June 25, 2021, Artius Acquisition, Inc.consummated the Business Combination with Legacy Origin pursuant to the Merger Agreement. In connection with the closing of the Business Combination, Artiuschanged its name to Origin Materials, Inc.Legacy Origin was deemed to be the accounting acquirer in the Merger. While Artiuswas the legal acquirer in the Merger, because Legacy Origin was deemed the accounting acquirer, the historical consolidated financial statements of Legacy Origin became the historical consolidated financial statements of the combined company, upon the consummation of the Merger. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" as set forth elsewhere in this Annual Report. Unless the context otherwise requires, references in this section to "Legacy Origin", "the Company", "we", "us" and "our" refer to the business and operations of Legacy Origin and its consolidated subsidiaries prior to the Business Combination and to Origin Materials, Inc.and its consolidated subsidiaries, following the Closing.
Origin is a carbon negative materials company with a mission to enable the world's transition to sustainable materials by replacing petroleum-based materials with decarbonized materials in a wide range of end products, such as food and beverage packaging, clothing, textiles, plastics, car parts, carpeting, tires, adhesives, soil amendments and more. We believe that our platform technology can help make the world's transition to "net zero" possible and support the fulfillment of greenhouse gas reduction pledges made by countries as part of the United Nations Paris Agreement as well as corporations that are committed to reducing emissions in their supply chains. Our technology can convert sustainable feedstocks such as sustainably harvested wood residues, agricultural waste, wood waste and even corrugated cardboard into materials and products that are currently made from fossil feedstocks such as petroleum and natural gas. These sustainable feedstocks are not used in food production, which differentiates our technology from other sustainable materials companies that use feedstocks such as vegetable oils or high fructose corn syrup and other sugars. While we have has succeeded in producing small amounts of our products in the pilot plant for customer trials and testing purposes, we have has not yet commenced large-scale production. We believe that products made using Origin's platform technology can compete directly with petroleum-derived products on both performance and price. Due to abundant and renewable wood supplies that have historically stable pricing, our cost of production is expected to be more stable than potential competing platforms that use other types of feedstocks. We believe that end products made using our platform technology will have a significant unit cost advantage over products made from other low carbon feedstocks. We have developed a proprietary platform technology to convert biomass, or plant-based carbon, into the versatile "building block" chemicals CMF and HTC, as well as other product intermediates. At a commercial scale, Origin's platform technology is expected to produce CMF and HTC with a negative carbon footprint. Origin believes these chemicals can replace petroleum-based counterparts, lowering the carbon footprint of a wide range of materials without sacrificing performance or cost. We are currently developing and constructing our first manufacturing plant in
Ontario, Canada(Origin 1), which is expected to become operational by the end of 2022. We are also currently in the planning phase for the construction of a significantly larger manufacturing plant (Origin 2), which is expected to become operational in 2025.
Impact of the COVID-19 pandemic
March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The pandemic has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments, school closures and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of the COVID-19 pandemic. 37 -------------------------------------------------------------------------------- We continue to monitor the rapidly evolving conditions and circumstances, as well as guidance from international and domestic authorities, including public health authorities, and we may need to take additional actions based on their recommendations. There is considerable uncertainty regarding the impact on our business stemming from current measures and potential future measures that could restrict access to our facilities, limit manufacturing and support operations and place restrictions on our workforce and suppliers. The measures implemented by various authorities related to the COVID-19 outbreak have caused us to change our business practices including those related to where employees work, the distance between employees in our facilities, limitations on in-person meetings between employees and with customers, suppliers, service providers and stakeholders, as well as restrictions on business travel to domestic and international locations or to attend trade shows, investor conferences and other events. The full extent to which the ongoing COVID-19 pandemic adversely affects our financial performance will depend on future developments, many of which are outside of our control, that are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the effectiveness of actions to contain the virus (including the availability and effectiveness of vaccines) or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. The COVID-19 pandemic could also result in additional governmental restrictions and regulations, which could harm Origin's business and financial results. In addition, a recession, depression or other sustained adverse market impact resulting from COVID-19 could harm our business and its access to needed capital and liquidity. Even after the COVID-19 pandemic has subsided, Origin may continue to experience adverse impacts on its business and financial performance as a result of the global economic impact of the COVID-19 pandemic. To the extent that the COVID-19 pandemic adversely affects our business, results of operations, financial condition or liquidity, it may also heighten other risks, such as the risk that, if the business impacts of COVID-19 carry on for an extended period, we may be required to recognize impairments for certain long-lived assets including amortizable intangible assets.
Key Factors and Trends Affecting Origin’s Operating Results
We are a pre-revenue company. We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and under "Risk Factors" appearing elsewhere in this Annual Report.
We currently conduct our business through one operating segment. As a pre-revenue company with no commercial operations, our activities to date have been limited, and our historical results are reported under
U.S.GAAP and in U.S.Dollars. Upon commencement of commercial operations, we expect to expand our operations substantially, including in the United Statesand Canada, and as a result, we expect Origin's future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in Origin's historical financial statements. As a result, we expect that the financial results we report for periods after we begin commercial operations will not be comparable to the financial results included in this Annual Report.
Components of operating results
We are a pre-revenue company and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.
Research and development costs
To date, our research and development expenses have consisted primarily of development of our four key product intermediates CMF, HTC, levulinic acid and furfural, and the conversion of those intermediates into products familiar to and desired by our customers, such as PX and PET. Our research and development expenses also include investments associated with the expansion of the Origin 1 plant and planning and construction of the Origin 2 plant, including the material and supplies to support product development and process engineering efforts. 38 --------------------------------------------------------------------------------
General and administrative expenses
General and administrative expenses mainly include personnel costs, including stock-based compensation, professional fees, including accounting, auditing, legal, regulatory and tax compliance costs.
Additionally, costs related to advertising, trade shows, corporate marketing, as well as an allocated portion of our occupancy costs also comprise general and administrative expenses.
Change in fair value of deemed liability related to common share purchase warrants
The change in fair value of assumed common stock warrants liability consists of the change in fair value of the Public Warrants and Private Placement Warrants assumed in connection with the Business Combination. We expect to incur an incremental income (expense) for the fair value adjustments for the outstanding assumed common stock warrants liability at the end of each reporting period or through the exercise of the warrants.
Other income (expenses)
Our other income (expense) consists of income from governmental grant programs, interest expense for stockholder convertible notes payable, interest income on marketable securities and income or expenses related to changes in the fair value of assumed common stock warrants liability, earnout liability, and derivative assets and liabilities. We expect to incur an incremental income (expense) for the fair value adjustments of these assets and liabilities at the end of each reporting period. Income Tax Expense (Benefit)
Our provision for income taxes consists of an estimate of
To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA) as a non-GAAP measure. This measure is not a financial measure calculated in accordance with GAAP, and it should not be considered as a substitute for net income, operating income, or any other measure calculated in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.
We believe that the presentation of Adjusted EBITDA is appropriate to provide additional information to investors about our operating profitability adjusted for certain non-cash items, non-routine items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures. 39 -------------------------------------------------------------------------------- We define Adjusted EBITDA as net income or loss adjusted for certain non-cash and non-recurring items, including (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) interest income, (iv) interest expense, net of capitalized interest, (v) change in fair value of derivative liabilities, (vi) change in fair value of warrants liability, (vii) change in fair value of earnout liability, (viii) professional fees related to completed mergers, and (ix) other income, net. Year ended December 31, (in thousands) 2021 2020 Net income (loss)
$ 42,090 $ (30,302)Stock based compensation 5,767 1,630 Depreciation and amortization 544 479 Interest income (1,413) - Interest expense, net of capitalized interest 2,838 341 Change in fair value of derivative liabilities
Change in fair value of warrants liability
Change in fair value of earnout liability (75,488) - Professional fees related to completed mergers 640 - Other income, net (811) (805) Adjusted EBITDA
$ (19,982) $ (9,071)
Comparison of the year ended
The following table summarizes the Company's results of operations with respect to the items set forth in such table for the year ended
December 31, 2021and 2020 together with the change in such items in dollars and as a percentage. Year Ended December 31, (in thousands) 2021 2020 Variance Variance % Operating expenses: Research and development $ 9,124 $ 4,138 $ 4,986120 % General and administrative expenses 17,265 6,563 10,702 163 % Depreciation and amortization 544 479 65 14 % Total operating expenses and loss from operations 26,933 11,180 15,753 141 % Other expenses (income): Interest income (1,413) - (1,413) 100 % Interest expense, net of capitalized interest 2,838 341 2,497 732 % Change in fair value of derivative liabilities 1,326 1,088 238 22 % Change in fair value of warrant liability 4,525 18,498 (13,973) 76 % Change in fair value of earnout liability (75,488) - (75,488) 100 % Other income, net (811) (805) (6) 1 % Total other expense (income), net (69,023) 19,122 (88,145) (461) % Net income (loss) $ (42,090) $ 30,302 $ (72,392)(239) %
Research and development costs
Research and development expenses increased
$5.0 million, or 120%, from 2020 compared to 2021. This increase was primarily due to increases of $1.1 millionin stock compensation related to additional stock grants, $0.6 millionin fees paid to third-party consultants, $1.8 millionrelated to incremental research and development staffing, $0.3 millionin additional research and development supplies, $0.3 millionin additional service costs, $0.2 millionin additional software and information technology costs, and $0.7 millionin other additional expenses. 40 --------------------------------------------------------------------------------
General and administrative expenses
General and administrative expenses increased
$10.7 million, or 163%, from 2020 compared to 2021. This increase was primarily related to increases of $3.0 millionin stock compensation expenditures, $0.8 millionfor incremental increases in staffing supporting construction of Origin 1, including additional expense for personnel within executive, accounting, procurement, sales, and supply-chain development, as well as services in support of the Merger, $0.4 millionin legal and professional fees related to regulatory compliance costs, $0.6 millionin professional fees related to completed mergers, $2.1 millionin additional directors and officers insurance policies, $0.6 millionin additional software and information technology costs, $2.8 millionin financing costs, and $0.4 millionin marketing costs.
Interest income increased
$1.4 millionfrom 2020 compared to 2021. This increase was related to $1.4 millionin interest income from investments in marketable securities.
Interest charges. net of capitalized interest
Interest expense increased
Change in fair value of derivative liabilities, liability related to warrants and liability related to price supplements
The Company recognized a gain on the change in the fair values of the derivative liabilities, the warrant liability, and the earnout liability in the amount of
$89.2 millionfrom 2020 to 2021. The earnout liability and a portion of the change in the warrant liability are from newly created liabilities reclassified from equity as a result of the Business Combination, with a combined decrease in fair value of $89.4 millionresulting from the change in fair value of these instruments over the period from the closing of the merger to December 31, 2021. The decrease in fair value was offset by a $0.3 millionincrease in the fair value of derivative liability and $0.1 millionunrealized gain in the fair value of the foreign currency forward contract derivatives. The movement in these instruments' fair values are driven by the value of the Company's stock price.
Other income, net
Other income increased by a total of
Cash and capital resources
Sources of liquidity
Since inception, we have financed our operations principally from the sales and issuances of redeemable preferred stock, common stock, and convertible notes, and governmental grant programs. Origin had
$444.6 millionand $1.9 millionin cash, cash equivalents, restricted cash and marketable securities as of December 31, 2021and December 31, 2020, respectively. Our cash equivalents are invested primarily in U.S. Treasurymoney market funds and our marketable securities are primarily U.S. Treasurynotes and bonds, corporate bonds, asset-back securities, foreign government and agency securities, and municipal bonds. We are yet to generate any revenue from our business operations. Our ability to successfully develop the products, commence commercial operations and expand the business will depend on many factors, including our ability to meet the working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations. We will require a significant amount of cash for capital expenditures as we invest in the construction of Origin 1 and Origin 2 plants, and additional research and development. In addition to our cash on hand following the Business Combination, we anticipate that we will need substantial additional project financing and government incentives to meet our financial projections, execute our growth strategy and expand our manufacturing capability, including to finance the construction of the Origin 1 and Origin 2 plants. Our ability to obtain financing for the construction of future plants may depend in part on our ability to first enter into customer agreements sufficient to demonstrate sufficient demand to justify 41 -------------------------------------------------------------------------------- the construction of such plants. We may also raise additional capital through equity offerings or debt financings, as well as through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties. Our future capital requirements will depend on many factors, including actual construction costs of the Origin 1 and Origin 2 plants, changes in the costs in our supply chain, expanded operating activities and our ability to secure customers. If our financial projections are inaccurate, we may need to seek additional equity or debt financing from outside sources, which may not be available on acceptable terms, if at all. If we are unable to raise additional capital when required, our business, financial condition and results of operations would be harmed. We expect to continue to incur operating losses in the near term as our operating and capital expenses will increase to support the growth of the business. We expect that our general and administrative expenses and research and development expenses will continue to increase as we increase our sales and marketing activities, develop our distribution infrastructure, support our growing operations and operate as a public company.
November 2019, Legacy Origin entered into secured convertible note agreements (the "2019 Notes") with certain Legacy Origin preferred stockholders, whereby Legacy Origin could borrow up to $6.0 millionin aggregate from the noteholders. The 2019 Notes bear an annual interest rate of 10% and an original maturity date of September 30, 2021. All principal and accrued interest under the 2019 Notes were converted into shares of Legacy Origin Common Stock immediately prior to the closing of the Business Combination. In April 2020, Legacy Origin received an unsecured loan in the amount of $905,838under the Paycheck Protection Program (the "PPP Loan"). The Paycheck Protection Program was established under the CARES Act and is administered by the U.S. Small Business Administration. The PPP Loan had a two-year term and bears interest at a rate of 1.00% per annum. This loan was repaid on June 24, 2021. As of December 31, 2021and December 31, 2020, we have $6.8 millionand $6.2 millionof indebtedness under a Canadian government program, respectively, of which $0.5 millionand $2.6 millionwas received during the year ended December 31, 2021and December 31, 2020, respectively. Additionally, as of December 31, 2021, we had liability balances consisting of a $5.1 millionlegacy related party customer prepayment, $5.7 millionlegacy related party liabilities, and $2.5 millionin customer prepayments. As of December 31, 2020, we had liability balances consisting of a $2.5 millioncustomer prepayment, a $5.5 millionlegacy stockholder note, and a $5.1 millionlegacy related party customer prepayment. During 2020, we received $550,000for the admission of an additional member to a consortium agreement with two legacy Series B preferred stock investors and a legacy Series C investor to collaborate on development of a process to commercialize bio-based, decarbonizing materials for application on an industrial scale at a competitive price. These funds were recorded as other income, net, in the Statements of Operations and Comprehensive Income (Loss). In February 2021, Legacy Origin issued and sold convertible promissory notes with an aggregate principal amount of $10.0 millionand an interest rate of 8.0% per annum (the "2021 Notes"). The 2021 Notes had an original maturity date on September 30, 2021. All principal and accrued interest on the 2021 Notes were converted into shares of Legacy Origin Common Stock immediately prior to the closing of the Business Combination. In November 2016, Legacy Origin received a $5.0 millionprepayment from a stockholder for product from Origin 1 pursuant to an Offtake Agreement. The prepayment was to be credited against the purchase of products over the term of the agreement. The prepayment was secured by a promissory note to be repaid in cash in the event that the prepayment could not be credited against the purchase of product, for example, if Origin 1 is never constructed. The promissory note was collateralized substantially by Origin 1 and other assets of Origin Material Canada Pioneer Limited. In May 2019, Legacy Origin and the legacy stockholder amended the offtake agreement and promissory note. The amendment added accrued interest of $0.2 millionto the principal balance of the prepayment and provided for the prepayment amount to be repaid in three annual installments rather than being applied against the purchase of product from Origin 1. The promissory note would bear interest at 3.5% per annum and be repaid in three installments of $2.2 million, $2.1 million, and $2.1 million(inclusive of accrued but unpaid interest) on December 20, 2024, December 19, 2025, and December 18, 2026, respectively. At December 31, 2021and December 31, 2020, the total aggregate principal amount of debt outstanding was $5.2 millionand accrued interest totaled $0.5 millionand $0.3 million, respectively. 42 --------------------------------------------------------------------------------
November 2016, Legacy Origin received a $5.0 millionprepayment from a legacy stockholder for product from Origin 1 pursuant to an Offtake Agreement. The prepayment is to be credited against the purchase of products from Origin 1 over the term of the Offtake Agreement. Specifically, repayment is effected by applying a credit to product purchases each month over the first five years of operation of Origin 1 up to $7.5 million, which is equal to 150% of the prepayment amount. If product purchases are not sufficient to recover the advances, the application of the credit to purchases as payment of the advances will continue until fully repaid. The prepayment is secured by a note to be repaid in cash in the event the prepayment cannot be credited against the purchase of product, for example, if Origin 1 is never constructed. The note is collateralized substantially by Origin 1 and other assets of Origin Material Canada Pioneer Limited. If repaid in cash, the note bears an annual interest rate of the three-month London Interbank Offered Rate (LIBOR) plus 0.25% (0.38% at December 31, 2021) and matures five years from the commercial operation date of Origin 1. At December 31, 2021and December 31, 2020the total note principal outstanding was $5.1 millionplus accrued interest of $0.1 millionand $0.1 million, respectively. In September 2019, Legacy Origin entered into a $5.0 millionprepayment agreement with a counterparty for the purchase of products from Origin 2. The prepayment is to be made in two equal installments: the first $2.5 millionwas in October 2019and the remaining $2.5 millionis due within 30 days of the customer confirming that a sample from Origin 1 meets the customer's specifications. Origin and the customer agreed to work in good faith to execute an Offtake Agreement, the agreed terms of which are set forth in the prepayment agreement, whereby 100% of the prepayment will be applied against future purchases. The prepayment agreement provides the customer a capacity reservation of up to a specified annual volume of product from Origin 1 for a term of ten years, pursuant to the terms of an Offtake Agreement. At December 31, 2021and December 31, 2020, the total amount outstanding on this agreement was $2.5 million.
Cash flow for the year ended
The following table shows a summary of cash flows for the year ended
December 31, 2021and 2020: Year Ended December 31, 2021 2020 Total cash used in operating activities $ (22,043) $ (5,461)Total cash used in investing activities (411,638) (2,054) Total cash provided by financing activities 478,948 5,829
Effects of changes in exchange rates on the balance of cash and cash equivalents and on restricted cash held in foreign currencies
(14) (52) Net increase (decrease) in cash
$ 45,253 $ (1,738)
Cash flows used in operating activities
Net cash used in operating activities was
$22.0 millionfor the year ended December 31, 2021, compared to net cash used in operating activities of $5.5 millionover the same period in 2020. The increase in cash used in operating activities was primarily attributable to an increase in net loss (after adjusting for non-cash items) attributed to incremental increases in staffing supporting construction of Origin 1, including additional expense within executive, accounting, procurement, sales, and supply-chain development, increase in prepaid expenses and other current assets, and offset by decreases in accrued expenses. Cash Used in Investing Activities Net cash used in investing activities was $411.6 millionfor the year ended December 31, 2021, compared to net cash used in investing activities of $2.1 millionover the same period in 2020. Our cash flows from investing activities, to date, have been comprised of purchases of property and equipment and purchases and maturities of our marketable securities. We expect the costs to acquire property, plant and equipment to increase substantially in the near future as we fully build out Origin 1 as well as acquire the property, plant and equipment for Origin 2. The change was primarily related to net purchases of marketable securities of $424.2 millionfor the year ended December 31, 2021, compared to $0.0 millionfor the year ended December 31, 2020. and cash used for property, plant and equipment purchases in the year ended December 31, 2021of $12.3 million, an increase over the $1.8 millionof cash used for property, plant and equipment purchases in the year ended December 31, 2020. The Company continues to increase activity related to the construction of Origin 1, which is the main driver of the variation in cash used in investing activities between the two periods. 43 --------------------------------------------------------------------------------
Cash provided by financing activities
Net cash provided by financing activities was
$478.9 millionfor the year ended December 31, 2021, compared to net cash provided by financing activities of $5.8 millionover the same period in 2020. The Company completed a business combination during the year ended December 31, 2021, netting cash proceeds of $467.5 million. Cash of $11.7 millionwas provided by proceeds from notes payable, payments of $0.9 millionwere made on short term debt, and $0.5 millionprovided by proceeds from Canadian Government Researchand Development during the year ended December 31, 2021, compared to cash of $3.2 millionprovided by proceeds from notes payable, payments of $0.0 millionwere made on short-term debt, and $2.7 millionprovided by proceeds from Canadian Government Researchand Development over the same period in 2020.
Significant cash requirements arising from known contractual obligations
Our significant liquidity needs arising from contractual obligations known to
•The total cost of Origin 1, our initial plant, under construction in
Sarnia, Ontario, Canadaand Origin 2 is projected to cost over $1.1 billion, including amounts spent in 2021. These costs, plus the ongoing operating loss of the Company is expected to be funded through a combination of Company cash and marketable securities in addition to substantial project financing and government incentives. We also expect to secure funding for plant construction under potential collaborations, strategic alliances or marketing, distribution or licensing arrangements which have not yet been secured, until such time as Origin 2 is operational. •Operating lease liabilities that are included in our consolidated balance sheets consists of future non-cancelable minimum rental payments under operating leases for our office space, research and development space, and leases of various office equipment, warehouse space, and temporary fencing. For additional information regarding our lease liabilities, see Note 18 to the consolidated financial statements in Item 8 of this Annual Report.
Significant Accounting Policies and Estimates
Our financial statements have been prepared in accordance with
U.S.GAAP. In the preparation of these consolidated financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements. Our significant accounting policies are described in Note 3 to our consolidated financial statements included elsewhere in this Annual Report. We have the critical accounting policies and estimates which are described below.
Origin may grant a wide variety of equity securities under various stock incentive plans, including incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards, and other awards. At
December 31, 2021, the Company has granted incentive stock options, RSU awards, and performance awards. Origin measures stock options and other stock-based awards granted to employees, directors and other service providers based on their fair value on the date of grant and recognizes compensation expenses of those awards over the requisite service period, net of estimated forfeitures, which is generally the vesting period of the respective award. For awards with performance conditions, compensation is recorded once there is sufficient objective evidence the performance conditions are considered probable of being met. The estimated number of stock awards that will ultimately vest requires judgement, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. Origin applies the straight-line method of expense recognition to all awards with only service-based vesting conditions. Origin estimates the fair value of each stock option 44 -------------------------------------------------------------------------------- grant on the date of grant using the Black-Scholes option-pricing model and the grant date closing stock price for restricted stock awards. The Black-Scholes option-pricing model requires the use of highly subjective assumptions including: •Expected Term-Origin have opted to use the "simplified method" for estimating the expected term of plain-vanilla options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). •Risk-Free Interest Rate-The risk-free rate assumption is based on the U.S. Treasuryzero-coupon instruments with maturities similar to the expected term of Origin's stock options. •Expected Dividend-Origin has not issued any dividends and does not anticipate issuing dividends on Origin's common stock. As a result, Origin has estimated the dividend yield to be zero. •Forfeiture- The Companyestimates forfeitures based on historical activity and considers voluntary and involuntary termination behavior as well as analysis of actual historical option forfeitures, netting the estimated expense by the derived forfeiture rate. •Expected Volatility-Due to Origin's limited operating history and a lack of company-specific historical and implied volatility data, Origin has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility data was computed using the daily closing prices for the various companies' shares during the equivalent period of the calculated expected term of the stock-based awards.
We account for the Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Liability for price supplements
The Company has recorded an earnout liability related to future contingent equity shares related to the Business Combination (Note 13). The Company recorded these instruments as liabilities on the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in earnings at each reporting date. The determination of the fair value involves certain judgments and estimates. These judgments include, but are not limited to, the probability of achievement of the market conditions, expected volatility of the Company's common stock, and the appropriate discount rate.
We maintain a portfolio of investments in a variety of fixed and variable rate debt securities, including
U.S.treasuries, U.S.government sponsored entities, corporate debt, asset-backed securities and other. We consider our investments in marketable debt securities to be available-for-sale, and accordingly, are recorded at their fair values. We determine the appropriate classification of investments in marketable debt securities at the time of purchase. Interest along with amortization of purchase premiums and accretion of discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other income (expense), net in the consolidated statements of operations. At December 31, 2021the fair value of marketable securities was estimated to be $397.5 million. See Note 6 - "Fair Value Measurements" of our Notes to the Consolidated Financial Statements for additional information. We typically invest in highly-rated debt securities, and our investment policy generally limits the amount of credit exposure to any one issuer. The policy requires substantially all investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. We regularly review our available-for-sale marketable securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. As of December 31, 2021none of the marketable securities in an unrealized loss position have been in the continuous unrealized loss for more than twelve months. The unrealized losses were attributable to changes in 45 -------------------------------------------------------------------------------- interest rates that impacted the value of the investments, and not increased credit risk. Accordingly, we have not recorded an allowance for credit losses associated with these investments. Declines in the fair value of our investments judged to be other than temporary could adversely affect our future operating results.
Recent accounting pronouncements
See Note 5 to the consolidated financial statements in this Annual Report for more information about recent accounting pronouncements, the timing of their adoption, and our, to the extent it has made one, of their potential impact on our financial condition and its results of operations and cash flows.
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