ORIGIN MATERIALS, INC. OnJune 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,Artius changed its name toOrigin Materials, Inc. Legacy Origin was deemed to be the accounting acquirer in the Merger. WhileArtius was 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 unaudited condensed consolidated financial statement the related notes appearing elsewhere in this 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 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 toOrigin Materials, Inc. and its consolidated subsidiaries, following the Closing. Overview 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 converts sustainable feedstocks such as sustainably harvested wood, 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 our 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, our 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. 32 -------------------------------------------------------------------------------- Table of Contents We are currently developing and constructing our first manufacturing plant inOntario, 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 In March 2020, the COVID-19 outbreak was declared a pandemic by theWorld 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. 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 Report. Basis of Presentation 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 underU.S. GAAP and inU.S. Dollars. Upon commencement of commercial operations, we expect to expand our operations substantially, including inthe United States andCanada , and as a result, we expect its future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its 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 Report. 33 -------------------------------------------------------------------------------- Table of Contents Components of Results of Operations 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 Expenses 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. As we ramp up our engineering operations to complete the development of the Origin 1 and Origin 2 plants, we anticipate that research and development expenses will increase significantly in the foreseeable future, due to expansion in hiring and increase in investment in additional plant and equipment for product development and testing. General and Administrative Expenses General and administrative expenses consist primarily of personnel-related costs, including stock-based compensation, professional fees, including, the costs of accounting, audit, legal, regulatory and tax compliance. 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 Assumed Common Stock Warrant Liability The change in fair value of Assumed Common Stock Warrant liabilities 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 Warrant liabilities at the end of each reporting period or through the exercise of the warrants. Other (Income) Expense Our other income (expense) consists of income from governmental grant programs, interest expense for convertible notes and income or expenses related to changes in the fair value of redeemable convertible preferred stock warrants liability and derivative liability. Income Tax Expense (Benefit) Our income tax provision consists of an estimate forU.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We maintain a valuation allowance against the full value of ourU.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not. 34 -------------------------------------------------------------------------------- Table of Contents Non-GAAP Measures To provide investors with additional information in connection with our results as determined in accordance with GAAP, we disclose Adjusted Net Income 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. Adjusted EBITDA We believe that the presentation of Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (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. We define Adjusted EBITDA as net income or loss adjusted for (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) interest expense, net of capitalized interest, (iv) change in fair value of derivative liability, (v) change in fair value of warrants liability, (vi) change in fair value of earnout liability, and (vii) other income, net. Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Net Income (loss)$ 62,531 $ (1,693 ) $ 8,961 $ (3,663 ) Stock based compensation 3,545 9 4,172 18 Depreciation and amortization 121 100 236 204 Interest expense, net of capitalized interest 2,560 50 2,839 113 Change in fair value of derivative liability 1,035 (12 ) 1,426 (15 )
Change in fair value of warrants liability (27,265 ) 105
20,844 105
Change in fair value of earnout liability (45,497 ) - (45,497 ) -
Other Income, net (42 ) (157 ) (624 ) (168 )
Adjusted EBITDA $ (3,012 ) $ (1,598 ) $ (7,643 ) $ (3,406 )
35-------------------------------------------------------------------------------- Table of Contents Results of Operations Comparison of the Six Months EndedJune 30, 2021 and 2020 The following table summarizes the Company's results of operations with respect to the items set forth in such table for the six months endedJune 30, 2021 and 2020 together with the change in such items in dollars and as a percentage. Six Months Ended June 30, (in thousands) 2021 2020 Variance Variance % Operating expenses: Research and development$ 3,648 $ 2,122 $ 1,526 72 % General and administrative expenses 8,167 1,302 6,865 527 % Depreciation and amortization 236 204 32 15 % Total operating expenses and loss from operations 12,051 3,628 8,423 232 % Other (income) expenses: Interest expense, net of capitalized interest 2,839 113 2,726 n.m Change in fair value of derivative liability 1,426 (15 ) 1,441 n.m Change in fair value of warrant liability 20,844 105 20,739 n.m Change in fair value of earnout liability (45,497 ) - (45,497 ) n.m Other income, net (623 ) (168 ) (455 ) 271 % Total other expense (income), net (21,011 ) 35 (21,046 ) n.m Net Income (Loss)$ 8,960 $ (3,663 ) $ 12,623 (345 )% n.m. - not meaningful. Research and Development Expenses Research and development expenses increased$1.5 million , or 72%, from 2020 compared to 2021. This increase was primarily due to increases of$1.0 million in stock compensation related to additional stock grants and$0.5 million related to incremental research and development staffing. General and Administrative Expenses General and administrative expenses increased$6.8 million , or 527%, from 2020 compared to 2021. This increase was primarily related to increased of$3.2 million in stock compensation expenditures and$3.4 million supporting construction of Origin 1, including additional hiring of personnel within executive, accounting, procurement, sales, and supply-chain development, as well as services in support of the Merger. Interest Income (expense) Interest expense increased$2.7 million from 2020 compared to 2021. This is due to the conversion of stockholder convertible notes as a result of the business combination and the elimination of the associated debt discount. 36 -------------------------------------------------------------------------------- Table of Contents Change in fair value of derivative liability, warrant liability, and earnout liability The fair values of the derivative liability, the warrant liability, and the earnout liability decreased a total of$23.3 million from 2020 to 2021. The earnout liability and a portion of the change in the warrant liability are from newly created liabilities from the business combination, with a combined decrease in fair value of$59 million resulting from the change in fair value of these instruments over the period from the closing of the merger toJune 30, 2021 . The remaining combined increase in fair value of$82.3 million resulting from an increase in the liabilities due to the closing of the business combination becoming more likely, eventually occurring onJune 25, 2021 . Other Income, net Other expense increased a total of$0.5 million from 2020 compared to 2021. This change was primarily due to increasing funding from government grants. Comparison of the Three Months EndedJune 30, 2021 andMarch 31, 2021 The following table summarizes the Company's results of operations with respect to the items set forth in such table for the three months endedJune 30, 2021 and 2020 together with the change in such items in dollars and as a percentage. Three Months Ended (in thousands) June 30, 2021 March 31, 2021 Variance Variance% Operating expenses: Research and development $ 2,339 $ 1,309$ 1,030 79 % General and administrative expenses 4,219 3,948 271 7 % Depreciation and amortization 121 115 6 5 % Total operating expenses and loss from operations 6,679 5,372 1,307 24 % Other (income) expenses: Interest income 2,560 279 2,281 n.m Change in fair value of derivative liability 1,035 391 644 165 % Change in fair value of warrant liabilities (27,265 ) 48,109 (75,374 ) (157 )% Change in fair value of earnout liability (45,497 ) - (45,497 ) n.m Other income, net (42 ) (581 ) 538 (93 )% Total other (income) expenses, net (69,210 ) 48,198 (117,408 ) (244 )% Net Income (loss)$ 62,531 $ (53,570 ) $ 116,101 217 % Research and Development Expenses Research and development expenses increased$1.0 million , or 79%, from the previous quarter. This increase was due to increases of$0.7 million in stock compensation related to additional stock grants and$0.3 million related to incremental research and development staffing. 37 -------------------------------------------------------------------------------- Table of Contents General and Administrative Expenses General and administrative expenses increased$0.3 million , or 7%, from the previous quarter. This increase was primarily related to increased stock compensation expenditures of$2.3 million and$0.4 million supporting construction of Origin 1, including additional hiring of personnel within executive, accounting, procurement, sales, and supply-chain development, offset by a decrease of$2.3 million in expenditures in preparation of efforts preceding the Merger Agreement. Interest Income (expense) Interest income (expense) decreased$2.3 million from the previous quarter. This is due to the conversion of stockholder convertible notes as a result of the business combination and the elimination of the associated debt discount. Change in fair value of derivative liability, warrant liability, and earnout liability The fair values of the derivative liability, the warrant liability, and the earnout liability decreased a total of$120.2 million from the previous quarter. The earnout liability and a portion of the change in the warrant liability are from newly created liabilities from the business combination, with a combined decrease in fair value of$59 million resulting from the change in fair value of these instruments over the period from the closing of the merger toJune 30, 2021 . The remaining combined increase in fair value of$179.2 million resulting from an increase in the liabilities due to the closing of the business combination becoming more likely, eventually occurring onJune 25, 2021 . Other Income, net Other expense decreased a total of$0.6 million from the previous quarter. This change was primarily due to increasing funding from government grants. Liquidity and Capital Resources Sources of Liquidity Since inception, we have financed our operations principally from the sales and issuances of redeemable preferred stock and convertible notes, and governmental grant programs. Origin had$470.9 million and$1.9 million in cash, cash equivalents and restricted cash as ofJune 30, 2021 andDecember 31, 2020 , respectively. Our cash equivalents are invested primarily inU.S. Treasury money market funds and Origin's marketable securities are primarilyU.S. Treasury notes and 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, including the proceeds from thePIPE Investment , 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 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 38 -------------------------------------------------------------------------------- Table of Contents 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. Indebtedness InNovember 2019 , Legacy Origin entered into secured convertible note agreements (the "2019 Notes") with certain Legacy Origin preferred stockholders, whereby Legacy Origin can borrow up to$6.0 million in aggregate from the noteholders. The 2019 Notes bear an annual interest rate of 10% and mature onSeptember 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. InApril 2020 , Legacy Origin received an unsecured loan in the amount of$905,838 under the Paycheck Protection Program (the "PPP Loan"). The Paycheck Protection Program was established under the CARES Act and is administered by theU.S. Small Business Administration . The PPP Loan has a two-year term and bears interest at a rate of 1.00% per annum. This loan was repaid onJune 24, 2021 . As ofJune 30, 2021 andDecember 31, 2020 , we have$6.4 million and$6.2 million of indebtedness under a Canadian government program, respectively, of which$2.7 million was received in 2020 and$0.1 million was received during the six months endedJune 30, 2021 . Additionally, as ofJune 30, 2021 , we had liability balances consisting of a$5.2 million customer prepayment and$5.6 million related party liabilities. As ofDecember 2020 , we had liability balances consisting of a$2.5 million customer prepayment, a$5.5 million stockholder note, and a$5.2 million customer prepayment. During 2020, we received$550,000 for the admission of an additional member to a consortium agreement with two Series B preferred stock investors and a 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 condensed consolidated statement of operations and comprehensive income and loss. InFebruary 2021 , Legacy Origin issued and sold convertible promissory notes with an aggregate principal amount of$10.0 million and an interest rate of 8.0% per annum (the "2021 Notes"). The 2021 Notes mature onSeptember 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. InNovember 2016 , Legacy Origin received a$5.0 million prepayment 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 ofOrigin Material Canada Pioneer Limited . InMay 2019 , Legacy Origin and the stockholder amended the offtake agreement and promissory note. The amendment added accrued interest of$189,169 to 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 3.50% per annum and be repaid in three installments 39 -------------------------------------------------------------------------------- Table of Contents of$2.2 million ,$2.1 million and$2.1 million (inclusive of accrued but unpaid interest) onDecember 20, 2024 ,December 19, 2025 , andDecember 18, 2026 , respectively, unless the 2019 Notes have not been converted or repaid byDecember 30, 2021 , in which case the promissory note maturity date would beDecember 31, 2021 . The promissory note is subordinate to the 2019 Notes. AtJune 30, 2021 andDecember 31, 2020 , the total aggregate principal amount of debt outstanding was$5.2 million and accrued interest totaled$0.4 million and$0.3 million , respectively. Prepayments InNovember 2016 , Legacy Origin received a$5.0 million prepayment from a 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 ofOrigin 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% (0.44% atMarch 31, 2021 ) and matures five years from the commercial operation date of Origin 1, unless the 2019 Notes have not been converted or repaid byDecember 30, 2021 , in which case the note maturity date would beDecember 31, 2021 . The note is subordinated to the 2019 Notes. AtJune 30, 2021 andDecember 31, 2020 the total note principal outstanding was$5.1 million plus accrued interest of$0.5 million and$0.1 million , respectively. InSeptember 2019 , Legacy Origin entered into a$5.0 million prepayment agreement for the purchase of products from Origin 2. The prepayment is to be made in two equal installments: the first$2.5 million was inOctober 2019 and the remaining$2.5 million is due within 30 days of the customer confirming that a sample from Origin 1 meets the customer's specifications. We 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. AtJune 30, 2021 andDecember 31, 2020 , the total amount outstanding on this agreement was$2.5 million . Cash Flows for the Six Months EndedJune 30, 2021 Compared to the Six Months EndedJune 30, 2020 The following table shows a summary of cash flows for the six months endedJune 30, 2021 and 2020: Six Months Ended June 30, (in thousands) 2021 2020 Total cash used in operating activities$ (6,675 ) $ (2,271 ) Total cash used in investing activities (2,703 ) (1,267 ) Total cash provided by financing activities 478,559
1,962
Effects of foreign exchange rate changes on the balance of cash and cash equivalents, and restricted cash held in foreign currencies
(178 ) 184
Net increase (decrease) in cash$ 469,003 $ (1,392 ) 40
-------------------------------------------------------------------------------- Table of Contents Cash Used in Operating Activities Net cash used in operating activities was$6.7 million for the six months endedJune 30, 2021 , compared to net cash used in operating activities of$2.3 million over the same period in 2020. The decrease was primarily attributable to an increase in net loss (after adjusting for non-cash items) and decreases in accounts payable. Cash Used in Investing Activities Net cash used in investing activities was$2.7 million for the six months endedJune 30, 2021 , compared to net cash used in investing activities of$1.3 million over the same period in 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. Cash Provided by Financing Activities Net cash from financing activities was$479 million for the six months endedJune 30, 2021 , compared to net cash from financing activities of$2 million over the same period in 2020. The Company completed a business combination during the current period, netting cash proceeds of$467 million . Cash of$11.7 million was provided by proceeds from notes payable, and payments of$0.9 million were made on short term debt. Off-Balance Sheet Arrangements The Company did not have any off-balance sheet arrangements during the periods presented, as defined in the rules and regulations of theSEC . Critical Accounting Policies and Estimates Our financial statements have been prepared in accordance withU.S. GAAP. In the preparation of these condensed 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 unaudited condensed consolidated financial statements included elsewhere in this Report. We have the critical accounting policies and estimates which are described below. Stock-Based Compensation 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, which is generally the vesting period of the respective award. Origin estimates forfeitures at the grant date based on historical activity of the grantee class and adjust stock-based compensation expenses based on that historical percentage. Origin applies the straight-line method of expense recognition to all awards with only service-based vesting conditions. 41 -------------------------------------------------------------------------------- Table of Contents Origin estimates the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model, which 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 theU.S. Treasury zero-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. • 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. Warrant Liability 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. Earnout Liability 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 condensed consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in earnings at each reporting date. Net Loss Per Ordinary Share We apply the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. Our net income is adjusted for the portion of income that is attributable to ordinary shares subject to redemption, as these shares only participate in the earnings of the Trust Account and not our income or losses. Recent Accounting Pronouncements See Note 5 to the condensed consolidated financial statements in this 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. 42 -------------------------------------------------------------------------------- Table of Contents Emerging Growth Company Status Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. The Company is an "emerging growth company" as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act") and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. The Company may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our Common Stock that is held by non-affiliates equals or exceeds$700 million as of the end of that year's second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of$1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than$1 billion in non-convertible debt in the prior three-year period or (iv)December 31, 2026 . We will no longer qualify as an emerging growth company for Securities Act or Exchange Act reporting afterDecember 31, 2021 . Implications of being aSmaller Reporting Company Additionally, we qualify as a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our Common Stock held by non-affiliates exceeds$250 million as of the end of that year's second fiscal quarter, or (ii) our annual revenues exceeded$100 million during such completed fiscal year and the market value of our Common Stock held by non-affiliates equals or exceeds$700 million as of the end of that year's second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. We will no longer qualify as a smaller reporting company for Securities Act or Exchange Act reporting afterDecember 31, 2021 . Item 3. Quantitative and Qualitative Disclosures About Market RiskThe Company is exposed to a variety of markets and other risks, including the effects of change in interest rates, inflation and foreign currency translation and transaction risks, as well as risks to the availability of funding sources, hazard events and specific asset risks. Interest Rate Risk The market interest risk in our financial instruments and our financial positions represents the potential loss arising from adverse changes in interest rates. As ofJune 30, 2021 , we had cash and cash equivalents and marketable securities of$2.5 million , consisting of interest-bearing money market accounts and marketable securities, for which the fair market value would be affected by change in the general level ofU.S. interest rates. However, due to the short-term maturities and the low-risk profile of our investments, an immediate 10% change in the interest rate would not have a material effect on the fair market value of our cash and cash equivalents and marketable securities. 43 -------------------------------------------------------------------------------- Table of Contents Foreign Currency Risk Our functional currency is theU.S. dollar, while certain of our current and future subsidiaries will be expected to have other functional currencies, reflecting their principal operating markets. We expect to be exposed to both currency transaction and translation risk. To date, we have not had material exposure to foreign currency fluctuations and have not hedged such exposure, although we may do so in the future. Item 4. Controls and Procedures Limitations on Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officers and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. The term "disclosure controls and procedures," as defined in Rules 13a15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of theSecurities and Exchange Commission , orSEC . Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In connection with the audit of our consolidated financial statements for the fiscal years endedDecember 31, 2019 andDecember 31, 2020 , during the course of preparing for the Business Combination, as well as during the preparation of the unaudited condensed consolidated interim financial statements for this 10Q filing, we identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim financial statements will not be prevented or detected on a timely basis Specifically, we did not have in place an effective control environment with formal processes and procedures to allow for a detailed review of accounting transactions that would identify errors in a timely manner. In addition, due to our size, we did not have proper segregation of duties and had insufficient accounting and finance personnel with an appropriate level of technical accounting knowledge in the application ofU.S. GAAP commensurate with our complexity and financial accounting and reporting requirements to design, implement and operate precise business processes and internal control activities over financial reporting to provide reasonable assurance of preventing or detecting material misstatements. 44 -------------------------------------------------------------------------------- Table of Contents Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the six months endedJune 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than as described below under the caption "Remediation Plan." Remediation Plan The Company is committed to remediating the material weakness to our internal control over financial reporting. We have begun implementing and are continuing to implement measures designed to improve our internal control over financial reporting to remediate these material weaknesses, including retention of an accounting consultant to assist in areas of complex accounting and financial reporting, converting and upgrading our accounting system and hiring additional IT personnel. We also plan to hire additional accounting personnel including a staff accountant, a corporate controller and/or a director ofSEC reporting. 45
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