2021 was $1.7 million and $1.0 million, respectively.

Under the 2017 and 2021 Plans, stock options generally expire 10 years from the date of grant and are exercisable when the options vest. The options generally vest over four years, the majority of which vest at a rate of 25% on the first anniversary of the grant date, with the 75% remainder vesting ratably each quarter over the next three years, subject to continued employment. Stock-based compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the graded vesting period, using the accelerated attribution method, for each employee stock option expected to vest. We estimate the forfeiture rate based on

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(13) Stock-Based Compensation (Cont.)

the historical experience at the date of grant and revises it, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

On September 2, 2021, the Company granted 1,132,290 stock options to a former employee of the Company to purchase VO Holdings common stock. The stock option grant was fully vested on the date of issuance and was intended to replace an earlier stock option grant with the same exercise price that had been cancelled in 2021. The new stock option was not granted pursuant to the 2017 Stock Incentive Plan and has a mandatory exercise on the one year anniversary of the date of grant. The aggregate grant date fair value of the stock options was estimated to be $4.2 million, which was expensed at the grant date. The aggregate grant date fair value was based on the estimated fair value of the underlying Virgin Orbit common stock using the Black-Scholes option pricing model.

CEO Awards

Except with respect to the milestone and supplemental milestone awards granted to our CEO, Mr. Hart, described below, Mr. Hart’s stock options vest and become exercisable as to 25% of the underlying shares on the first anniversary of the applicable vesting commencement date, and thereafter as to the remaining 75% of the underlying shares in either (a) six substantially equal installments on each successive six-month anniversary of the vesting commencement date, or (b) twelve substantially equal installments on each successive quarterly anniversary of the applicable vesting commencement date, subject to continued employment through the applicable vesting date. In addition, Mr. Hart’s stock options will vest and become exercisable in full upon a termination of employment without “cause” within 24 months following a “change in control”, each as defined in the 2017 Plan.

On November 20, 2017, the Company granted Mr. Hart a milestone award of 757,978 stock options with an estimated grant date fair value approximating $2.1 million. Fifty percent of the stock options vested when we achieved our first commercial launch on June 30, 2021. Additionally, on March 17, 2021, the Company granted our CEO a supplemental milestone award of 845,317 stock options with an estimated grant date fair value approximating $2.5 million. On June 30, 2021, the day Virgin Orbit achieved the first commercial launch, Tubular Bells Part One, 50.0% of the milestone award vested. And on December 31, 2021, the last day of the first calendar year in which the first commercial launch occurred, 33.3% of the supplemental milestone award vested. The remaining 50.0% of the milestone award and the remaining 66.7% of the supplemental milestone award will vest upon Mr. Hart’s continued service through the last day of the first calendar year in which the Company has five successful revenue-generating deployment launches of satellites into their respective intended orbits in such calendar year.

Stock Option Valuation

The Company uses the Black-Scholes option pricing model to determine the fair value of the awards. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, risk-free interest rate, and expected dividends.

The weighted average assumptions used to value the option grants for the three months ended March 31, 2022 are as follows:


						2022
Expected life (in years)						5.97
Volatility						85.0%
Risk-free interest rate						1.47%
Dividend yield						—

There were no options granted during the three months ended March 31, 2021.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(14) Net Loss Per Share

The following table presents net loss per share and related information:


	Three Months Ended March 31,
	2022		2021

	(In thousands, except for per share data)
Basic and diluted:
Net loss	$	(62,570)	$	(32,325)
Weighted average common shares outstanding	334,919,905		275,958,168
Basic and diluted net loss per share	$	(0.19)	$	(0.12)

Earnings per share calculations for all periods prior to the Business Combination have been retrospectively adjusted by the Exchange Ratio for the equivalent number of shares outstanding immediately after the Business Combination to effect the reverse recapitalization. Subsequent to the Business Combination, net loss per share is calculated based on the weighted average number of common stock then outstanding.

Basic and dilutive net loss per share is computed by dividing the net loss for the period by the weighted average number of common stock outstanding during the period. Basic and diluted net loss per share attributable to common stockholders are presented in conformity with the two-class method required for participating securities. The 1,319,980 Sponsor Earnback Shares are securities that do not contractually entitle the holders of such shares to participate in nonforfeitable dividends and do not contractually obligate the holders of such shares to participate in losses. The condensed consolidated statements of operations and comprehensive loss reflects a net loss for the period presented and, accordingly, no loss amounts have been allocated to the Sponsor Earnback Shares. The Sponsor Earnback Shares have also been excluded from basic and diluted net loss per share attributable to common stockholders as such shares of Virgin Orbit common stock are contingently recallable until the Sponsor Earnback Shares are no longer subject to transfer restrictions and contingent forfeiture provisions upon the satisfaction of the earnback triggering events.

As of March 31, 2022 and March 31, 2021, the Company has excluded the potential effect of warrants to purchase shares of common stock totaling 13,904,628 and 13,985,224 shares, respectively, and the potential effect of outstanding Virgin Orbit Options to purchase shares of common stock totaling 10,704,645 shares in the calculation of diluted loss per share, as the effect would be anti-dilutive due to losses incurred. The 1,015,190 Sponsor Earnback Warrants are excluded as the underlying shares are contingently recallable until the Sponsor Earnback Warrants are no longer subject to transfer restrictions and contingent forfeiture provisions upon the satisfaction of the earnback triggering events.

(15) Investments in Noncontrolled Entity

Arqit PIPE Investment

On May 12, 2021, the Company entered into a binding term sheet (the “Term Sheet”) and a subscription agreement to commit to contribute $5.0 million to Arqit Limited (“Arqit”) in a PIPE transaction (the “Arqit PIPE Investment”) in exchange for 500,000 ordinary shares at $10.00 per share, subject to and contingent upon the closing of a planned merger transaction (the “Arqit Transaction”) between Arqit and Centricus Acquisition Corp., a SPAC unaffiliated with the Company.

On September 3, 2021, the Arqit Transaction was consummated, and the Company made the Arqit PIPE Investment, which was recorded as a financial asset in investments in the condensed consolidated balance sheets. During the three months ended March 31, 2022, the Company recorded an unrealized loss of $4.2 million from the Arqit PIPE Investment in the condensed consolidated statements of operations and comprehensive loss.

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(15) Investments in Noncontrolled Entity (cont.)

On September 7, 2021, Arqit delivered $5.0 million to the Company as a non-refundable deposit towards an executed launch service agreement for up to five launches, with $1 million of such deposit to be applied towards the price of each remaining launch services commencing with the second launch, if Arqit requires fewer than five launch services, and the remainder to be applied towards the price of the first launch service. As of March 31, 2022 and December 31, 2021, the Company recorded $5.0 million as a customer deposit in non-current deferred revenue on the condensed consolidated balance sheets.

(16) Commitments and Contingencies

(a)Purchase commitments

The Company has non-cancelable purchase commitments as of March 31, 2022, primarily related to supply and engineering services providers. The purchase commitments as of March 31, 2022 are as follows:


	Payments Due by Periods
Commitments and obligations	Less than 1 year (remaining)		1 – 3 years		3 – 5 years		More than 5 years		Total

	(In thousands)
Purchase commitments	$	20,997	$	25,625	$	—	$	—	$	46,622

Amounts purchased under these arrangements for the three months ended March 31, 2022 and 2021 were $3.3 million and $2.3 million, respectively.

(b)Litigation and Claims

From time to time, the Company is party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company determines when and how much to accrue for and disclose related to legal and other contingencies. Accordingly, the Company discloses contingencies deemed to be reasonably possible and accrues loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably estimable. Significant judgment is required to determine both probability and the estimated amount. The Company reviews these provisions on a quarterly basis and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The outcome of legal matters and litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management’s expectations, the Company’s results of operations, and financial condition, including in a particular reporting period, could be materially adversely affected.

On June 4, 2019, the Company filed a complaint in the U.S. District Court for the Southern District of New York as OneWeb, one of the Company’s largest customers, cancelled 35 of planned 39 launches. Subsequently on March 27, 2020, OneWeb filed for Chapter 11 Bankruptcy which terminated the entire launch service agreement entered with the Company during its bankruptcy process by September 18, 2020, resulting in a release of performance rights and performance obligations. As of the date of the issuance of these condensed consolidated financial statements, the claim with the bankruptcy court and disposition of the Company’s complaint remains outstanding.

For the three months ended March 31, 2022 and 2021, there were no other material legal proceedings.

(c)Contingencies

The Company identified certain contracts where the expected costs to fulfill the contract will be in excess of the estimated transaction price. On October 1, 2017, the Company entered into a launch service agreement with a customer to provide a dedicated primary launch service which would deliver 150 kg of the customer’s payload. Per the terms of the agreement, the dedicated primary launch shall have a firm fixed price of $4.9 million. The Company amended the contract from a dedicated primary launch to secondary rideshare launches, with the $4.9 million firm fixed price allocated across the three launches based on the relative anticipated payload kilogram

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VIRGIN ORBIT HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

(16) Commitments and Contingencies (cont.)

weight. During the year ended December 31, 2021, the Company determined that it was probable that the costs to provide the services as stipulated by the amended launch services agreement would exceed the allocated firm fixed price of each launch. As such, the Company recorded a provision for contract loss for these three secondary rideshare launches for a total of $12.5 million during the year ended December 31, 2021. As of March 31, 2022, two of the three launches occurred. The provision for contract losses outstanding as of March 31, 2022 related to the remaining launch is $2.6 million.

During the three months ended March 31, 2022, the Company entered into launch service agreements with seven other customers. It is probable for five of these launch service agreements that the costs to provide the services will exceed the allocated firm fixed price of each launch. The Company recorded a provision for contract losses of $11.6 million, with $5.8 million as a reduction of inventory during the year ended March 31, 2022. As of December 31, 2021, the provision for contract losses outstanding related to the remaining launches for these other customers was $0.6 million, with $0.2 million as a reduction of contract assets.

As part of the Business Combination, the Company is providing a concession launch service for a Third-Party PIPE Investor in the first quarter of 2023. Accordingly, the Company recorded a contract loss reserve of $4.1 million as of December 31, 2021 based on the estimate of the cost to fulfill this obligation, offset to additional paid in capital as this is considered to be a transaction cost or cost of capital.

Consistent with the accounting of its firm fixed price contracts, the Company continually reviews cost performance and estimates-to-complete at least quarterly and in many cases more frequently. Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur. The impact of revisions in estimate of completion for all types of contracts are recognized on a cumulative catch-up basis in the period in which the revisions are made.

(17) Subsequent Events

On April 21, 2022, the Company renamed its U.S.-based, wholly owned subsidiary engaged with national security organizations in the U.S. and its allies from “VOX Space, LLC” to “Virgin Orbit National Systems, LLC.”

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Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations

The following discussion and analysis provides information that Virgin Orbit’s management believes is relevant to an assessment and understanding of Virgin Orbit’s condensed consolidated results of operations and financial condition. You should read this discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited financial statements and related notes as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with filed with the SEC on March 31, 2022, as amended (the “2021 Annual Report on Form 10-K”). This discussion may contain forward-looking statements based upon Virgin Orbit’s current expectations, estimates and projections that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements due to, among other considerations, the matters discussed in the sections entitled “Part II, Item 1A. Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Vieco USA, Inc. entered into a merger agreement (the “Merger Agreement”) with NextGen Acquisition Corp. II (“NextGen”) on August 22, 2021. The transactions contemplated by the terms of the Merger Agreement (the “Business Combination”) were completed on December 29, 2021, in conjunction with which NextGen changed its name to Virgin Orbit Holdings, Inc. (hereafter referred to as “Virgin Orbit, the “Company,” “we,” “us” or “our”, unless the context otherwise requires).

Overview

We are a vertically integrated space company that provides customers dedicated and rideshare small satellite launch capabilities. Our philosophy is to operate a mobile launch system that can “launch at any time, from any place, to any orbit.” Our vision is to use space to drive positive and lasting change on Earth, from connecting communities to advancing scientific initiatives; supporting America’s and other nations’ space presence, and helping create the next generation of world-changing space technology.

Since our founding in 2017, we have invested in research and development efforts to develop a unique air-launch system, comprised of Cosmic Girl, a modified Boeing 747 aircraft, and the LauncherOne rocket. Cosmic Girl serves as a reusable mobile launch pad, carrying LauncherOne aloft, and LauncherOne is a two-stage rocket that is the world’s first and only liquid-fueled, air-launched rocket to reach orbit successfully. This mobile