Annual report pursuant to Section 13 and 15(d)

Organization and Business Operations

v3.23.1
Organization and Business Operations
12 Months Ended
Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business Operations Organization and Business Operations
Virgin Orbit Holdings, Inc. (“Virgin Orbit”) and, together 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 that provides customers with dedicated and rideshare small-satellite launch capabilities for various industries including government, research and education. We develop and manufacture our launch technology from a vertically-integrated manufacturing facility in Long Beach, California, with a testing facility in Mojave, California. As of the date of this Annual Report, we have successfully completed a total of four orbital launches since 2021, which we believe demonstrates the efficacy of our launch system, although our last launch attempt did not reach orbit. With the four completed orbital launches, we have delivered 33 satellites for commercial, civil and national security and defense customers to their desired orbits with high precision. Through our proprietary mobile launch system, we offer greater and more predictable access to space, enabling our vision of using space to drive positive and lasting change on Earth. The Company plans to conduct future commercial launches from other locations, including Cornwall in the UK.
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 system allows us to serve a broad array of applications and markets, providing customers with a highly differentiated solution to launch satellites relative to other existing small-satellite ground launch providers.
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 (“VIL” or “Parent Company”) is the holder of a majority of our outstanding common stock.
Upon the closing of the Business Combination (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 of approximately 1.250301 (the “Exchange Ratio”) and all holders of issued and outstanding as of the Closing 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.
the surrender and exchange of all 100 issued and outstanding shares of Vieco USA common stock and 242,423,615 shares of VO Holdings common stock into an equal amount of Vieco USA common stock shares;
the vesting and settlement of 290,689 granted and outstanding VO Holdings stock appreciation rights (“SARs”) with 218,584 shares of Vieco USA common stock for which the performance condition was deemed satisfied upon the merger of VO Holdings with and into Vieco USA occurred prior to the Closing;
the surrender and exchange of all issued and outstanding shares of Vieco USA common stock into 303,320,884 shares of common stock as adjusted by the Exchange Ratio; and
the cancellation and exchange of all 8,658,565 granted and outstanding vested and unvested Vieco USA Options into 10,704,645 Virgin Orbit Options exercisable for shares of common stock with the same terms and vesting conditions except for the number of shares exercisable and the exercise price, each of which was adjusted by the Exchange Ratio.
In addition, the following events occurred as part of the Transactions:
the sale and issuance of 10,000,000 shares of common stock at a purchase price of $10.00 per share for an aggregate purchase price of $100.0 million pursuant to the Subscription Agreements entered in connection with the PIPE Investment;
the sale and issuance of 6,020,000 shares of common stock, of which 5,820,000 shares were issued to Virgin Group, pursuant to the Additional Equity Amount, and 200,000 shares were issued to the co-chairmen of NextGen, at a price of $10.00 per share for a total purchase price of $60.0 million, in order to satisfy the Minimum Cash Condition included in the Merger Agreement;
the forfeiture of 765,000 Class B ordinary shares beneficially held by NextGen Sponsor II LLC (“NextGen Sponsor”) prior to the Closing;
the effectiveness of transfer restrictions and contingent forfeiture provisions of 1,319,980 Class B ordinary shares (the “Sponsor Earnback Shares”) and 1,015,190 private placement warrants (the “Sponsor Earnback Warrants”, and together with the Sponsor Earnback Shares, “Sponsor Earnback Securities”) beneficially held by NextGen Sponsor until the earnback triggering events occur when Virgin Orbit’s stock price exceeded certain predetermined levels in the post-Closing period pursuant to a letter agreement (the “Sponsor Agreement”). See Part 4. Note 13. Stockholders' Equity (Deficit) - Sponsor Earnback Securities for more information; and
payments of $27.9 million for NextGen’s transaction costs and of $314.8 million for the redemption of NextGen’s 31,480,291 Class A ordinary shares at approximately $10.00 per share from NextGen’s trust account.
Upon Closing, the following were outstanding:
334,919,914 shares of Virgin Orbit common stock, consisting of (a) 303,320,884 shares issued to holders of all issued and outstanding Vieco USA common stock (b) 6,020,000 shares issued to the Parent Company and NextGen (b) 6,779,166 shares issued to the holders of NextGen’s Class A ordinary shares, which reflects the redemptions of 31,480,291 Class A ordinary shares with respect to the holders who exercised their redemption rights, (c) 8,799,864 shares issued to the holders of NextGen’s Class B ordinary shares, and (d) 10,000,000 shares issued in the PIPE Investment;
public warrants to purchase 7,651,891 shares of Virgin Orbit common stock at an exercise price of $11.50 per share issued upon conversion of the outstanding NextGen warrants prior to the Closing;
private placement warrants to purchase 6,767,927 shares of Virgin Orbit common stock at an exercise price of $11.50 per share issued upon conversion of the outstanding NextGen warrants prior to the Closing;
warrants to purchase 500,000 shares of Virgin Orbit common stock at an exercise price of $10.00 per share issued to a third-party investor of the PIPE Investment; and
options to purchase 10,704,645 shares of Virgin Orbit common stock Vieco USA Options at an exercise price ranging from $4.03 - $5.51 per share, prior to the Closing.
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 Closing are those of Vieco USA in future reports of Virgin Orbit. This determination was primarily based on the following:
Vieco USA stockholders in aggregate have a relative majority of the voting power of Virgin Orbit;
The board of directors of Virgin Orbit (the “Board”) has seven members, and Vieco USA stockholders have the right to nominate the majority of the Virgin Orbit Board;
Vieco USA’s senior management continues to hold the senior management roles of Virgin Orbit and is responsible for the day-to-day operations;
Virgin Orbit assumed Vieco USA’s name of business; and
The intended strategy and operations of Virgin Orbit will continue Vieco USA’s strategy and operations to develop small-satellite launch solutions.
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 Closing. As such, the shares and corresponding capital amounts and earnings per share related to Vieco USA common stock Vieco USA Options prior to the Closing 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 Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company has not generated positive cash flows from operations or sufficient revenues to provide sufficient cash flows to enable the Company to finance its operations internally, and may not be able to raise sufficient capital to do so. We have incurred significant losses since our inception and had an accumulated deficit of $1,011.6 million as of December 31, 2022. Our cash and cash equivalents were $51.2 million and $194.2 million as of December 31, 2022 and December 31, 2021, respectively.
Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, our management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within our control as of the date the consolidated financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the consolidated financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant
conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
On April 4, 2023, the Company and its domestic subsidiaries, Virgin Orbit National Systems, LLC, Vieco USA, Inc., Virgin Orbit, LLC and JACM Holdings, Inc. (together with the Company, the “Debtors”), commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Debtors have requested that the Chapter 11 proceedings be jointly administered under the caption In re Virgin Orbit Holdings, Inc., et al. (the “Chapter 11 Cases”).
The filing of the Chapter 11 Cases constituted an event of default that accelerated substantially all of the Company's obligations under nearly all of its prepetition debt instruments.
In light of the Company's Chapter 11 Cases, the Company's ability to continue as a going concern is contingent upon, among other things, its ability to, subject to the Bankruptcy Court's approval as applicable, (i) implement a restructuring in a timely manner and within the milestones that have been established under the DIP Credit Agreement, which currently contemplate obtaining confirmation of a restructuring plan, and (ii) generate sufficient liquidity during the Chapter 11 Cases and following emergence from Chapter 11 to meet our contractual obligations and operating needs. As a result of risks and uncertainties related to, among other things, the Company's ability to obtain requisite support for the restructuring plan from various stakeholders, and the disruptive effects of the Chapter 11 Cases on our business and liquidity making it potentially more difficult to maintain business, financing and operational relationships, substantial doubt exists regarding our ability to continue as a going concern within one year after the date that the financial statements are issued.
COVID-19 Pandemic
The COVID-19 pandemic continues to directly and indirectly impact the Company’s business, results of operations and financial condition, including revenue, expenses, reserves and allowances. The Company continues to monitor developments that are highly uncertain as well as the economic impact on domestic and international suppliers, customers, and markets. The Company assessed certain accounting matters that require consideration of forecasted financial information, including, but not limited to, its current expected credit losses, the carrying value of the Company's intangible assets and other long-lived assets, and valuation allowances in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 31, 2022 and through the date of this report. As a result of these assessments, there were no impairments or material increases in expected credit losses or valuation allowances that impacted the Company's financial statements as of and for the years ended December 31, 2022 and December 31, 2021. However, the Company's future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the financial statements in future reporting periods.