Derivative Liability

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liability

9. Derivative Liability

The Company’s derivative liability represents embedded share-settled redemption features bifurcated from its July 2021 Convertible Notes and is carried at fair value. The changes in the fair value of the derivative liability are recorded in other income (expense), net in the Company’s condensed consolidated statements of operations and comprehensive loss.

Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Since derivative financial instruments are initially and subsequently carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption changes.

The features embedded in the July 2021 Convertible Notes are combined into one compound embedded derivative. The fair value of the embedded derivative was estimated based on the present value of the redemption discount applied to the principal amount of the July 2021 Convertible Notes adjusted to reflect the weighted probability of exercise. The discount rate was based on the risk-free interest rate.

The estimated fair value of the embedded derivative is determined using a lattice model with the following assumptions:

	As of March 31,			As of December 31,
	2024			2023
Principal	$	2,110		$	2,110
Interest rate	4.0		%	4.0		%
Common stock fair value per share	$	25.59		$	15.46
Risk-free interest rate	3.7% - 4.2%			3.7% - 4.0%
Term (in years)	2.3			2.5
Volatility	66.4% - 76.9%			43.0% - 61.2%
Option adjusted spread (bps)	561			613
Annual dividend yield	0		%	0		%
Exchange rate (AUD to USD)	0.65			0.68

Upon the issuance of the July 2021 Convertible Notes, the Company recorded a derivative liability of $0.7 million at fair value using inputs classified as Level 3 in the fair value hierarchy. As of March 31, 2024 and December 31, 2023, the fair value of the derivative liability was $1.9 million and $0.2 million, respectively. Refer to Note 6, "Fair Value Measurements" for further details.