Virgin Galactic Holdings, Inc

(1)Description of Business and Basis of Presentation

Virgin Galactic Holdings, Inc., together with its consolidated subsidiaries (“Virgin Galactic” or the “Company”), is an aerospace and space travel company focused on the development, manufacture and operation of spaceships and related technologies. The Company provides access to space for private individuals, researchers and government agencies. The Company’s missions include flying passengers to space, as well as flying scientific payloads and researchers to space in order to conduct experiments for scientific and educational purposes.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Certain information and footnote disclosures, normally included in annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to such rules and regulations. However, in management’s opinion, the condensed consolidated financial statements reflect all adjustments, including those of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods presented.

The operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the entire fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no changes to the significant accounting policies presented in the audited consolidated financial statements contained in the Annual Report on Form 10-K that would have a material impact on the accompanying condensed consolidated financial statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

(2)Liquidity and Financial Condition

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern and will be able to realize its assets and satisfy its liabilities in the normal course of business.

The Company is currently in the pre-commercial service phase and accordingly has no spaceflight revenue. The Company has recently used significant cash for operating activities and capital expenditures primarily related to the development of its next-generation spaceships and expects to continue to incur significant operating expenses and capital expenditures to complete the production of these spaceships and place them into commercial operation.

In preparation of the condensed consolidated financial statements, 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 twelve months from the date the condensed consolidated financial statements are issued, in accordance with the requirements of the Financial Accounting Standards Board's Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”).

Factors, among others, that are included in management’s evaluation are:

•cash, cash equivalents, and marketable securities on hand as of the date the condensed consolidated financial statements are issued;

•all company costs that are forecasted to be incurred over the upcoming twelve months from the date the condensed consolidated financial statements are issued, including costs expected to be incurred in completing fabrication and testing of the next-generation spaceships and costs expected to be incurred in the ramp-up to, and commercial operation of, spaceflights; and

•all contractual debt payments due within the next twelve months are assumed to be settled in cash.

Items that are planned or expected by management, but the execution of which may not be fully under management’s control, are not included in management’s evaluation in accordance with ASC 205-40. Factors, among others, excluded from management’s evaluation include:

•Revenues: any revenues or cash receipts, from spaceflights or otherwise, planned during the upcoming twelve months.

•Capital Market Transactions: any proceeds from capital market transactions, whether from debt issuance, equity issuance, or otherwise.

•Debt Repayment Terms: any change of contractual debt repayment schedules or settlement methods.

Management’s evaluation, which excluded the items that are not within its control (i.e., Revenues, Capital Market Transactions, and Debt Repayment Terms), resulted in the determination that the Company may not have sufficient cash and marketable securities to maintain its planned operations for the next twelve months following the issuance date of the condensed consolidated financial statements and has concluded that there are conditions present in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern pursuant to ASC 205-40.

Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt include implementing some or all of the following initiatives:

•Commencing commercial service in February 2027.

•Generating significant cash from the current backlog of future astronauts as their final payments become due in advance of their spaceflight.

•Offering the sale of a limited number of early spaceflights at a premium to historical prices.

•Increasing cash on hand through additional debt or equity financing, including use of the Company’s existing “at-the-market” equity offering program.

•Partnering with third parties to fund and accelerate the pace of future space vehicle development.

•Settling debt through the issuance of equity and/or extending maturities of certain debt payments that are due within the period.

The plans discussed above are subject to market conditions and, while management intends to apply its best efforts to the execution of these plans, they are not fully within the Company’s control and therefore cannot be deemed to be probable in accordance with ASC 205-40, and as a result, management has concluded that its plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern for twelve months after the date that the condensed consolidated financial statements are issued.

The accompanying condensed consolidated financial statements do not include any adjustments related to the carrying amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

(3)Cash, Cash Equivalents and Marketable Securities

The Company maintains certain cash balances restricted as to withdrawal or use. Restricted cash consists of cash deposits received from future astronauts that are contractually restricted for operational use until the condition of carriage is signed or the deposits are refunded.

The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash, cash equivalents and marketable securities are as follows:

Interest receivable of $0.5 million and $2.0 million is included in other current assets in the accompanying condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025, respectively.

The Company recognizes amortization and accretion of purchase premiums and discounts on its marketable securities in interest income in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company recognized $0.4 million and $1.8 million in accretion income for its marketable securities for the three months ended June 30, 2026 and 2025, respectively. The Company recognized $0.8 million and $4.0 million in accretion income for its marketable securities for the six months ended June 30, 2026 and 2025, respectively.

(4)Property, Plant and Equipment, Net

Property, plant and equipment consists of the following:

(5)Leases

The components of expense related to leases are as follows:

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

The supplemental balance sheet information related to leases is as follows:

Right-of-use assets are included in other non-current assets, and lease liabilities are included in other current liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets.

(6)Other Current Liabilities

The components of other current liabilities are as follows:

(7)2025 Capital Realignment Transactions

In December 2025, the Company completed privately negotiated repurchase agreements (the “2027 Notes Repurchase Agreements”) with a limited number of holders of its 2.50% convertible senior notes due 2027 (“2027 Notes”), pursuant to which the Company repurchased $354.6 million in aggregate principal amount of the 2027 Notes (the “Repurchases”) with cash proceeds received from the Registered Offering (as defined below) and the Private Placement (as defined below).

Concurrently with the Repurchases, the Company completed the issuance and sale for cash in a registered direct offering, pursuant to separate, privately negotiated subscription agreements with certain investors, of (i)2.2 million shares of its common stock, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase 8.4 million shares of its common stock (collectively, the “Registered Offering”). In connection with the Registered Offering, the Company received cash proceeds of $45.6 million.

As of March 31, 2026, all Pre-Funded Warrants had been exercised and 8.4 million shares of common stock had been issued in connection with the exercise of the Pre-Funded Warrants.

Concurrently with the Registered Offering, the Company issued and sold for cash, in a private placement, (i) $212.5 million aggregate principal amount of a new series of its 9.80% First Lien Notes due 2028 (“2028 Notes”) and (ii) warrants to purchase 31.7 million shares of its common stock (the “Purchase Warrants”), with an exercise price equal to $6.696 per share. The Purchase Warrants are exercisable at any time on or after June 18, 2026 until December 18, 2030. The Purchase Warrants are exercisable only for cash and are subject to appropriate adjustment in the event of cash or share dividends, share splits, share repurchases, reorganizations or similar events affecting the Company’s common stock.

(8)Long-Term Debt

A summary of the components of long-term debt is as follows:

During the three months ended June 30, 2026 and 2025, the Company recognized $2.0 million and $3.2 million of interest expense related to long-term debt, respectively. Interest expense included $0.4 million and $0.6 million of amortized debt issuance costs during the three months ended June 30, 2026 and 2025, respectively.

During the six months ended June 30, 2026 and 2025, the Company recognized $3.8 million and $6.5 million of interest expense related to long-term debt, respectively. Interest expense included $0.9 million and $1.1 million of amortized debt issuance costs during the six months ended June 30, 2026 and 2025, respectively.

During the six months ended June 30, 2026, the Company recognized $8.2 million of amortization of debt premium in connection with certain interest payments. This amount has been presented as a payment of long-term debt in the accompanying condensed consolidated statement of cash flows for the six months ended June 30, 2026.

2028 Notes

In connection with the Private Placement, the Company issued $212.5 million aggregate principal amount of the 2028 Notes. The 2028 Notes bear interest at a rate of 9.80% per year, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. The 2028 Notes mature on December 31, 2028, unless earlier redeemed or repurchased.

The Company is required to redeem $30.4 million of the 2028 Notes on or before September 30, 2026, and beginning on December 31, 2027 and at every calendar quarter end thereafter, the Company is required to redeem $10.1 million of the outstanding 2028 Notes. In addition, the Company is required to repurchase a portion of the 2028 Notes upon certain asset sales and capital raises. The Company may also redeem any or all of the 2028 Notes at par plus accrued and unpaid interest at any time. Any such mandatory or optional redemptions may be made using cash, or subject to certain conditions, shares of common stock or a combination thereof.

During May and June 2026, the Company completed the redemption of an aggregate of $40.5 million in principal amount of the 2028 Notes, and accrued interest thereon, in advance of the mandatory redemption dates by issuing 10.5 million shares of the Company’s common stock to holders of the 2028 Notes. In connection with these debt redemptions, the Company recognized a gain on extinguishment of debt of $6.8 million, which is included in the accompanying condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2026. With the completion of these redemptions, the Company reduced the outstanding balance of the 2028 Notes to $172.0 million and now has no mandatory principal payments due on these notes until March 31, 2028.

The 2028 Notes are secured on a first-priority basis by liens on substantially all of the assets of the Company and its domestic subsidiaries, subject to customary exceptions, including customer deposits, pursuant to a security agreement and related collateral documents.

The following table presents the remaining scheduled contractual interest payments for the 2028 Notes as of June 30, 2026. These contractual interest payments are allocated to the reduction of the recorded premium and interest expense as presented below. The amount of interest which reduces the recorded premium will be reported as a financing activity on the Company’s consolidated statements of cash flows.

2027 Notes

In January 2022, the Company completed an offering of $425 million aggregate principal amount of the 2027 Notes. The 2027 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 2.50% per year. Interest is payable in cash semi-annually in arrears on February 1 and August 1 of each year. The 2027 Notes mature on February 1, 2027 unless earlier repurchased, redeemed or converted.

In December 2025, the Company repurchased $354.6 million in aggregate principal amount of the 2027 Notes. See Note 7 for additional information.

In June 2026, the Company completed an exchange of $52.5 million in principal amount of the 2027 Notes, and accrued interest thereon, for (i)7.0 million shares of its common stock, and (ii) pre-funded warrants to purchase 10.3 million shares of its common stock. The pre-funded warrants are exercisable at any time on or after June 29, 2026 at an exercise price of $0.0001 per share. The pre-funded warrants contain a cashless exercise feature that allows the holders to exercise the pre-funded warrants without a cash payment to the Company upon the terms set forth therein. The number of shares of common stock for which the pre-funded warrants are exercisable are subject to certain additional customary adjustments as set forth in the pre-funded warrants. As of June 30, 2026, none of the pre-funded warrants had been exercised.

In connection with this debt exchange, the Company recorded a gain on extinguishment of debt of $1.8 million, which is included in the accompanying condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2026. With the completion of this exchange, the Company reduced the outstanding balance of the 2027 Notes from $70.4 million to $17.9 million.

Other Debt

In May 2026, the Company entered into a commercial loan agreement for an aggregate principal amount of $2.5 million. The loan bears interest at a fixed rate of 11.0% and is payable in monthly principal and interest payments through its maturity in April 2036.

Debt Maturities and Mandatory Payments

Maturities and mandatory payments of the contractual debt outstanding as of June 30, 2026 are as follows:

(9)Stockholders’ Equity

In November 2024, the Company entered into an open market sale agreement with Jefferies LLC (“Jefferies”) providing for the offer and sale of up to $300 million of shares of the Company’s common stock from time to time through Jefferies, acting as sales agent, or directly to Jefferies, acting as principal, through an “at-the-market offering” program (the “2024 ATM Program”).

During the six months ended June 30, 2026, the Company sold 45.0 million shares of common stock under the 2024 ATM Program and generated $145.0 million in gross proceeds, before deducting $3.7 million in commissions and other expenses.

As of June 30, 2026, the Company had sold a total of 82.6 million shares of common stock under the 2024 ATM Program, generating $295.8 million in gross proceeds since its inception, before deducting $8.1 million in commissions and other expenses.

(10)Stock-Based Compensation

Equity Incentive Plans

The Company maintainstwo equity incentive plans -- the Fourth Amended and Restated Virgin Galactic Holdings, Inc. 2019 Incentive Award Plan (the “Fourth A&R Plan”) and the Second Amended and Restated Virgin Galactic Holdings, Inc. 2023 Employment Inducement Incentive Award Plan (the “Second A&R Inducement Plan”).

The Fourth A&R Plan was adopted by the Company's board of directors in April 2026, subject to the approval of the Company’s stockholders, and became effective upon the approval of the Company’s stockholders in June 2026. The Fourth A&R Plan amended and restated the Third Amended and Restated Virgin Galactic Holdings, Inc. 2019 Incentive Plan (the “Third A&R Plan”) and made the following material changes to the Third A&R Plan: (i) increased the number of shares available by 9.45 million shares to an aggregate of 17,120,437 shares reserved for issuance under the Fourth A&R Plan, (ii) increased the number of shares which may be granted as incentive stock options (“ISOs”) under the Fourth A&R Plan, such that an aggregate of 17,120,437 shares may be granted as ISOs under the Fourth A&R Plan, and (iii) extended the right to grant awards under the Fourth A&R Plan through June 11, 2036, provided that ISOs may not be granted under the Fourth A&R Plan after April 14, 2036.

The Second A&R Inducement Plan was adopted by the Company’s board of directors and became effective in March 2026. The Second A&R Inducement Plan increased the number of shares available by 555,000 shares to an aggregate of 1,695,000 shares reserved for issuance under the Second A&R Inducement Plan.

Pursuant to the Fourth A&R Plan and related predecessor plans, the Company has granted equity incentive awards, including time-based stock options, performance-based stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”). Pursuant to the Second A&R Inducement Plan and related predecessor plans, the Company has granted RSUs and PSUs.

Employee Stock Purchase Plan

The Virgin Galactic Holdings, Inc. 2025 Employee Stock Purchase Plan (the “ESPP”) was adopted by the Company’s board of directors in April 2025, subject to the approval of the Company’s stockholders, and became effective upon the approval of the Company’s stockholders in June 2025.

On June 30, 2026,0.2 million shares were purchased under the ESPP at $2.46 per share, resulting in cash proceeds of $0.5 million. As of June 30, 2026,2.1 million shares remained available for issuance under the ESPP.

Stock-Based Compensation

A summary of stock-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss is as follows:

As of June 30, 2026, the Company had unrecognized stock-based compensation expense of $49.4 million and $4.0 million for RSUs and PSUs, respectively, which are expected to be recognized over weighted-average periods of 2.4 years and 2.5 years, respectively.

(11)Income Taxes

Income tax expense (benefit) was $30,000 and $(37,000) for the three months ended June 30, 2026 and 2025, respectively. Income tax expense was $60,000 and $11,000 for the six months ended June 30, 2026 and 2025, respectively. The effective income tax rate wasnil for each of the three and six months ended June 30, 2026 and 2025. The effective tax rate differs from the U.S. statutory rate primarily due to a full valuation allowance against net deferred tax assets where it is more likely than not that some or all of the deferred tax assets will not be realized.

(12)Earnings Per Share

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

Basic and diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. The computation of diluted net loss per share excludes the effect of all potential common shares outstanding as their impact would have been anti-dilutive. In June 2026, in connection with the exchange of debt (see Note 8), the Company issued pre-funded warrants exercisable for 10.3 million shares of its common stock at an exercise price of $0.0001 per share. As the pre-funded warrants are issuable for nominal consideration, the shares underlying the unexercised pre-funded warrants were considered outstanding for purposes of the calculation of net loss per share for the three and six months ended June 30, 2026.

The Company has excluded stock-based awards and shares issuable upon conversion of the 2027 Notes from the diluted loss per share calculation because their effect was anti-dilutive. The total number of shares excluded for the three and six months ended June 30, 2026 was 11.3 million. The total number of shares excluded for the three and six months ended June 30, 2025 was 7.3 million.

(13)Fair Value Measurements

Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair value. Accordingly, assets and liabilities carried at fair value are classified within the fair value hierarchy in one of the following categories:

• Level 1 inputs — Quoted prices in active markets for identical assets or liabilities.

• Level 2 inputs — Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 inputs — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability.

The following tables present the Company’s financial assets that are recorded at fair value on a recurring basis, segregated among the appropriate levels within the fair value hierarchy:

The following tables present the Company’s financial liabilities that are recorded at amortized cost, segregated among the appropriate levels within the fair value hierarchy:

The estimated fair values of the 2028 Notes and 2027 Notes, which are classified as Level 2 financial instruments, were determined based on the estimated or actual bid prices of the respective notes in an over-the-counter market on the last business day of the period, if available, or indicative pricing from market information.

(14)Commitments and Contingencies

Leases

Future minimum lease payments under noncancelable operating leases and future minimum finance lease payments as of June 30, 2026 are as follows:

Legal Proceedings

From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company applies accounting for contingencies to determine 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. Although the ultimate aggregate amount of monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, management believes that any monetary liability or financial impact to the Company from these matters, individually and in the aggregate, beyond that provided at June 30, 2026, would not be material to the Company’s consolidated financial position, results of operations or cash flows. However, there can be no assurance with respect to such result, and monetary liability or financial impact to the Company from legal proceedings, lawsuits and other claims could differ materially from those projected.

Lavin v. the Company

On May 28, 2021, a putative class action complaint was filed against the Company in the Eastern District of New York captioned Lavin v. Virgin Galactic Holdings, Inc., Case No. 1:21-cv-03070. In September 2021, the Court appointed Robert Scheele and Mark Kusnier as co-lead plaintiffs for the purported class. Co-lead plaintiffs amended the complaint in December 2021, asserting violations of Sections 10(b), 20(a) and 20A of the Exchange Act of 1934 against the Company and certain of its current and former officers and directors on behalf of a putative class of investors who purchased the Company’s common stock between July 10, 2019 and October 14, 2021.

The amended complaint alleged, among other things, that the Company and certain of its current and former officers and directors made false and misleading statements and failed to disclose certain information regarding the safety of the Company’s ships and success of its commercial flight program. Co-lead plaintiffs seek damages, interest, costs, expenses, attorneys’ fees, and other unspecified equitable relief. The defendants moved to dismiss the amended complaint and, on November 7, 2022, the Court granted in part and denied in part the defendants’ motion and gave the plaintiffs leave to file a further amended complaint.

Plaintiffs sought leave to file a second amended complaint on December 12, 2022, and subsequently filed that complaint on February 9, 2023. The second amended complaint contains many of the same allegations as in the first amended complaint. The defendants moved to dismiss the second amended complaint and, on August 8, 2023, the Court granted in part and denied in part the defendants’ motion and did not give plaintiffs leave to file a further amended complaint. Plaintiffs moved for reconsideration of the Court’s dismissal order and, on December 19, 2023, the Court denied plaintiffs’ motion. On March 27, 2024, the defendants moved for judgment on the pleadings as to the remaining Section 10(b) insider trading claim alleged against Branson. On April 2, 2024, the Court stayed briefing on defendants’ motion for judgment on the pleadings pending resolution of plaintiffs’ anticipated motion for leave to add a new representative plaintiff, which plaintiffs’ subsequently filed on May 1, 2024. The Court granted plaintiffs’ motion on July 2, 2024. On July 8, 2024, defendants withdrew their motion for judgment on the pleadings.

On August 21, 2024, plaintiffs filed a third amended complaint in which Xinqiang Cui, Justin Carlough, Jennifer Ortiz, Richard O’Keefe-Jones, Vipul Gupta, Maria Josephine Rosales, and Hesham Ibrahim (previously named plaintiffs), were designated by plaintiffs as lead plaintiffs (in addition to Robert Scheele and Mark Kusnier), and an additional named plaintiff, Montgomery Brantley, was added. The third amended complaint contains substantively the same allegations as in the second amended complaint. On September 11, 2024, defendants filed an answer to plaintiffs’ third amended complaint.

On October 12, 2024, plaintiffs filed a motion to certify their proposed class. The defendants filed an opposition to plaintiffs’ motion on December 20, 2024, plaintiffs filed their reply on January 24, 2025, and defendants filed a sur-reply on March 21, 2025. On February 27, 2026, the Court entered an order denying the motion as moot in light of the parties’ settlement (see below).

On February 12, 2025, plaintiffs submitted a letter request to the Court seeking permission to file a motion for leave to file a Fourth Amended Complaint. On March 17, 2025, the Court granted plaintiffs’ request to file a motion for leave to amend, which plaintiffs did on March 26, 2025. Defendants filed their opposition on April 11, 2025, and plaintiffs filed their reply on April 23, 2025. On June 12, 2025, the Court issued an order allowing plaintiffs to file a fourth amended complaint. On June 26, 2025, plaintiffs filed their fourth amended complaint.

On July 18, 2025, plaintiffs and defendants (“Parties”) executed a Memorandum of Understanding (“MOU”) outlining the terms of a settlement to resolve all claims in the above-referenced action. In connection with the MOU, the Company recorded the expected net settlement of $2.25 million and included it in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2025.

Pursuant to the MOU, the Company agreed to pay $8.5 million, of which the Company expected $6.25 million to be covered and paid directly by the Company’s insurers pursuant to insurance policies. The Company accrued a liability for the gross settlement amount and also recorded a receivable for the portion of the settlement that was expected to be covered directly by insurance. On November 4, 2025, plaintiffs asked the Court to preliminarily approve the Parties’ settlement. On March 11, 2026, the Court entered an order granting preliminary approval of the settlement. On May 27, 2026, plaintiffs filed a motion seeking final approval of the settlement. The Company made all payments related to the settlement in April 2026. The settlement remains subject to final approval by the Court.

Spiteri, Grenier, Laidlaw, St. Jean, and Gera derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors

On February 21, 2022, March 1, 2022, September 21, 2022, December 13, 2022, and July 11, 2024, five alleged shareholders filed separate derivative complaints purportedly on behalf of the Company against certain of the Company’s current and former officers and directors in the Eastern District of New York captioned Spiteri v. Branson et al., Case No. 1:22-cv-00933 (“Spiteri Action”), Grenier v. Branson et al., Case No. 1:22-cv-01100 (“Grenier Action”), Laidlaw v. Branson et al., Case No. 1:22-cv-05634 (“Laidlaw Action”), St. Jean v. Branson et al., Case No. 1:22-cv-7551 (“St. Jean Action”), and Gera v. Branson et al., Case No. 1:24-cv-04795 (“Gera Action”), respectively. On May 4, 2022, the Spiteri and Grenier Actions were consolidated and recaptioned In re Virgin Galactic Holdings, Inc. Derivative Litigation, Case No. 1:22-cv-00933 (“Consolidated Derivative Action”). On September 30, 2023, the Laidlaw Action was consolidated into the Consolidated Derivative Action. On September 12, 2024, the Gera Action was consolidated into the Consolidated Derivative Action. Collectively, the complaints assert violations of Sections 10(b), 14(a), and 21D of the Exchange Act of 1934 and claims of breach of fiduciary duty, aiding and abetting breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, contribution and indemnification, and unjust enrichment arising from substantially similar allegations as those contained in the securities class action described above. The complaints seek an unspecified sum of damages, interest, restitution, expenses, attorneys’ fees and other equitable relief.

On March 20, 2026, the parties in the Consolidated Derivative Action and the St. Jean Action reached a settlement in principle to resolve both actions. On April 23, 2026, the Parties executed a stipulation of settlement, which, if approved, will resolve all claims pending in the Consolidated Derivative Action and the St. Jean Action, and will also release all claims that were or could have been asserted on behalf of the Company, derivatively, by plaintiffs or any of the Company’s stockholders that are related to or based upon any of the allegations in the Consolidated Derivative Action and the St. Jean Action.

The proposed settlement, if approved, will result in the adoption of certain corporate reforms and a monetary payment of $2.75 million by the Company’s insurers to the Company, half of which the Company will retain and the other half of which the Company shall pay to counsel for plaintiffs in the Consolidated Derivative Action and St. Jean Action, collectively, for their attorneys’ fees and costs. On April 23, 2026, Plaintiffs asked the Court to preliminarily approve the Parties’ settlement. On May 19, 2026, the Court entered an order granting preliminary approval of the settlement. On June 30, 2026, plaintiffs filed a motion seeking final approval of the Parties’ settlement. The proposed settlement remains subject to final approval by the Court.

Abughazaleh derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors

On February 13, 2023, alleged shareholder Yousef Abughazaleh filed a derivative complaint purportedly on behalf of the Company against certain of the Company’s current and former officers and directors in the District of Delaware captioned Abughazaleh v. Branson et al., Case No. 23-156-MN (“Abughazaleh Action”). The complaint asserts violations of Section 14(a) of the Exchange Act of 1934 and SEC Rule 14a-9, and claims of breach of fiduciary duty, contribution and indemnification, and unjust enrichment arising from substantially similar allegations as those contained in the securities class action described above.

The complaint seeks an unspecified sum of damages, interest, restitution, expenses, attorneys’ fees and other equitable relief. The Abughazaleh Action is presently stayed.

Molnar and Tubbs derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors

On April 9, 2024, alleged shareholders Crystal Molnar and Cleveland Tubbs filed a derivative complaint purportedly on behalf of the Company against certain of the Company’s current and former officers and directors in the Central District of California captioned Molnar v. Branson et al., Case No. 8:24-cv-775. The complaint asserts violations of Section 10(b) and 21D of the Exchange Act of 1934, and claims of breach of fiduciary duty and unjust enrichment arising from substantially similar allegations as those contained in the securities class action described above.

The complaint seeks an unspecified sum of damages, restitution, expenses, attorneys’ fees, and other equitable relief.

On July 11, 2025, the Court entered an order to show cause regarding dismissal for lack of prosecution. In response, on July 16, 2025, plaintiffs filed a joint stipulation of voluntary dismissal without prejudice indicating their intention to participate in the Espinosa action pending in Delaware Chancery Court. On July 17, 2025, the Court granted plaintiffs’ stipulation and entered an order of dismissal.

Espinosa derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors

On September 3, 2024, alleged shareholder Kimberly Espinosa filed a derivative complaint purportedly on behalf of the Company against certain of the Company’s current and former officers and directors (the “Individual Defendants”) in the Delaware Court of Chancery captioned Espinosa v. Branson et al., Case No. 2024-0895-JTL. The complaint asserts claims of breach of fiduciary duty and unjust enrichment arising from substantially similar allegations as those contained in the securities class action described above.

The complaint seeks an unspecified sum of damages, interest, restitution, expenses, attorneys’ fees and other equitable relief. On August 12, 2025, the Court granted plaintiff Crystal Molnar’s unopposed motion to intervene in the Espinosa action. On August 14, 2025, the Company and the Individual Defendants filed a motion to dismiss the complaint. In response to the motion to dismiss, plaintiffs Espinosa and Molnar communicated their intent to file an amended complaint. Per Court order adopting the parties’ stipulation, plaintiffs filed an amended complaint on October 29, 2025. On December 23, 2025, the Company and the Individual Defendants filed a motion to dismiss the amended complaint.

On February 3, 2026, in light of settlement discussions in the Consolidated Derivative and St. Jean Actions, the parties filed a stipulation seeking to stay the Espinosa Action, including remaining briefing on the Company’s and the Individual Defendants’ motion to dismiss the amended complaint, for 120 days following the Court’s entry of the stay. The Court entered the stipulated stay on February 4, 2026. On April 7, 2026, the parties filed a joint status report notifying the Court of the settlement in principle in the Consolidated Derivative and St. Jean Actions, and requested a continued stay of the Espinosa action pending settlement proceedings in the Consolidated Derivative and St. Jean Actions. On June 1, 2026, the parties filed a further joint status report notifying the Court that the court in the Consolidated Derivative Action entered an order granting preliminary approval of the settlement, and requested a continued stay of the Espinosa action pending final approval of that settlement.

(15)Related Party Transactions

The Company licenses its brand name from certain entities affiliated with Virgin Enterprises Limited (“VEL”), a company incorporated in England. VEL is an affiliate of the Company. Under the trademark license, the Company has the exclusive right to operate under the brand name “Virgin Galactic” worldwide. Royalties payable, excluding sponsorship royalties, are the greater of (a) a low single-digit percentage of gross sales and (b) (i) prior to the first spaceflight for paying astronauts, a mid-five figure amount in dollars and (ii) from the first spaceflight for paying astronauts, a low-six figure amount in dollars, which increases to a low-seven figure amount in dollars over a four-year ramp up and thereafter increases in correlation with the consumer price index. Royalties payable on sponsorships are based on a mid-double-digit percentage of the related gross sales. During the six months ended June 30, 2026 and 2025, the Company incurred royalty expenses of $1.5 million and $1.0 million, respectively.

(16)Supplemental Cash Flow Information