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Fair Value Measurements
 3 Months Ended
Mar. 31, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

Note 3 – FAIR VALUE MEASUREMENTS 

 

Financial assets and liabilities are recorded at fair value. The Company uses a three-level hierarchy, which prioritizes, within the measurement of fair value, the use of market-based information over entity-specific information for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date. Fair value focuses on an exit price and is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risk associated with investing in those financial instruments.

 

A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

 

  Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

  Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.

 

  Level 3 – Significant unobservable inputs that cannot be corroborated by market data.

 

The Company measures its cash equivalents, short-term investments and derivative financial instruments at fair value. The Company classifies its cash equivalents and short-term investments within Level 1 or Level 2 because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. The fair value of the Company’s Level 1 financial assets is based on quoted market prices of the identical underlying security. The fair value of the Company’s Level 2 financial assets is based on inputs that are directly or indirectly observable in the market, including the readily-available pricing sources for the identical underlying security that may not be actively traded.

 

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

  

Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. At December 31, 2020, the warrants related to the Series A preferred stock issuance, the Series B preferred stock issuance, and the convertible promissory notes and the derivative liability related to the issuance of convertible promissory notes were classified within level 3 of the valuation hierarchy. However, these instruments are not present at March 31, 2021 in light of accounting ramifications of the IPO, which are discussed further in Note 7 and Note 8.

 

The carrying amounts of prepaid expenses, payroll tax credit, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments.

 

The following tables provide a summary of the assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 (in thousands). 

 

Fair Value Measurements

 

   March 31, 2022 
   Fair Value   Level 1   Level 2   Level 3 
Cash equivalents:                
Money market funds  $16,016   $16,016   $
—
   $
—
 
Total cash equivalents  $16,016   $16,016   $—   $— 
                     
Short-term investments:                    
Certificates of deposit  $249   $—   $249   $— 
Commercial paper   548    —    548    — 
Corporate notes   7,998    —    7,998    — 
Municipal bonds   452    —    452    — 
Total short-term investments  $9,247   $—   $9,247   $— 

   December 31, 2021 
   Fair Value   Level 1   Level 2   Level 3 
                 
Cash equivalents:                
Money market funds  $16,830   $16,830   $
—
   $
—
 
Total cash equivalents  $16,830   $16,830   $
—
   $
—
 
                     
Short-term investments:                    
Certificates of deposit  $250   $
—
   $250   $
—
 
Commercial paper   2,210    
—
    2,210    
—
 
Corporate notes   12,024    
—
    12,024    
—
 
Municipal bonds   1,437    
—
    1,437    
—
 
Total short-term investments  $15,921   $
—
   $15,921   $
—