Cardiff Oncology, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS CARDIFF ONCOLOGY, INC. CONDENSED BALANCE SHEETS (in thousands, except par value) (Unaudited) March 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 14,662 $ 130,981 Short-term investments 110,922 — Accounts receivable and unbilled receivable 242 320 Prepaid expenses and other current assets 2,744 2,055 Total current assets 128,570 133,356 Property and equipment, net 504 624 Operating lease right-of-use assets 261 343 Other assets 238 404 Total Assets $ 129,573 $ 134,727 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 803 $ 1,366 Accrued expenses 2,999 3,851 Operating lease liabilities 635 860 Other current liabilities 42 42 Total current liabilities 4,479 6,119 Derivative financial instruments—warrants 78 285 Operating lease liabilities, net of current portion 8 9 Other liabilities 191 156 Total Liabilities 4,756 6,569 Commitments and contingencies (Note 8) Stockholders’ equity Preferred stock, 20,000 shares authorized; (Note 7) 1 1 Common stock, $ 0.0001 par value, 150,000 shares authorized; 37,552 and 36,781 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 4 4 Additional paid-in capital 363,350 361,819 Service receivables ( 1,791 ) ( 2,171 ) Accumulated other comprehensive loss ( 67 ) — Accumulated deficit ( 236,680 ) ( 231,495 ) Total stockholders’ equity 124,817 128,158 Total liabilities and stockholders’ equity $ 129,573 $ 134,727 See accompanying notes to the unaudited condensed financial statements. 3 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2021 2020 Revenues: Royalties $ 72 $ 68 Total revenues 72 68 Costs and expenses: Research and development 3,279 2,706 Selling, general and administrative 2,235 1,486 Total operating expenses 5,514 4,192 Loss from operations ( 5,442 ) ( 4,124 ) Interest income, net 57 36 Gain from change in fair value of derivative financial instruments—warrants 207 2 Other income (expense), net ( 1 ) ( 3 ) Net loss ( 5,179 ) ( 4,089 ) Preferred stock dividend payable on Series A Convertible Preferred Stock ( 6 ) ( 6 ) Net loss attributable to common stockholders $ ( 5,185 ) $ ( 4,095 ) Net loss per common share — basic and diluted $ ( 0.14 ) $ ( 0.41 ) Weighted-average shares outstanding — basic and diluted 37,164 9,910 See accompanying notes to the unaudited condensed financial statements. 4 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (Unaudited) Three Months Ended March 31, 2021 2020 Net loss $ ( 5,179 ) $ ( 4,089 ) Other comprehensive loss: Unrealized loss on securities available-for-sale ( 67 ) — Total comprehensive loss ( 5,246 ) ( 4,089 ) Preferred stock dividend payable on Series A Convertible Preferred Stock ( 6 ) ( 6 ) Comprehensive loss attributable to common stockholders $ ( 5,252 ) $ ( 4,095 ) See accompanying notes to the unaudited condensed financial statements. 5 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) (Unaudited) Preferred Stock Shares Preferred Stock Amount Common Stock Shares Common Stock Amount Additional Paid-In Capital Service Receivable Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balance, January 1, 2021 716 $ 1 36,781 $ 4 $ 361,819 $ ( 2,171 ) $ — $ ( 231,495 ) $ 128,158 Stock-based compensation — — — — 268 — — — 268 Issuance of common stock upon exercise of warrants — — 771 — 1,263 — — — 1,263 Other comprehensive loss — — — — — — ( 67 ) — ( 67 ) Preferred stock dividend — — — — — — — ( 6 ) ( 6 ) Release of clinical trial funding commitment — — — — — 380 — — 380 Net loss — — — — — — — ( 5,179 ) ( 5,179 ) Balance, March 31, 2021 716 $ 1 37,552 $ 4 $ 363,350 $ ( 1,791 ) $ ( 67 ) $ ( 236,680 ) $ 124,817 See accompanying notes to the unaudited condensed financial statements. 6 Table of Contents Preferred Stock Shares Preferred Stock Amount Common Stock Shares Common Stock Amount Additional Paid-In Capital Service Receivable Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balance, January 1, 2020 61 $ — 8,594 $ 8 $ 217,172 $ ( 972 ) $ — $ ( 208,898 ) $ 7,310 Stock-based compensation — — — 177 — — — 177 Sale of common stock and warrants — — 800 — 1,000 — — — 1,000 Issuance of common stock upon exercise of warrants — — 1,610 — 1,456 — — — 1,456 Issuance of common stock upon vesting of restricted stock units — — 7 — — — — — — Preferred stock dividend — — — — — — — ( 6 ) ( 6 ) Release of clinical trial funding commitment — — — — — 293 — — 293 Net loss — — — — — — — ( 4,089 ) ( 4,089 ) Balance, March 31, 2020 61 $ — 11,011 $ 8 $ 219,805 $ ( 679 ) $ — $ ( 212,993 ) $ 6,141 See accompanying notes to the unaudited condensed financial statements. 7 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Three Months Ended March 31, 2021 2020 Operating activities Net loss $ ( 5,179 ) $ ( 4,089 ) Adjustments to reconcile net loss to net cash used in operating activities: Loss on disposal of assets 1 — Depreciation 119 119 Stock-based compensation expense 268 177 Amortization of premiums on short-term investments 204 — Change in fair value of derivative financial instruments—warrants ( 207 ) ( 2 ) Release of clinical trial funding commitment 380 293 Changes in operating assets and liabilities: Other assets 166 1 Accounts receivable and unbilled receivable 79 97 Prepaid expenses and other assets ( 183 ) 56 Operating lease right-of-use assets 82 80 Accounts payable and accrued expenses ( 1,421 ) 89 Operating lease liabilities ( 227 ) ( 206 ) Other liabilities 34 11 Net cash used in operating activities ( 5,884 ) ( 3,374 ) Investing activities: Purchases of short-term investments ( 114,195 ) — Sales of short-term investments 2,497 — Net cash used in investing activities ( 111,698 ) — Financing activities: Proceeds from sales of common stock, preferred stock and warrants, net of expenses of $ 0 and $ 634 , respectively — 1,000 Proceeds from exercise of warrants 1,263 1,456 Net cash provided by financing activities 1,263 2,456 Net change in cash and cash equivalents ( 116,319 ) ( 918 ) Cash and cash equivalents—Beginning of period 130,981 10,195 Cash and cash equivalents—End of period $ 14,662 $ 9,277 Supplementary disclosure of cash flow activity: Cash paid for taxes $ 1 $ 1 Supplemental disclosure of non-cash investing and financing activities: Preferred stock dividend payable on Series A Convertible Preferred Stock $ 6 $ 6 See accompanying notes to the unaudited condensed financial statements. 8 Table of Contents CARDIFF ONCOLOGY, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Basis of Presentation Business Organization and Overview Cardiff Oncology, Inc. (“Cardiff Oncology” or the “Company”) headquartered in San Diego, California, is a clinical-stage biotechnology company with the singular mission of developing new treatment options for cancer patients in indications with the greatest medical need, including KRAS-mutated metastatic colorectal cancer, metastatic pancreatic cancer and Zytiga®-resistant metastatic castration-resistant prostate cancer. Our goal is to overcome resistance, improve response to treatment and increase overall survival. Through the integration of tumor genomics and biomarker technology, we are performing correlative studies in our clinical programs to enable assessment of patient response to treatment. Basis of Presentation The accompanying unaudited interim condensed financial statements of Cardiff Oncology have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows for the periods presented. The unaudited condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for annual financial statements. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s annual report on Form 10-K filed with the SEC on February 25, 2021. Liquidity The Company has incurred net losses since its inception and has negative operating cash flows. As of March 31, 2021, the Company had $ 125.6 million in cash, cash equivalents and short-term investments and believes it has sufficient cash to meet its funding requirements for at least the next 12 months following the issuance date of these financial statements. For the foreseeable future, the Company expects to continue to incur losses and require additional capital to further advance its clinical trial programs and support its other operations. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company can raise additional funds by issuing equity securities, the Company’s stockholders may experience additional dilution. The economic effects of COVID-19 could also have an adverse effect on the Company's ability to raise additional capital. See Note 10 to the condensed financial statements for further information. 2. Summary of Significant Accounting Policies During the three months ended March 31, 2021, there have been no changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020, other than the addition of investment securities as described below. Investment Securities All investments have been classified as “available-for-sale” and are carried at fair value as determined based upon quoted market prices or pricing models for similar securities at period end. Investments with contractual maturities less than 12 months at the balance sheet date are considered short-term investments. Investments with contractual maturities beyond one year are also classified as short-term due to the Company’s ability to liquidate the investment for use in operations within the next 12 months. 9 Table of Contents Realized gains and losses on investment securities are included in earnings and are derived using the specific identification method for determining the cost of securities sold. The Company has not realized any significant gains or losses on sales of available-for-sale investment securities during any of the periods presented. As all the Company’s investment holdings are in the form of debt securities or certificates of deposit, unrealized gains and losses that are determined to be temporary in nature are reported as a component of accumulated other comprehensive income. A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Interest income is recognized when earned and is included in investment income, as are the amortization of purchase premiums and accretion of purchase discounts on investment securities. Net Loss Per Share Basic and diluted net loss per common share is determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. Preferred dividends are included in net loss attributable to common stockholders in the computation of basic and diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended March 31, (in thousands, except per share amounts) 2021 2020 Numerator: Net loss used for basic and diluted loss per share $ ( 5,185 ) $ ( 4,095 ) Denominator: Weighted-average shares used to compute basic and diluted net loss per share 37,164 9,910 Net loss per share attributable to common stockholders: Basic and diluted $ ( 0.14 ) $ ( 0.41 ) The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their effect was anti-dilutive: March 31, 2021 2020 Options to purchase Common Stock 1,849,737 975,233 Warrants to purchase Common Stock 4,490,159 10,516,377 Restricted Stock Units — 4,491 Series A Convertible Preferred Stock 877 877 Series E Convertible Preferred Stock 2,684,607 — 9,025,380 11,496,978 Recent Accounting Pronouncement Not Yet Adopted In August 2020, the FASB issued ASU No. 2020-06 ("ASU 2020-06"), Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2021 (or December 15, 2023 for companies who meet the SEC definition of Smaller Reporting Companies), and interim periods within those fiscal years. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early 10 Table of Contents adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures. 3. Fair Value Measurements The following table presents the Company’s assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of March 31, 2021 and December 31, 2020: Fair Value Measurements at March 31, 2021 (in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets: Money market fund (1) $ 6,271 $ — $ — $ 6,271 Corporate debt securities (1) — 5,345 — 5,345 Total included in cash and cash equivalents $ 6,271 $ 5,345 $ — $ 11,616 Available for sale investments (2): Certificate of deposit — 2,599 — 2,599 Corporate debt securities — 81,450 — 81,450 Commercial paper — 5,745 — 5,745 Non U.S. government — 741 — 741 U.S. treasury securities — 20,387 — 20,387 Total available for sale investments $ — $ 110,922 $ — $ 110,922 Total assets measured at fair value on a recurring basis $ 6,271 $ 116,267 $ — $ 122,538 Liabilities: Derivative financial instruments — warrants (3) $ — $ — $ 78 $ 78 Total liabilities measured at fair value on a recurring basis $ — $ — $ 78 $ 78 Fair Value Measurements at December 31, 2020 (in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets: Money market fund (1) $ 129,988 $ — $ — $ 129,988 Total assets measured at fair value on a recurring basis $ 129,988 $ — $ — $ 129,988 Liabilities: Derivative financial instruments — warrants (3) $ — $ — $ 285 $ 285 Total liabilities measured at fair value on a recurring basis $ — $ — $ 285 $ 285 (1) Included as a component of cash and cash equivalents on the accompanying condensed balance sheets. (2) Included in short-term investments in the accompanying consolidated balance sheets depending on the respective maturity date. 11 Table of Contents (3) A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments that trade infrequently and therefore have little or no price transparency are classified as Level 3. See Note 6 to the condensed financial statements for further information. 4. Supplementary Balance Sheet Information Investments available for sale consist of the following: As of March 31, 2021 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value Certificate of deposit 2,599 — — 2,599 Corporate debt securities 81,518 1 ( 69 ) 81,450 Commercial paper 5,745 1 ( 1 ) 5,745 Non U.S. government 742 — ( 1 ) 741 U.S. treasury securities 20,385 3 ( 1 ) 20,387 Total short term investments $ 110,989 $ 5 $ ( 72 ) $ 110,922 Property and equipment consist of the following: (in thousands) As of March 31, 2021 As of December 31, 2020 Furniture and office equipment $ 798 $ 798 Leasehold improvements 1,962 1,962 Laboratory equipment 853 868 3,613 3,628 Less—accumulated depreciation and amortization ( 3,109 ) ( 3,004 ) Property and equipment, net $ 504 $ 624 5. Leases As a lessee, the Company’s current leases include its master facility lease and immaterial equipment leases, all of which are considered operating leases. The Company (as a sublessor) also subleases portions of its facility to third parties under three separate subleases. All of these subleases have been determined to be operating leases and are accounted for separately from the head lease. Master Facility Lease The Company leases a building in San Diego under an operating lease that expires on December 31, 2021. The lease currently requires fixed monthly rent payments of approximately $ 80,000 , with 3 % annual escalation. The Company is currently in negotiations to lease lab and office space after our current lease expires. Facility Subleases As a result of corporate restructurings in previous years, the Company vacated a portion of its facility and has subleased the space to third parties under three separate sublease agreements, which all expire December 31, 2021. The components of lease expense were as follows: 12 Table of Contents Three Months Ended March 31, (in thousands) 2021 2020 Operating lease cost $ 95 $ 107 Operating sublease income ( 101 ) ( 73 ) Net operating lease cost $ ( 6 ) $ 34 Supplemental balance sheet information related to leases was as follows: (in thousands) As of March 31, 2021 As of December 31, 2020 Operating lease ROU assets $ 261 $ 343 Current operating lease liabilities $ 635 $ 860 Non-current operating lease liabilities 8 9 Total operating lease liabilities $ 643 $ 869 Weighted-average remaining lease term–operating leases 0.8 years 1.0 year Weighted-average discount rate–operating leases 6.5 % 6.5 % Supplemental cash flow and other information related to leases was as follows: Three Months Ended March 31, (in thousands) 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 240 $ 233 Total remaining annual commitments under non-cancelable lease agreements for each of the years ended December 31 are as follows: (in thousands) Year Ending December 31, Operating Leases Sublease Income Net Operating Leases 2021 (excluding the three months ended March 31, 2021) $ 650 $ ( 303 ) $ 347 2022 6 — 6 2023 3 — 3 Total future minimum lease payments 659 $ ( 303 ) $ 356 Less imputed interest ( 16 ) Total $ 643 6. Derivative Financial Instruments — Warrants Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”) or ASC Topic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”), Cardiff Oncology determined that certain warrants issued in connection with the execution of certain equity financings must be recorded as derivative liabilities. In accordance with ASC 815-40 and ASC 480-10, the warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant change in fair value is being recorded in the Company’s condensed statements of operations. The Company estimates the fair value of these warrants using the Black-Scholes option pricing model. 13 Table of Contents The assumptions used to determine the fair value of the warrants using the Black-Scholes option pricing model were: As of March 31, 2021 As of December 31, 2020 Fair value of Cardiff Oncology common stock $ 9.26 $ 17.99 Expected warrant term 1.8 years 2.2 years Risk-free interest rate 0.14 % 0.13 % Expected volatility of Cardiff Oncology common stock 121 % 116 % Dividend yield 0 % 0 % Expected volatility is based on historical volatility of Cardiff Oncology’s common stock. The warrants have a transferability provision, accordingly, Cardiff Oncology used the remaining contractual term as the expected term of the warrants. The risk-free rate is based on the U.S. Treasury security rates consistent with the expected remaining term of the warrants at each balance sheet date. The following table sets forth the components of changes in the Company’s derivative financial instruments — warrants liability balance, valued using the Black-Scholes option pricing method, for the periods indicated. (in thousands, except for number of warrants) Date Description Number of Warrants Derivative Instrument Liability December 31, 2020 Balance of derivative financial instruments — warrants liability 64,496 $ 285 Change in fair value of derivative financial instruments — warrants during the period recognized as a gain in the condensed statements of operations — ( 207 ) March 31, 2021 Balance of derivative financial instruments — warrants liability 64,496 $ 78 7. Stockholders’ Equity Stock Options Stock-based compensation expense related to Cardiff Oncology equity awards have been recognized in operating results as follows: Three Months Ended March 31, (in thousands) 2021 2020 Included in research and development expense $ 40 $ 77 Included in selling, general and administrative expense 228 100 Total stock-based compensation expense $ 268 $ 177 The unrecognized compensation cost related to non-vested stock options outstanding at March 31, 2021, net of estimated forfeitures, was $ 1.2 million, which is expected to be recognized over a weighted-average remaining vesting period of 1.8 . The weighted-average remaining contractual term of outstanding options as of March 31, 2021 was approximately 8.6 years. The total fair value of stock options vested during the three months ended March 31, 2021 and 2020 were $ 24,333 and $ 34,929 , respectively. 14 Table of Contents The estimated fair value of stock option awards was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions during the following periods indicated: Three Months Ended March 31, 2021 2020 Risk-free interest rate (1) 1.8 % Dividend yield (1) 0 % Expected volatility of Cardiff Oncology common stock (1) 102.0 % Expected term (1) 6.0 years (1) No stock options were granted during the period. A summary of stock option activity and changes in stock options outstanding is presented below: Total Options Weighted-Average Exercise Price Per Share Intrinsic Value Balance outstanding, December 31, 2020 1,860,507 $ 7.43 $ 27,963,363 Canceled / Forfeited ( 10,770 ) $ 2.55 Balance outstanding, March 31, 2021 1,849,737 $ 7.46 $ 12,125,293 Exercisable at March 31, 2021 756,300 $ 14.61 $ 4,739,794 Vested and expected to vest at March 31, 2021 1,768,104 $ 7.68 $ 11,572,933 The number of authorized shares in the Cardiff Oncology 2014 Equity Incentive Plan (“2014 EIP”) is 2,243,056 . As of March 31, 2021, there were 271,216 shares available for issuance under the 2014 EIP. Restricted Stock Units A summary of the RSU activity is presented below: Total Restricted Stock Units Weighted-Average Grant Date Fair Value Per Share Intrinsic Value Non-vested RSUs outstanding, December 31, 2020 491 $ 147.60 $ 8,833 Vested ( 491 ) $ 147.60 Non-vested RSUs outstanding, March 31, 2021 — $ — $ — The total fair value of vested RSUs during the three months ended March 31, 2021 and 2020 were $ 72,472 and $ 95,170 , respectively. Warrants A summary of warrant activity and changes in warrants outstanding, including both liability and equity classifications is presented below: Total Warrants Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Balance outstanding, December 31, 2020 5,260,992 $ 5.19 4.1 years Exercised ( 770,833 ) $ 1.64 Balance outstanding, March 31, 2021 4,490,159 $ 5.80 3.7 years 15 Table of Contents Preferred Stock A summary of our Company's classes of preferred stock is presented below: Shares outstanding Class Par value Shares designated Liquidation preference As of March 31, 2021 As of December 31, 2020 Series A Convertible Preferred Stock $ 0.001 277,100 $ 606,000 60,600 60,600 Series B Convertible Preferred Stock $ 0.001 8,860 None — — Series C Convertible Preferred Stock $ 0.001 200,000 None — — Series D Convertible Preferred Stock $ 0.0001 154,670 None — — Series E Convertible Preferred Stock $ 0.001 865,824 None 655,044 655,044 8. Commitments and Contingencies Executive Agreements Certain executive agreements provide for severance payments in case of terminations without cause or certain change of control scenarios. Research and Development and Clinical Trial Agreements In March 2017, the Company entered into a license agreement with Nerviano which granted the Company development and commercialization rights to NMS-1286937, which Cardiff Oncology refers to as onvansertib. Onvansertib, an investigational drug, is an oral, and a highly-selective adenosine triphosphate competitive inhibitor of the serine/threonine PLK1. The Company is developing onvansertib in cancer indications with the greatest medical need for new treatment options. The Company was committed to order $ 1.0 million of future services provided by Nerviano, such as the cost to manufacture drug product, no later than June 30, 2019, and these services have been purchased. Terms of the agreement also provide for the Company to pay development milestones and royalties based on sales volume. The Company is a party to various agreements under which it licenses technology on an exclusive basis in the field of human diagnostics and oncology therapeutics. License fees are generally calculated as a percentage of product revenues, with rates that vary by agreement. For the three months ended March 31, 2021 and 2020, payments have not been material. Litigation Cardiff Oncology does not believe that it has legal liabilities that are probable or reasonably possible that require either accrual or disclosure. From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in matters may arise from time to time that may harm the Company’s business. As of the date of this report, management believes that there are no claims against the Company, which it believes will result in a material adverse effect on the Company’s business or financial condition. 9. Related Party Transactions In November 2018, the Company entered into a Material Transfer Agreement (“MTA”) with Leucadia Life Sciences (“Leucadia”) pursuant to which Leucadia developed a PCR-based assay for onvansertib for Acute Myeloid Leukemia (“AML”). This assay was completed in December 2020. For the duration of the agreement, one of the Company's directors, Dr. Thomas Adams, was a principal stockholder of Leucadia. In connection with the MTA, the Company entered into a consulting agreement with Tommy Adams, Co-Founder & Chief Operating Officer of Leucadia, who is the son of Dr. Adams. During the three months ended March 31, 2021 and 2020 the Company incurred and recorded research and development expenses of approximately $ 0 and $ 0.3 million, respectively, for services performed by Leucadia and Tommy Adams. 16 Table of Contents 10. COVID-19 The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on the Company's future operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and impact on the Company's clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact the Company's future financial condition or results of operations is uncertain. While there has not been a material impact on the Company's condensed financial statements for the three months ended March 31, 2021, a prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its drugs and raise additional capital. In response to the pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company is utilizing the deferment of employer social security payments. The CARES Act did not have a material impact on our income tax provision for the three months ended March 31, 2021. We continue to monitor changes and revisions of the CARES Act and its impact on our financial position, results of operations and cash flows. 11. Subsequent Events On May 5, 2021 the Company agreed to sell 2.0 million shares of its Common Stock for gross proceeds of $ 20.0 million under the Sales Agreement with Jefferies LLC. 17 Table of Contents