Cardiff Oncology, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS CARDIFF ONCOLOGY, INC. CONDENSED BALANCE SHEETS (in thousands, except par value) (Unaudited) June 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 10,581 $ 130,981 Short-term investments 129,470 — Accounts receivable and unbilled receivable 308 320 Prepaid expenses and other current assets 2,512 2,055 Total current assets 142,871 133,356 Property and equipment, net 422 624 Operating lease right-of-use assets 178 343 Other assets 263 404 Total Assets $ 143,734 $ 134,727 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 543 $ 1,366 Accrued expenses 3,592 3,851 Operating lease liabilities 402 860 Other current liabilities 42 42 Total current liabilities 4,579 6,119 Derivative financial instruments—warrants 17 285 Operating lease liabilities, net of current portion 6 9 Other liabilities 214 156 Total Liabilities 4,816 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; 39,552 and 36,781 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively 4 4 Additional paid-in capital 383,611 361,819 Service receivables ( 1,245 ) ( 2,171 ) Accumulated other comprehensive loss ( 10 ) — Accumulated deficit ( 243,443 ) ( 231,495 ) Total stockholders’ equity 138,918 128,158 Total liabilities and stockholders’ equity $ 143,734 $ 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenues: Royalties $ 68 $ 43 $ 140 $ 110 Total revenues 68 43 140 110 Costs and expenses: Research and development 4,119 2,476 7,398 5,181 Selling, general and administrative 2,838 1,669 5,073 3,155 Total operating expenses 6,957 4,145 12,471 8,336 Loss from operations ( 6,889 ) ( 4,102 ) ( 12,331 ) ( 8,226 ) Interest income, net 71 16 115 51 Gain (loss) from change in fair value of derivative financial instruments—warrants 61 ( 44 ) 268 ( 42 ) Other income (expense), net — 6 12 4 Net loss ( 6,757 ) ( 4,124 ) ( 11,936 ) ( 8,213 ) Preferred stock dividend payable on Series A Convertible Preferred Stock ( 6 ) ( 6 ) ( 12 ) ( 12 ) Deemed dividend recognized on beneficial conversion features of Series D Convertible Preferred Stock issuance — ( 602 ) — ( 602 ) Deemed dividend recognized on beneficial conversion features of Series E Convertible Preferred Stock issuance — ( 2,665 ) — ( 2,665 ) Net loss attributable to common stockholders $ ( 6,763 ) $ ( 7,397 ) $ ( 11,948 ) $ ( 11,492 ) Net loss per common share — basic and diluted $ ( 0.17 ) $ ( 0.51 ) $ ( 0.31 ) $ ( 0.94 ) Weighted-average shares outstanding — basic and diluted 38,761 14,492 37,967 12,201 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 June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net loss $ ( 6,757 ) $ ( 4,124 ) $ ( 11,936 ) $ ( 8,213 ) Other comprehensive loss: Unrealized gain (loss) on securities available-for-sale 57 — ( 10 ) — Total comprehensive loss ( 6,700 ) ( 4,124 ) ( 11,946 ) ( 8,213 ) Preferred stock dividend payable on Series A Convertible Preferred Stock ( 6 ) ( 6 ) ( 12 ) ( 12 ) Deemed dividend recognized on beneficial conversion features of Series D Convertible Preferred Stock issuance — ( 602 ) — ( 602 ) Deemed dividend recognized on beneficial conversion features of Series E Convertible Preferred Stock issuance — ( 2,665 ) — ( 2,665 ) Comprehensive loss attributable to common stockholders $ ( 6,706 ) $ ( 7,397 ) $ ( 11,958 ) $ ( 11,492 ) 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 Stock-based compensation — — — — 1,036 — — — 1,036 Sale of common stock, net of expenses (1) — — 2,000 — 19,225 — — — 19,225 Other comprehensive gain — — — — — — 57 — 57 Preferred stock dividend — — — — — — — ( 6 ) ( 6 ) Release of clinical trial funding commitment — — — — — 546 — — 546 Net loss — — — — — — — ( 6,757 ) ( 6,757 ) Balance, June 30, 2021 716 $ 1 39,552 $ 4 $ 383,611 $ ( 1,245 ) $ ( 10 ) $ ( 243,443 ) $ 138,918 (1) Net of expenses of $ 0.8 million. 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 Stock-based compensation — — — — 282 — — — 282 Issuance of common stock, preferred stock and warrants for clinical trial funding commitment 155 — 603 — 2,292 ( 2,300 ) — — ( 8 ) Deemed dividend recognized on beneficial conversion features of Series D Convertible Preferred Stock issuance — — — — 602 — — ( 602 ) — Deemed dividend recognized on beneficial conversion features of Series E Convertible Preferred Stock issuance — — — — 2,665 — — ( 2,665 ) — Sale of common stock, preferred stock and warrants (2) 866 1 4,689 1 17,277 — — — 17,279 Issuance of common stock upon exercise of warrants — — 3,473 — 4,605 — — — 4,605 Issuance of common stock upon vesting of restricted stock units — — 2 — — — — — — Issuance of common stock upon conversion of Series D Convertible Preferred Stock ( 155 ) — 1,547 — — — — — — Preferred stock dividend payable on Series A Convertible Preferred Stock — — — — — — — ( 6 ) ( 6 ) Release of clinical trial funding commitment — — — — — 213 — — 213 Net loss — — — — — — — ( 4,124 ) ( 4,124 ) Balance, June 30, 2020 927 $ 1 21,325 $ 9 $ 247,528 $ ( 2,766 ) $ — $ ( 220,390 ) $ 24,382 (2) Net of expenses of $ 0.6 million, and fair value of warrants issued as a transaction advisory fee as of the date of issuance of $ 0.4 million. See accompanying notes to the unaudited condensed financial statements. 7 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Six Months Ended June 30, 2021 2020 Operating activities Net loss $ ( 11,936 ) $ ( 8,213 ) Adjustments to reconcile net loss to net cash used in operating activities: Loss on disposal of assets 1 — Impairment loss — 34 Depreciation 228 234 Stock-based compensation expense 1,304 459 Amortization of premiums on short-term investments 698 — Change in fair value of derivative financial instruments—warrants ( 268 ) 42 Release of clinical trial funding commitment 926 506 Changes in operating assets and liabilities: Other assets 141 5 Accounts receivable and unbilled receivable 12 94 Prepaid expenses and other assets 68 — Operating lease right-of-use assets 165 161 Accounts payable and accrued expenses ( 1,121 ) ( 513 ) Operating lease liabilities ( 461 ) ( 418 ) Other liabilities 58 ( 56 ) Net cash used in operating activities ( 10,185 ) ( 7,665 ) Investing activities: Maturities of short-term investments 5,510 — Purchases of short-term investments ( 141,948 ) — Sales of short-term investments 5,735 — Net cash used in investing activities ( 130,703 ) — Financing activities: Proceeds from sales of common stock, preferred stock and warrants, net of expenses of $ 776 and $ 93 , respectively 19,225 18,802 Costs related to the clinical trial funding commitment — ( 8 ) Proceeds from exercise of warrants 1,263 6,126 Borrowings under note payable — 305 Net cash provided by financing activities 20,488 25,225 Net change in cash and cash equivalents ( 120,400 ) 17,560 Cash and cash equivalents—Beginning of period 130,981 10,195 Cash and cash equivalents—End of period $ 10,581 $ 27,755 Supplementary disclosure of cash flow activity: Cash paid for taxes $ 1 $ 1 Supplemental disclosure of non-cash investing and financing activities: Acquisition of property and equipment included in accounts payable and accrued expenses $ 27 $ 11 8 Table of Contents Six Months Ended June 30, 2021 2020 Expenses from sales of common stock, preferred stock and warrants included in accounts payable and accrued liabilities $ — $ 523 Expenses from exercise of warrants included in accounts payable and accrued liabilities $ — $ 64 Preferred stock dividend payable on Series A Convertible Preferred Stock $ 12 $ 12 Deemed dividend recognized for beneficial conversion features of Series D Convertible Preferred Stock issuance $ — $ 602 Deemed dividend recognized for beneficial conversion features of Series E Convertible Preferred Stock issuance $ — $ 2,665 Common stock, Series D Convertible Preferred Stock and warrants issued in connection with clinical trial funding commitment, net of discount of $0 and $ 488 , respectively $ — $ 2,300 See accompanying notes to the unaudited condensed financial statements. 9 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 oncology company with the mission of developing new precision medicine treatment options for cancer patients in indications with the greatest unmet medical need, including KRAS-mutated metastatic colorectal cancer, metastatic pancreatic cancer and Zytiga®-resistant metastatic castration-resistant prostate cancer. The Company's common stock is listed on the Nasdaq Capital Market under the ticker symbol "CRDF". 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 June 30, 2021, the Company had $ 140.1 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 six months ended June 30, 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. 10 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 June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2021 2020 2021 2020 Numerator: Net loss used for basic and diluted loss per share $ ( 6,763 ) $ ( 7,397 ) $ ( 11,948 ) $ ( 11,492 ) Denominator: Weighted-average shares used to compute basic and diluted net loss per share 38,761 14,492 37,967 12,201 Net loss per share attributable to common stockholders: Basic and diluted $ ( 0.17 ) $ ( 0.51 ) $ ( 0.31 ) $ ( 0.94 ) 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: June 30, 2021 2020 Options to purchase Common Stock 2,966,843 1,924,039 Warrants to purchase Common Stock 4,490,159 12,329,435 Restricted Stock Units — 2,241 Series A Convertible Preferred Stock 877 877 Series E Convertible Preferred Stock 2,684,607 3,548,459 10,142,486 17,805,051 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 11 Table of Contents adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures. In May 2021, the FASB issued ASU No. 2021-04 ("ASU 2021-04), Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures. 12 Table of Contents 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 June 30, 2021 and December 31, 2020: Fair Value Measurements at June 30, 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 $ 9,596 $ — $ — $ 9,596 Total included in cash and cash equivalents (1) $ 9,596 $ — $ — $ 9,596 Available for sale investments: Certificate of deposit — 1,740 — 1,740 Corporate debt securities — 87,678 — 87,678 Commercial paper — 12,782 — 12,782 Non U.S. government — 737 — 737 U.S. treasury securities — 26,533 — 26,533 Total available for sale investments (2) $ — $ 129,470 $ — $ 129,470 Total assets measured at fair value on a recurring basis $ 9,596 $ 129,470 $ — $ 139,066 Liabilities: Derivative financial instruments — warrants (3) $ — $ — $ 17 $ 17 Total liabilities measured at fair value on a recurring basis $ — $ — $ 17 $ 17 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. Cash equivalents are considered by the Company to be highly liquid investments purchased with original maturities of three months or less from the date of purchase. (2) Included in short-term investments in the accompanying condensed balance sheets. (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. 13 Table of Contents 4. Supplementary Balance Sheet Information Investments available for sale consist of the following: As of June 30, 2021 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value Certificate of deposit 1,739 1 — 1,740 Corporate debt securities 87,689 10 ( 21 ) 87,678 Commercial paper 12,780 3 ( 1 ) 12,782 Non U.S. government 737 — — 737 U.S. treasury securities 26,535 2 ( 4 ) 26,533 Total short term investments $ 129,480 $ 16 $ ( 26 ) $ 129,470 Property and equipment consist of the following: (in thousands) As of June 30, 2021 As of December 31, 2020 Furniture and office equipment $ 825 $ 798 Leasehold improvements 1,962 1,962 Laboratory equipment 853 868 3,640 3,628 Less—accumulated depreciation and amortization ( 3,218 ) ( 3,004 ) Property and equipment, net $ 422 $ 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. During July 2021, the Company entered into an amended lease agreement to continue leasing 12,300 square feet of the 26,100 square feet from the lease that expires at year end. See Note 11 to the condensed financial statements for further information regarding the amended lease agreement. 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: 14 Table of Contents Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Operating lease cost $ 92 $ 139 $ 187 $ 246 Operating sublease income ( 101 ) ( 73 ) ( 202 ) ( 146 ) Net operating lease cost $ ( 9 ) $ 66 $ ( 15 ) $ 100 Supplemental balance sheet information related to leases was as follows: (in thousands) As of June 30, 2021 As of December 31, 2020 Operating lease ROU assets $ 178 $ 343 Current operating lease liabilities $ 402 $ 860 Non-current operating lease liabilities 6 9 Total operating lease liabilities $ 408 $ 869 Weighted-average remaining lease term–operating leases 0.5 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 June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 243 $ 236 $ 483 $ 469 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 six months ended June 30, 2021) $ 406 $ ( 202 ) $ 204 2022 6 — 6 2023 3 — 3 Total future minimum lease payments 415 $ ( 202 ) $ 213 Less imputed interest ( 7 ) Total $ 408 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. 15 Table of Contents The assumptions used to determine the fair value of the warrants using the Black-Scholes option pricing model were: As of June 30, 2021 As of December 31, 2020 Fair value of Cardiff Oncology common stock $ 6.65 $ 17.99 Expected warrant term 1.6 years 2.1 years Risk-free interest rate 0.16 % 0.13 % Expected volatility of Cardiff Oncology common stock 110 % 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 — ( 268 ) June 30, 2021 Balance of derivative financial instruments — warrants liability 64,496 $ 17 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 June 30, Six Months Ended June 30, (in thousands) 2021 2020 2021 2020 Included in research and development expense $ 72 $ 70 $ 112 $ 147 Included in selling, general and administrative expense 964 212 1,192 312 Total stock-based compensation expense $ 1,036 $ 282 $ 1,304 $ 459 The unrecognized compensation cost related to non-vested stock options outstanding at June 30, 2021, net of estimated forfeitures, was $ 7.9 million, which is expected to be recognized over a weighted-average remaining vesting period of 3.3 years. The weighted-average remaining contractual term of outstanding options as of June 30, 2021 was approximately 8.9 years. The total fair value of stock options vested during the six months ended June 30, 2021 and 2020 were $ 1.2 million and $ 0.8 million, respectively. 16 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: Six Months Ended June 30, 2021 2020 Risk-free interest rate 0.94 % 0.44 % Dividend yield 0 % 0 % Expected volatility of Cardiff Oncology common stock 108 % 105 % Expected term 6.0 years 5.9 years 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 Granted 1,117,106 $ 7.98 Canceled / Forfeited ( 10,770 ) $ 2.55 Balance outstanding, June 30, 2021 2,966,843 $ 7.65 $ 7,439,918 Exercisable at June 30, 2021 1,282,401 $ 9.65 $ 5,076,084 Vested and expected to vest at June 30, 2021 2,886,407 $ 7.72 $ 7,262,361 2021 Equity Incentive Plan In June 2021 the Company's stockholders approved the 2021 Omnibus Equity Incentive Plan ("2021 Plan"). The number of authorized shares in the 2021 plan is equal to the sum of (i) 3,150,000 shares, plus (ii) the number of shares of Common Stock reserved, but unissued under the 2014 Plan; and (iii) the number of shares of Common Stock underlying forfeited awards under the 2014 Plan. As of June 30, 2021, there were 2,304,110 shares available for issuance under the 2021 Plan. 2014 Equity Incentive Plan Subsequent to the adoption of the 2021 Plan, no additional equity awards can be made under the terms of the 2014 Plan. Modification of Stock Options In June 2021 two of the Company's directors left the Board of Directors. At the time of departure, the Compensation Committee passed a resolution to extend the expiration date of both of the departing directors vested stock options, and to immediately accelerate the vesting of one of the directors unvested options. The Company recorded incremental stock compensation expense of $ 0.6 million during the three months ended June 30, 2021 related to the modifications. 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, June 30, 2021 — $ — $ — The total fair value of vested RSUs during the six months ended June 30, 2021 and 2020 were $ 72 thousand and $ 99 thousand, respectively. 17 Table of Contents 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, June 30, 2021 4,490,159 $ 5.80 3.5 years 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 June 30, 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 Sale of Common Stock During May 2021, the Company sold 2.0 million shares of its common stock under the Sales Agreement with Jefferies LLC. 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 of various agreements under which it licenses technology on an exclusive basis in the field of oncology therapeutics. These agreements include License fees, Royalties and Milestone payments. The company also has a legacy license agreement in the field of oncology diagnostics under which royalty payments are due. These royalty payments are calculated as a percent of revenue. For the three and six months ended June 30, 2021 and 2020, payments have not been material. 18 Table of Contents 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 Gary Pace Securities Purchase Agreement In May 2020, the Company entered into a Securities Purchase Agreement with Gary W. Pace, one of the Company's directors. Dr. Pace purchased 447,761 shares of the Company's common stock at $ 1.34 per share for an aggregate purchase price of $ 600,000 . Leucadia Life Sciences 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. During the duration of the agreement, one of the Company's directors Dr. Thomas Adams (who is no longer a director as of June 2021), 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 June 30, 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. During the six months ended June 30, 2021 and 2020 the Company incurred and recorded research and development expenses of approximately $ 0 and $ 0.5 million, respectively, for services performed by Leucadia and Tommy Adams. 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 six months ended June 30, 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 six months ended June 30, 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. 19 Table of Contents 11. Subsequent Events Amendment to facility lease agreement During July 2021, the Company entered into an amended lease agreement ("amended lease") with BMR-COAST 9 LP. The amended agreement commences on January 1, 2022 and expires on February 28, 2027. The Company will lease approximately 12,300 square feet of office and lab space. The minimum monthly rent under the amended lease is $ 55 thousand with an annual rent escalation of 3 % per year. 20 Table of Contents