CRDF US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a clinical stage biotechnology company, developing new treatment options for cancer patients in indications with the greatest medical need. Our goal is to overcome resistance, extend duration of response and increase overall survival. We are developing onvansertib, a first-in-class, third-generation Polo-like Kinase 1 ("PLK1") inhibitor, in combination with standard-of-care chemotherapy and targeted therapeutics. Our clinical development programs incorporate tumor genomics and biomarker technology to enable assessment of patient response to treatment.

We licensed onvansertib from Nerviano Medical Sciences ("NMS") pursuant to a license agreement with NMS dated March 13, 2017. This exclusive, world-wide license agreement includes 3 issued patents for onvansertib which cover composition of matter, salt forms of onvansertib and combination of onvansertib with other drugs.

Onvansertib is highly potent against the PLK1 enzyme (concentration for 50% inhibition [IC50] = 2nM), whereas low or no activity was observed on a panel of 63 kinases (IC50>500 nM), including the PLK members PLK2 and PLK3 (IC50>10 μM). Onvansertib was developed to have ideal pharmacokinetics, including oral bioavailability and administration and a drug half-life of approximately 24 hours, allowing for flexible dosing and scheduling, and is well tolerated and safe with only mild to moderate side effects reported to-date. A Phase 1 safety study of onvansertib was successfully completed in patients with advanced metastatic solid tumors and published in 2017 in Investigational New Drugs.

PLK1, a serine/threonine kinase, is a master regulator of mitotic progression with various roles and localizations during the different mitotic phases. Upon PLK1 depletion in cancer cells by RNA interference ("RNAi"), inhibition of proliferation and decreased viability, resulting from cell cycle arrest with 4N DNA content followed by apoptosis, are observed. PLK1 depletion also results in an increase in the number of cells containing abnormal spindle formation and misaligned chromosomes. Expression of PLK1 is seen in all proliferating normal tissues, and PLK1 is overexpressed in a number of tumors (including breast, prostate, ovary, lung, gastric and colon cancers), as well as in hematologic cancers.

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Onvansertib has been tested for antiproliferative activity on a panel of 148 tumor cell lines and appeared highly active with an IC50 (a measure concentration for 50% target inhibition) below 100 nM in 75 cell lines and IC50 values below 1 uM in 133 out of 148 cell lines. Onvansertib also appears active in cells expressing multi-drug resistant (“MDR”) transporter proteins and we believe its apparent ability to overcome the MDR transporter resistance mechanism in cancer cells could prove useful in broader drug combination applications. Additionally, onvansertib has been tested in in-vivo xenograft and transgenic models of different cancer types with the demonstration of tumor growth inhibition or tumor regression.

Onvansertib has been evaluated preclinically in combination with several different chemotherapies, including irinotecan, cisplatin, cytarabine, doxorubicin, gemcitabine and paclitaxel, and with targeted therapeutics such as abiraterone, histone deacetylase ("HDAC") inhibitors, fms-like tyrosine kinase 3 ("FLT3") inhibitors, and bortezomib. These therapies are used clinically for the treatment of many hematologic and solid cancers, including acute myeloid leukemia ("AML"), non-Hodgkin’s lymphoma ("NHL"), metastatic CRC, metastatic castration resistant prostate cancer ("mCRPC"), adrenocortical carcinoma ("ACC"), triple negative breast cancer ("TNBC"), small cell lung cancer ("SCLC"), and ovarian cancer.

We believe the high-selectivity of onvansertib to PLK1, its 24-hour half-life and oral bioavailability, as well as its demonstrated safety and tolerability, with expected on-target, easy to manage and reversible side effects, may prove beneficial in addressing clinical therapeutic needs across a variety of cancers.

Clinical Program Updates

We currently have three active clinical trials:

•TROV-054 is a Phase 1b/2 open-label clinical trial of onvansertib in combination with FOLFIRI and bevacizumab ("Avastin®")for the second line treatment of patients with KRAS-mutated mCRC, which is being conducted at 6 clinical trial sites across the U.S. - USC Norris Comprehensive Cancer Center, The Mayo Clinic Cancer Centers (Arizona, Minnesota and Florida), Kansas University Medical Center ("KUMC") and CARTI Cancer Center;

•TROV-053 is a Phase 2 open-label clinical trial of onvansertib in combination with abiraterone acetate (Zytiga®) and prednisone in patients with mCRPC, which is being conducted at Beth Israel Deaconess Medical Center ("BIDMC"), Dana-Farber Cancer Institute ("DFCI"), and Massachusetts General Hospital ("MGH");

•TROV-052 is a Phase 2 open-label clinical trial of onvansertib in combination with standard-of-care chemotherapy, decitabine, in patients with relapsed or refractory AML, which is being conducted at nine sites across the U.S. The Phase 1b portion of the AML trial was completed in the fourth quarter of 2019 and enrollment in Phase 2 was completed in October 2020.

KRAS-mutated mCRC

TROV-054 is a Phase 1b/2 study of onvansertib for the second-line treatment of patients with KRAS-mutated metastatic colorectal cancer ("mCRC") in combination with standard-of-care FOLFIRI and bevacizumab (Avastin®).

The primary objective of this study is to evaluate the dose-limiting toxicities ("DLTs") and maximum tolerated dose ("MTD") or recommended Phase 2 dose ("RP2D") of onvansertib in combination with FOLFIRI and bevacizumab (Phase 1b) and to continue to assess the safety and preliminary efficacy of onvansertib in combination with FOLFIRI and bevacizumab (Phase 2).

The rationale for this clinical trial is based on three key principles including synthetic lethality, synergy and proof-of-concept clinical benefit. Synthetic lethality arises when a combination of deficiencies in the expression of two genes leads to cell death, whereas a deficiency in only one of these genes does not. The deficiencies can arise through mutations, epigenetic alterations or inhibitors of the protein encoded by one of the genes. In reference to onvansertib, CRC tumor cells harboring KRAS mutations are more vulnerable to cell death with PLK1 inhibition versus KRAS wild-type isogenic cells. Synergy occurs when the combination of two drugs results in an unexpected greater activity than an expected additive effect of the two drugs. Onvansertib in combination with irinotecan and 5-FU (components of FOLFIRI) demonstrate synergy in colorectal cancer cell lines and the combination has demonstrated significantly greater tumor growth inhibition than either drug alone.Proof-of-concept clinical response has been demonstrated in a previously completed Phase 1 trial in solid tumors in which 3 of 5 patients showing stable disease had a KRAS mutation; 2 in colorectal cancer and 1 in pancreatic cancer.

Data presented on January 15, 2021, at the American Society of Clinical Oncology Gastrointestinal Cancers Symposium (“ASCO-GI”), demonstrated the safety and efficacy of onvansertib. Of the 12 patients evaluable for efficacy, 5

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(42%) achieved a partial response (PR); 4 patients had a confirmed PR; 1 patient went on to curative surgery; 1 patient with a non-confirmed PR went off study due to an unrelated event prior to their 16-week confirmatory scan. 8 (67%) patients showed a durable response to treatment of >6 months with a range from 6.1 to 13.7 months. Time to achieving a PR ranges from 2 to 6 months in patients on treatment. 10 of 12 patients had a KRAS variant detected by ddPCR at baseline (all had a KRAS mutation detected by NGS). Clinical responses were observed across different KRAS variants, including the 3 most common in CRC. The greatest decreases in KRAS mutant allelic frequency (MAF) after 1 cycle of treatment were observed in patients achieving a PR (ranging from -78% to -100%), while the 2 patients who progressed showed a more modest reduction in KRAS MAF (-55% and -26%). Patients with PR and stable disease (SD) tended to have lower on-treatment KRAS MAF than patients with early progressive disease (PD). Onvansertib in combination with FOLFIRI/bevacizumab is safe and well tolerated with only 9% of all adverse events (AEs) being grade 3 or 4. Grade 4 adverse events were attributed to the 5-FU bolus component of the combination regimen, which was eliminated in subsequent cycles of treatment per protocol and institutional guidelines. The only G3/G4 AEs reported in ≥2 patients were neutropenia (n=8), which were managed by dose delay, growth factor therapy and/or discontinuation of the 5-FU bolus; no patients went off trial due to neutropenia. No major or unexpected toxicities were attributed to onvansertib.

Key News Releases

On January 15, 2021, we announced an electronic poster presentation of clinical data further demonstrating the clinical benefit of onvansertib in KRAS-mutate mCRC and initial findings from our Expanded Access Program (EAP) in mCRC.

On September 17, 2020, we announced an electronic poster presentation of clinical data further demonstrating the safety, efficacy and durability of response of onvansertib in KRAS-mutated mCRC patients at the European Society of Medical Oncology ("ESMO") Virtual Congress 2020.

On June 9, 2020, we announced the initiation of our Expanded Access Program ("EAP") for onvansertib, in combination with standard-of-care FOLFIRI and bevacizumab, for second-line treatment of patients with KRAS-mutated mCRC. This announcement followed the FDA granting Fast Track Designation for onvansertib in KRAS-mutated mCRC.

mCRPC

TROV-053 is a Phase 2 study of onvansertib in combination with Zytiga® (abiraterone) and prednisone for the treatment of patients with metastatic castration resistant prostate cancer ("mCRPC").

The primary objective of this study is to observe the effects of onvansertib in combination with abiraterone and prednisone on disease control as assessed by prostate specific antigen ("PSA") decline or stabilization after 12 weeks of study treatment in patients with mCRPC showing early signs of resistance to abiraterone.

The rationale for this trial is based on the mechanism of action ("MOA") of onvansertib and Zytiga® and the synergy of these two drugs when used in combination. Onvansertib inhibits tumor cell division (mitosis) by inducing G2/M arrest of tumor cells and the combination of onvansertib and Zytiga® significantly increases mitotic arrest and is synergistic when used in combination. Additionally, PLK1 inhibition appears to enhance the efficacy of androgen signaling blockade in castration-resistant prostate cancer.

Data presented on February 11, 2021, at the American Society of Clinical Oncology Genitourinary Cancers Symposium (“ASCO-GU”) demonstrated safety and efficacy of onvansertib in combination with abiraterone. Arms A (n=17) and B (n=12) showed similar efficacy with 29% and 25% of patients achieving the primary endpoint and 53% and 42% of patients with SD at 12 weeks, respectively. The more continuous dosing schedule of Arm C (n=8) has shown a higher response rate with 63% of patients, to-date, achieving the primary endpoint and 75% with SD at 12 weeks. Efficacy was observed in patients harboring AR alterations across all 3 arms. ctDNA analysis revealed differences in baseline genomic profiles of patients achieving SD at 12 weeks vs patients progressing before or at 12 weeks. Mutations exclusively present in patients with SD were associated with cell cycle and DNA repair pathways that may result in increased sensitivity to onvansertib and efficacy of the combination. Onvansertib + abiraterone has demonstrated safety across all 3 dosing schedules.

Key News Releases

On February 11, 2021, we announced an electronic poster presentation of clinical data further demonstrating the safety, efficacy and durability of response in patient with mCRPC at the American Society of Clinical Oncology Genitourinary Cancers Symposium (“ASCO-GU”).

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AML

TROV-052 is a Phase 2 Study of onvansertib in combination with standard-of-care chemotherapy, decitabine, for the treatment of patients with relapsed or refractory acute myeloid leukemia ("AML"). The Phase 1b portion of this trial was completed in the fourth quarter of 2019.

The objective of this trial is to evaluate the DLTs and MTD or RP2D of onvansertib (Phase 1b – completed in October 2019). In Phase 2, the objective is to assess the safety, tolerability and preliminary efficacy of the combination of onvansertib at the RP2D and decitabine in patients with relapsed or refractory AML (Phase 2 enrollment completed in October 2020). Additionally, as a correlative objective, this trial is evaluating potential pharmacodynamic ("PD") and diagnostic biomarkers of onvansertib in patients with AML. We were granted Orphan Drug Designation ("ODD") for onvansertib for the treatment of AML from the FDA and the European Commission.

Data presented on December 6, 2020 at the 62nd American Society of Hematology ("ASH") conference, demonstrated the safety, tolerability and anti-leukemic activity of onvansertib in combination with decitabine in patients with difficult-to-treat relapsed/refractory AML. Nine of 45 (20%) patients achieved a complete remission with or without hematologic count recovery (CR/CRi – 5 in Phase 1b and 4 in Phase 2); 55% of responders had a mutation in a splicing factor. Two patients proceeded to transplant following CR and four patients remain on treatment with duration of response of 9, 10, 17 and 20 months, respectively. Together with data demonstrating the safety and tolerability of the combination therapy, these findings highlight onvansertib’s potential to address critical unmet needs in hematologic malignancies.

Key News Releases

On December 6, 2020, we announced an electronic poster presentation of data from the Phase 1b/2 trial in AML demonstrating the safety and efficacy of onvansertib in relapsed or refractory patients at the annual American Society of Hematology (“ASH”) conference.

Financial and Company Updates

Financial

On September 29, 2020 we announced pricing of an underwritten public offering of 6,500,000 shares of our common stock at a price of $13.50 per share. The underwriters had an option to purchase an additional 975,000 shares, which was exercised in full. The offering was completed on October 2, 2020 and the gross proceeds were $100.9 million.

Company

On December 21, 2020 we announced that Dr. Thomas Adams has stepped down from his positions as Executive Chairman and Chairman of the Board of Directors and will continue to serve as a Director. Dr. Rodney Markin was appointed by the Board of Directors as our new Chairman of the Board.

On May 8, 2020 we changed our company name from Trovagene, Inc. to Cardiff Oncology, Inc., and our Nasdaq ticker symbol to ‘CRDF.’ The web address for the Cardiff Oncology website is www.cardiffoncology.com.

On May 8, 2020 Mark Erlander, PhD, assumed the role of Chief Executive Officer and Thomas Adams, PhD, transitioned from Chief Executive Officer and Chairman to Executive Chairman.

On April 22, 2020, we announced the election of three new independent Directors to our Board of Directors; Dr. James Armitage, Dr. Gary Pace and Ms. Lâle White. Each new Director brings extensive and relevant experience to our company.

Our accumulated deficit through December 31, 2020 is $231,495,279. To date, we have generated minimal revenues and expect to incur additional losses to perform further research and development activities.

Our drug development efforts are in their early stages, and we cannot make estimates of the costs or the time that our development efforts will take to complete, or the timing and amount of revenues related to the sale of our drugs. The risk of completion of any program is high because of the many uncertainties involved in developing new drug candidates to market, including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of

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research and development expenses, and competing technologies being developed by organizations with significantly greater resources.

Critical Accounting Policies

Our accounting policies are described in Part II, Item 8. Financial Statements—Note 2 Basis of Presentation and Summary of Significant Accounting Policies in this Annual Report on Form 10-K. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We believe that the following discussion represents our critical accounting policies.

Accrued Clinical Trial Expenses

We expense research and development expenditures as incurred, which include costs related to clinical trial activities. We accrue costs for clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the clinical research organizations (CROs), investigators, professional service providers, and other vendors providing clinical trial services (collectively, the “service providers”). As of December 31, 2020 our clinical trial accrual balance of $1,683,195 is included in accrued liabilities and other liabilities. Our related 2020 clinical trial expenses are included in research and development expense of $11,235,396. Certain accrued clinical trial expenses are released from service receivables classified within equity as clinical trial services are performed.

Derivative Financial Instruments—Warrants

We have issued common stock warrants in connection with the execution of certain equity financings. Such warrants are classified as derivative liabilities and are recorded at their fair market value as of each reporting period. Such warrants do not meet the exemption that a contract should not be considered a derivative instrument if it is (1) indexed to its own stock and (2) classified in stockholders’ equity. The warrants contain a feature that could require the transfer of cash in the event a change of control occurs without an authorization of our Board of Directors, and therefore classified as a liability. Changes in fair value of derivative liabilities are recorded in the statement of operations under the caption “gain (loss) from changes in fair value of derivative financial instruments—warrants.”

The fair value of warrants is determined using the Black-Scholes option-pricing model using assumptions regarding the historical volatility of Cardiff Oncology’s common stock price, the remaining life of the warrants, and the risk-free interest rates at each period end. Accordingly, the fair value of the warrants is sensitive to changes in these estimates. At December 31, 2020 and 2019, the fair value of such warrants was $284,971 and $4,127, respectively, and was recorded as a liability under the caption “derivative financial instruments—warrants” on the balance sheet.

Stock-based Compensation

Stock-based compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized straight-line over the requisite service period of the individual grants, which typically equals the vesting period. We estimate the grant date fair value using a Black-Scholes model. Stock-based compensation recorded in our statement of operations is based on awards expected to ultimately vest and has been reduced for estimated forfeitures. We recognize the value of the awards on a straight-line basis over the awards’ requisite service periods. The requisite service period is generally the time over which our stock-based awards vest. Compensation expense for RSU's is measured at the grant date and recognized ratably over the vesting period in the statement of operations. The fair value of RSU's is determined based on the closing market price of our common stock on the grant date.

Off-Balance Sheet Arrangements

As of December 31, 2020, we did not have any off-balance sheet arrangements as described by Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

See Item 8. Financial Statements—Note 2 Basis of Presentation and Summary of Significant Accounting Policies in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.

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Results of Operations

Years Ended December 31, 2020 and 2019

Revenues

Our total revenues were $365,993 and $244,632 for the years ended December 31, 2020 and 2019, respectively. Total revenues consisted of the following:

For the years ended December 31,

The increase in revenues for the year ended December 31, 2020 as compared to the prior period is primarily from fluctuations of our sales-based or usage-based royalties on other intellectual property licenses, unrelated to onvansertib. Revenue recognition of the royalty depends on the timing and overall sales activities of the licensees.

Research and Development Expenses

Research and development expenses consisted of the following:

For the years ended December 31,

Research and development expenses increased by $73,160 to $11,235,396 for the year ended December 31, 2020 from $11,162,236 for the year ended December 31, 2019. The increase in salaries and staff costs is primarily due to promotions, merit increases and increased headcount. The increase in costs associated with clinical programs and outside service costs is primarily related to assay development and recruiting fees. Facilities and other decreased primarily due to decreased travel and conference expenses to present data related to our drug candidate, onvansertib. Due to COVID-19 presentation of data has transitioned to virtual conferences.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consisted of the following:

For the years ended December 31,

Selling, general and administrative expenses increased by $2,455,581 to $8,216,471 for the year ended December 31, 2020, from $5,760,890 for the year ended December 31, 2019. The increase of stock-based compensation expense and salaries and staff costs is primarily related to the Separation Agreement with Thomas Adams which includes accelerated vesting of

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stock options of approximately $583,000 and a one-time severance payment of $300,000. The increase in outside services and professional fees is primarily related to legal and patent fees to analyze our competitive landscape and evergreen patent strategy. The increase in facilities and other cost was due to a decrease in sublease income, an increase in Delaware franchise tax and an increase in insurance costs.

Interest Income

Interest income was $89,809 and $234,169 for the years ended December 31, 2020 and 2019, respectively. The decrease of interest income is due to significantly lower average interest rates during 2020 as compared to 2019.

Change in Fair Value of Derivative Financial Instruments—Warrants

We have issued warrants to purchase shares of our common stock that are accounted for as derivative liabilities. As of December 31, 2020, the derivative financial instruments—warrants liabilities related to securities issued were revalued to $284,971, resulting in a increase in fair value of $280,844 from December 31, 2019 based primarily upon the change in our stock price from $1.24 at December 31, 2019 to $17.99 at December 31, 2020, and the changes in the expected term, volatility and risk-free interest rates for the expected term. The increase in value was recorded as non-operating loss for the year ended December 31, 2020.

Net Loss

Net loss and per share amounts were as follows:

For the years ended December 31,

Net loss per common share — basic and diluted $ (1.08) $ (2.80) $ (1.72)

The increase of $5,890,728 net loss attributable to common stockholders is primarily related to an increase of deemed dividends on preferred stock of $2,998,215, related to the beneficial conversion upon issuance of preferred stock and an increase of net loss of $2,892,513. The increase of 14,900,759 basic and diluted weighted-average shares outstanding primarily resulting from the sales of common stock through public and direct offerings and the issuance of common stock upon exercise of warrants. The $1.72 decrease in basic and diluted net loss per share was impacted by the increase in net loss attributable to shareholders and the increase in basic and weighted average shares outstanding.

Liquidity and Capital Resources

The COVID-19 outbreak in the United States has caused business disruptions. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and impact on our clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. The economic effects of the outbreak could also have an adverse effect on our ability to raise additional capital. At this point, the extent to which COVID-19 may impact our future financial condition or results of operations is uncertain. There has not been a material impact on the Company's financial statements for the twelve months ended December 31, 2020.

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As of December 31, 2020, we had $130,980,681 in cash and cash equivalents. Net cash used in operating activities for the year ended December 31, 2020 was $16,314,962, compared to $13,267,500 for the year ended December 31, 2019. Our use of cash was primarily a result of the net loss of $19,306,672 for the year ended December 31, 2020, adjusted for items mainly related to stock-based compensation of $1,764,804, release of clinical trial funding commitment of $1,100,415, and depreciation of $466,009. The net change in our operating assets and liabilities was $654,531 increasing cash used in operations. At our current and anticipated level of operating loss, we expect to continue to incur an operating cash outflow for the next several years.

Net cash used by investing activities was $211,880 and $67,622 for the years ended December 31, 2020 and 2019, respectively. Investing activities during the year ended December 31, 2020 and 2019 consisted of the purchase of capital equipment.

Net cash provided by financing activities was $137,312,231 during the year ended December 31, 2020, compared to $12,077,281 provided in financing activities during the year ended December 31, 2019. Financing activities during the year ended December 31, 2020 and 2019 related primarily to sales of Common Stock, Preferred Stock, Warrants and proceeds from exercise of warrants.

As of December 31, 2020 and 2019, we had working capital of $127,237,483 and $6,571,985, respectively. The increase in working capital is primarily due to the increase in cash and cash equivalents from financing activities during the year ended December 31, 2020.

We have incurred net losses since our inception and have negative operating cash flows. As of December 31, 2020, we had $130,980,681 in cash and cash equivalents and we believe we have sufficient cash to meet our funding requirements for at least the next 12 months following the issuance date of these financial statements.

For the foreseeable future, we expect to continue to incur losses and require additional capital to further advance our clinical trial programs and support our other operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we can raise additional funds by issuing equity securities, our stockholders may experience additional dilution. The economic effects of COVID-19 could also have an adverse effect on our ability to raise additional capital.

Our working capital requirements will depend upon numerous factors including but not limited to the nature, cost and timing of our research and development programs. To date, our sources of cash have been primarily limited to the sale of equity securities. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more product candidates, all of which may have a material adverse impact on our operations. We may also be required to (i) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (ii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves on unfavorable terms. We are evaluating all options to raise additional capital, increase revenue, as well as reduce costs, in an effort to strengthen our liquidity position, which may include the following: (1) Raising capital through public and private equity offerings; (2) Introducing operation and business development initiatives to bring in new revenue streams; (3) Reducing operating costs by identifying internal synergies; and (4) Engaging in strategic partnerships. We continually assess our spending plans to effectively and efficiently address our liquidity needs.

Controlled Equity Offerings and Public Offerings

See Note 5 to the financial statements.

Nasdaq Compliance

On September 5, 2017, we received a written notice from Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market, as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days. The Notice had no immediate effect on the listing of our common stock, and our common stock continued to trade on the Nasdaq Capital Market under the symbol “TROV”. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had until March 5, 2018, to regain compliance with the minimum bid price requirement.

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We were eligible for extensions and hearings and ultimately announced on February 12, 2019 that our stockholders approved a reverse stock split of our issued and outstanding shares of common stock and on February 19, 2019, we effected a six for one reverse stock split of our issued and outstanding shares of common stock. On March 11, 2019 we received a letter from Nasdaq, informing us that we had regained compliance with the minimum bid price requirement. We were subject to a Nasdaq Panel Monitor until March 10, 2020. We received a letter from Nasdaq on May 29, 2020 informing us that we are in compliance with applicable Nasdaq Listing Rules.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our cash and cash equivalents primarily consists of deposits and money market deposits managed by commercial banks as of December 31, 2020. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates, particularly because our investments were in short-term money marketable funds during the years ended December 31, 2020 and 2019. Due to the short-term duration of our investment portfolio and the relatively low risk profile of our investments, a sudden change in interest rates would not have a material effect on the fair market value of our portfolio, nor our operating results or cash flows.

We do not believe our cash and cash equivalents have significant risk of default issues; however, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. Given the current stability of financial institutions, we believe that we will not experience losses on these deposits.

Foreign Currency Risk

We face foreign currency risk as a result of entering into transactions denominated in currencies other than U.S. dollars. Changes in foreign currency exchange rates can create foreign exchange gains or losses to us. We did not incur significant foreign currency gains or losses for the years ended December 31, 2020 and 2019.

Effects of Inflation

We do not believe that inflation and changing prices during the years ended December 31, 2020 and 2019 had a significant impact on our results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our chief executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(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 Securities and Exchange Commission’s rules and forms. 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. 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

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decisions regarding required disclosure. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

As of December 31, 2020, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on those criteria.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference from the information contained in our Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to be held in 2021 (the “2021 Proxy Statement”), under the headings “Election of Directors.”

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from the information contained in the 2021 Proxy Statement under the heading “Executive Compensation.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference from the information contained in the 2021 Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference from the information contained in the 2021 Proxy Statement under the headings “Certain Relationships and Related Transactions.”

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference from the information contained in the 2021 Proxy Statement under the heading “Proposal 2: Ratification of the Appointment of Our Independent Registered Public Accounting Firm for Fiscal Year Ending December 31, 2021”.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ExhibitNumber Description of Exhibit

(a)(1) Financial Statements

(b) Exhibits

ExhibitNumber Description

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23.1 Consent of BDO USA, LLP.

24 Power of Attorney (included on signature page hereto).

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema.

101.CAL XBRL Taxonomy Extension Calculation Linkbase.

101.LAB XBRL Taxonomy Extension Labels Linkbase.

101.PRE XBRL Taxonomy Extension Presentation Linkbase.

101.DEF XBRL Taxonomy Extension Definition Linkbase.

+ Indicates a management contract or compensatory plan or arrangement.

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* The SEC has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CARDIFF ONCOLOGY, INC.

/s/ Mark Erlander

2/25/2021 Chief Executive Officer (Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Mark Erlander as his or her attorney-in-fact, with full power of substitution and resubstitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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SIGNATURE TITLE DATE

/s/ Mark Erlander Chief Executive Officer 2/25/2021

Mark Erlander (Principal Executive Officer)

/s/ Brigitte Lindsay VP, Finance 2/25/2021

Brigitte Lindsay (Principal Financial and Accounting Officer)

/s/ Rodney S. Markin Chairman of the Board and Director 2/25/2021

Rodney S. Markin

Thomas Adams

/s/ James O. Armitage Director 2/25/2021

James O. Armitage

/s/ John Brancaccio Director 2/25/2021

John Brancaccio

/s/ Gary S. Jacob Director 2/25/2021

Gary S. Jacob

Gary W. Pace

Lâle White

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CARDIFF ONCOLOGY, INC.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Balance Sheets F-4

Statements of Operations F-5

Statements of Stockholders’ Equity F-6

Statements of Cash Flows F-7

Notes to Financial Statements F-9

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Cardiff Oncology, Inc.

San Diego, California

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Cardiff Oncology, Inc. (the “Company”) as of December 31, 2020 and 2019, the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee of the Company’s board of directors and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued clinical trial expenses

As disclosed in Note 2 to the consolidated financial statements, the Company expenses research and development expenditures as incurred, which include costs relating to clinical trial activities. The Company accrues costs for clinical trial activities based upon estimates of the services performed and costs incurred that have not been invoiced by the service providers. The Company’s clinical trial accrual balance at December 31, 2020 is $1.69 million, and the Company’s related 2020 clinical trial expenses are included in research and development expense of $11.2 million for the year ended December 31, 2020.

We identified accrued clinical trial expenses as a critical audit matter. When estimating clinical trial expenses, the Company considers several factors including clinical trial budgets, contract amendments and the progress toward completion. Auditing these elements involves especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters and a high degree of auditor subjectivity.

The primary procedures we performed to address the critical audit matter included:

F-2

•Testing management’s process for estimating accrued clinical trial expenses by (i) obtaining and inspecting significant agreements, clinical trial budgets, and contract amendments, (ii) evaluating the Company’s documentation of trial progress and status (including consideration of patient enrollment and milestones achieved), (iii) confirming clinical trial progress with third party service providers, and (iv) testing a sample of transactions by comparing the costs against the related invoices and agreements.

•Testing the completeness of the Company’s clinical trial accruals by (i) evaluating publicly available information (such as press releases, investor presentations and public databases that track clinical trials) and board of directors’ minutes which discuss the status of clinical trials, (ii) inquiring of clinical staff outside of finance to gain an understanding of the status of significant on-going clinical trials, and (iii) testing a sample of payments subsequent to the year end to evaluate the completeness of clinical trial accruals.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2007.

San Diego, California

February 25, 2021

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Cardiff Oncology, Inc.

Balance Sheets

Assets

Current assets:

Liabilities and Stockholders’ Equity

Current liabilities:

Other current liabilities 42,000 —

Derivative financial instruments—warrants 284,971 4,127

Operating lease liabilities, net of current portion 9,291 860,963

Commitments and contingencies (Note 10)

Stockholders’ equity

The accompanying notes are an integral part of these financial statements.

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Cardiff Oncology, Inc.

Statements of Operations

Year Ended December 31,

Revenues:

Costs and expenses:

Interest expense (1,519) —

Net loss per common share — basic and diluted $ (1.08) $ (2.80)

Weighted-average shares outstanding — basic and diluted 20,874,665 5,973,906

The accompanying notes are an integral part of these financial statements.

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Cardiff Oncology, Inc.

Statements of Stockholders’ Equity

Release of clinical trial funding commitment — — — — — 703,327 — 703,327

Release of clinical trial funding commitment — — — — — 1,100,415 1,100,415

Common Stock par value adjustment — — — (7,453) 7,453 — — —

(1)Net of expenses of $7,507,123, and fair value of warrants issued as a transaction advisory fee as of the date of issuance of $370,666

The accompanying notes are an integral part of these financial statements.

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Cardiff Oncology, Inc.

Statements of Cash Flows

Year ended December 31,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Changes in operating assets and liabilities:

Accounts receivable and unbilled receivable (116,978) (35,725)

Investing activities

Net cash used in investing activities (211,880) (67,622)

Financing activities

Costs related to the clinical trial funding commitment (7,500) (40,000)

Proceeds from exercise of options 148,196 —

Borrowings under note payable 305,000 —

Repayments of note payable (305,000) —

Supplementary disclosure of cash flow activity:

Cash paid for taxes $ 800 $ 800

Supplemental disclosure of non-cash investing and financing activities:

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Year ended December 31,

The accompanying notes are an integral part of these financial statements.

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Cardiff Oncology, Inc.

Notes to Financial Statements

1. Business Overview and Liquidity

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, pancreatic cancer, Zytiga®-resistant metastatic castration-resistant prostate cancer and leukemias. 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 able to assess patient response to treatment.

Liquidity

The Company has incurred net losses since its inception and has negative operating cash flows. As of December 31, 2020, the Company had $131.0 million in cash and cash equivalents 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 13 to the financial statements for further information.

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2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying financial statements of Cardiff Oncology have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The Company made a reverse split of its common stock, $0.0001 par value, at a ratio of 1 for 6, effective February 19, 2019. All share and per share information in the financial statements and the accompanying notes have been retroactively adjusted to reflect the reverse stock split for all periods presented.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations as, and manages its business in, one operating segment.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates involve accrued clinical trial expenses and determining the assumptions made for stock-based compensation.

Accrued Clinical Trial Expenses

The Company expenses research and development expenditures as incurred, which include costs related to clinical trial activities. The Company accrues costs for clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the clinical research organizations (CROs), investigators, professional service providers, and other vendors providing clinical trial services (collectively, the “service providers”). As of December 31, 2020 the Company’s Clinical trial accrual balance of $1,683,195 is included in accrued liabilities and other liabilities. The Company’s related 2020 clinical trial expenses are included in research and development expense of $11,235,396. Certain accrued clinical trial expenses are released from service receivables classified within equity (see Note 5) as clinical trial services are performed.

Cash and Cash Equivalents

Cash and cash equivalents consist of operating and money market accounts as of December 31, 2020 and 2019 on deposit. 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.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposit accounts at financial institutions that are in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash due to the financial position of the depository institution in which those deposits are held. The Company limits its exposure to credit loss by generally placing its cash in high credit quality financial institutions and investment in non FDIC insured money market funds denominated and payable in U.S. dollars. Additionally, the Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity.

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Revenues

The Company recognizes revenue when control of its products and services are transferred to its customers in an amount that reflects the consideration it expects to receive from its customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of goods or service to the customer, meaning the customer has the ability to use and obtain the benefit of goods or service. The Company recognizes revenue for satisfied performance obligations only when it determines there are no uncertainties regarding payment terms or transfer of control. For sales-based royalties, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Royalty and License Revenues

The Company licenses and sublicenses its patent rights to healthcare companies, medical laboratories and biotechnology partners. These agreements may involve multiple elements such as license fees, royalties and milestone payments. Revenue is recognized when the criteria described above have been met as well as the following:

•Up-front nonrefundable license fees pursuant to agreements under which the Company has no continuing performance obligations are recognized as revenues on the effective date of the agreement and when collection is probable.

•Minimum royalties are recognized as earned, and royalties are earned based on the licensee’s use. The Company estimates and records licensee’s sales based on historical usage rate and collectability.

•For sales-based royalties, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Payment terms and conditions vary by contracts, although terms generally include a requirement of payment within 30 to 45 days after invoice. Minimum royalties are generally due quarterly or annually.

Derivative Financial Instruments—Warrants

The Company has issued common stock warrants in connection with the execution of certain equity financings. Such warrants are classified as derivative liabilities and are recorded at their fair market value as of each reporting period. Such warrants do not meet the exemption that a contract should not be considered a derivative instrument if it is (1) indexed to its own stock and (2) classified in stockholders’ equity. The warrants contain a feature that could require the transfer of cash in the event a change of control occurs without an authorization of the Company’s Board of Directors, and therefore classified as a liability. Changes in fair value of derivative liabilities are recorded in the statement of operations under the caption “Change in fair value of derivative instruments—warrants.”

The fair value of warrants is determined using the Black-Scholes option-pricing model using assumptions regarding the historical volatility of Cardiff Oncology’s common stock price, the remaining life of the warrants, and the risk-free interest rates at each period end. The Company thus uses model-derived valuations where inputs are observable in active markets to determine the fair value. The use of the Black-Scholes model classifies such warrants as Level 3 (See "Fair Value of Financial Instruments" below). At December 31, 2020 and 2019, the fair value of these warrants was $284,971 and $4,127, respectively, and was recorded as a liability under the caption “derivative financial instruments—warrants” on the balance sheets.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized straight-line over the requisite service period of the individual grants, which typically equals the vesting period.

Fair Value of Financial Instruments

Financial instruments consist of cash equivalents, accounts receivable, accounts payable and derivative liabilities. The Company applies ASC 820 for financial assets and liabilities that are required to be measured at fair value and non-financial assets

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and liabilities that are not required to be measured at fair value on a recurring basis. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature as they reflect current market interest rates.

The authoritative guidance establishes a fair value hierarchy that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities. In general, the authoritative guidance requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the measurement of its fair value. The three levels of input defined by the authoritative guidance are as follows:

The Company measures certain assets and liabilities at fair value on a recurring basis using the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers include:

•Level 1 — Quoted prices for identical instruments in active markets.

•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations where inputs are observable or where significant value drivers are observable.

•Level 3 — Instruments where significant value drivers are unobservable to third parties.

Long-Lived Assets

Long-lived assets consist of property and equipment. The Company records property and equipment at cost, and records other intangible assets based on their fair values at the date of acquisition. Depreciation on property and equipment is calculated using the straight-line method over the estimated useful life of five years for laboratory equipment and three to five years for furniture and office equipment. Depreciation of leasehold improvements is computed based on the shorter of the life of the asset or the term of the lease.

Impairment losses on long-lived assets used in operations are recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amount. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities and non-current operating lease liabilities in the Company’s balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would expect to pay to borrow on a collateralized and fully amortizing basis over a similar term an amount equal to the lease payments in a similar economic environment. The operating lease ROU asset also includes any lease payments made less lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Our facilities lease agreement contains lease and non-lease components, such as common area maintenance. We have elected to account for these lease and non-lease components of this agreement as a single lease component.

Leases with an initial term of 12 months or less are not recorded on the Company's balance sheets. These short-term leases are expensed on a straight-line basis over the lease term.

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Income Taxes

Income taxes are determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes result from differences between the financial statement and tax bases of Cardiff Oncology’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment of whether or not a valuation allowance is required often requires significant judgment.

Contingencies

In the normal course of business, Cardiff Oncology is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, stockholder lawsuits, product and environmental liability, and tax matters. In accordance with FASB ASC Topic 450, Contingencies, Cardiff Oncology records such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Cardiff Oncology, in accordance with this guidance, does not recognize gain contingencies until realized.

Research and Development

Research and development expenses include expenditures in connection with an in-house research and development laboratory, salaries and staff costs, clinical trials, purchased in-process research and development and regulatory and scientific consulting fees, as well as contract research and insurance. Also, patent filing and maintenance expenses are considered legal in nature and therefore classified as general and administrative expense, if any.

Non-refundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. As the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided, the deferred amounts are recognized as an expense.

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 and deemed dividends recognized in connection with certain preferred share issuances are included in net loss attributable to common stockholders in the computation of basic and diluted earnings per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive. Shares used in calculating diluted net loss per common share exclude as anti-dilutive the following share equivalents:

December 31,

Series A Convertible Preferred Stock 877 877

Series E Convertible Preferred Stock 2,684,607 —

Recently Adopted Accounting Pronouncement

In August 2018, the FASB issued ASU No. 2018-13 ("ASU 2018-13"), Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company has prospectively adopted ASU 2018-13 as of January 1, 2020 for periods presented after adoption. The adoption of ASU 2018-13 did not have a material impact on the Company's financial statements.

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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 adoption is permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

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3. Supplementary Balance Sheet Information

Property and Equipment

Fixed assets consist of furniture and office equipment, leasehold improvements and laboratory equipment. Depreciation expense for property and equipment for the years ended December 31, 2020 and 2019 was $466,009 and $494,232, respectively. Property and equipment consisted of the following:

As of December 31,

Accrued Liabilities

Accrued liabilities consisted of the following:

As of December 31,

Professional fees and outside services 38,180 21,000

4. 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 $78,000, with 3% annual escalation.

Facility Subleases

As a result of corporate restructurings in previous years, the Company vacated a portion of its facility and has subleased space to third parties under three separate sublease agreements, which all expire December 31, 2021. Income is recognized on a straight-line basis over the term of the sublease.

Impairment of Right-of-Use Assets

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The Company recorded an impairment loss of $34,169 and $0 for the twelve months ending December 31, 2020 and 2019, respectively. The loss related to a vacated portion of the facility that was no longer being subleased. The Company determined that the prolonged loss of sublease income and an adverse commercial real estate market caused by COVID-19 were indicators of impairment. A fair value approach using quoted prices for similar assets was used to determine the impairment loss. The loss was recorded within operating expenses in the statement of operations.

The components of lease expense were as follows:

Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019

Supplemental balance sheet information related to leases was as follows:

Non-current operating lease liabilities 9,291 860,963

Weighted-average remaining lease term–operating leases 1.0 year 2.0 years

Weighted-average discount rate–operating leases 6.5 % 6.5 %

Supplemental cash flow and other information related to leases was as follows:

Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 943,959 $ 916,762

Total remaining annual commitments under non-cancelable lease agreements for each of the years ended December 31 are as follows:

Year Ending December 31, Operating Leases Sublease Income Net Operating Leases

Less imputed interest (29,380)

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5. Stockholders’ Equity

Warrants

A summary of warrant activity and changes in warrants outstanding, including both liability and equity classifications, is presented below:

The above table excludes pre-funded warrants with a nominal exercise price of $.01 per share:

1.605,072 pre-funded warrants outstanding as of December 31, 2019;

2.386,967 pre-funded warrants which were issued during the twelve months ending December 31, 2020;

3.All 992,039 pre-funded warrants were exercised in full during the twelve months ending December 31, 2020.

Preferred Stock

A summary of our Company's classes of preferred stock is presented below:

Shares outstanding

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 A Convertible Preferred Stock

The material terms of the Series A Convertible Preferred Stock consist of:

1)Dividends. Holders of the Company’s Series A Convertible Preferred Stock are entitled to receive cumulative dividends at the rate per share of 4% per annum, payable quarterly on March 31, June 30, September 30 and December 31, beginning with September 30, 2005. Dividends are payable, at the Company’s sole election, in cash or shares of common stock. As of December 31, 2020 and 2019, the Company had $389,495 and $365,255, respectively in accrued cumulative unpaid preferred stock dividends, included in accrued liabilities in the Company’s balance sheets, and $24,240 and $24,240 of accrued dividends were recorded during the years ended December 31, 2020 and 2019, respectively.

2)Voting Rights. Shares of the Series A Convertible Preferred Stock have no voting rights. However, so long as any shares of Series A Convertible Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of the shares of Series A Convertible Preferred Stock then outstanding, (a) adversely change the powers, preferences or rights given to the Series A Convertible Preferred Stock, (b) authorize or create any class of stock senior or equal to the Series A Convertible Preferred Stock, (c) amend its certificate of incorporation or other charter

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documents, so as to affect adversely any rights of the holders of Series A Convertible Preferred Stock or (d) increase the authorized number of shares of Series A Convertible Preferred Stock.

3)Liquidation. Upon any liquidation, dissolution or winding-up of the Company, the holders of the Series A Convertible Preferred Stock are entitled to receive an amount equal to the Stated Value per share, which is currently $10 per share plus any accrued and unpaid dividends.

4)Conversion Rights. Each share of Series A Convertible Preferred Stock is convertible at the option of the holder into that number of shares of common stock determined by dividing the Stated Value, currently $10 per share, by the conversion price, which at the time of issuance was $928.80 per share, and subsequently adjusted to $691.20 per share.

5)Subsequent Equity Sales. The conversion price is subject to adjustment for dilutive issuances for a period of 12 months beginning upon registration of the common stock underlying the Series A Convertible Preferred Stock. The relevant registration statement became effective on March 17, 2006 and the conversion price was adjusted to $691.20 per share.

6) Automatic Conversion. If the price of the Company’s common stock equals $1,857.60 per share for 20 consecutive trading days, and an average of 116 shares of common stock per day are traded during the 20 trading days, the Company will have the right to deliver a notice to the holders of the Series A Convertible Preferred Stock, requesting the holders to convert any portion of the shares of Series A Convertible Preferred Stock into shares of common stock at the applicable conversion price. As of the date of these financial statements, such conditions have not been met.

Series C Convertible Preferred Stock and Service Receivable

On January 25, 2019, the Company entered into a Master Services Agreement and a Stock and Warrant Subscription Agreement with PoC Capital, LLC (“PoC”), whereby PoC agreed to finance $1.675 million for the development costs associated with Phase 1b/2 study of onvansertib in combination with FOLFIRI and Avastin® in patients with metastatic Colorectal Cancer (“mCRC”) harboring KRAS mutation in exchange for (i)183,334 shares of common stock, (ii) warrants to purchase an aggregate of 150,000 shares of common stock, with an exercise price of $3.762 per share, expiring on January 25, 2024, and (iii) 200,000 shares of Series C Convertible Preferred Stock, each share of which was convertible into 1.67 shares of common stock. In April of 2019, all 200,000 shares of Series C Convertible Preferred Stock were converted into 333,333 shares of the Company's common stock.

The Company evaluated the awards issued under this transaction and determined they should be classified as equity. These equity awards were fully vested and non-forfeitable. Since the equity awards were for clinical trial services yet to be provided, the Company recognized $1.675 million service receivables as contra equity. The Company releases the service receivables as clinical trial services are performed. The conversion feature of the Series C Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series C Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $0.3 million related to the beneficial conversion feature arising from the issuance of Series C Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share.

Series D Convertible Preferred Stock and Service Receivable

On May 8, 2020, the Company entered into a Stock and Warrant Subscription Agreement with PoC, whereby PoC agreed to finance an additional $2.3 million for a clinical trial in exchange for (i) 602,833 shares of its common stock (the “Common Stock”), (ii) 154,670 shares of its Series D Preferred Stock and (iii) a warrant exercisable for 859,813 shares of its Common Stock. In exchange, PoC is funding our clinical development of onvansertib in metastatic colorectal cancer pursuant to a Master Services Agreement dated as of January 25, 2019, as amended. The warrant will be exercisable six months following the date of issuance at an exercise price of $1.50 per share and will expire on November 7, 2025. In June of 2020, all 154,670 Series D Preferred Stock were converted to 1,546,700 shares of Common Stock.

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The Company evaluated the awards issued under this transaction and determined they should be classified as equity. These equity awards were fully vested and non-forfeitable. Since the equity awards were for clinical trial services yet to be provided, the Company recognized $2.3 million service receivables as contra equity. The Company releases the service receivables as clinical trial services are performed. The conversion feature of the Series D Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series D Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $0.6 million related to the beneficial conversion feature arising from the issuance of Series D Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share.

Series E Convertible Preferred Stock

On June 15, 2020 the Company entered into a Securities Purchase Agreement with Acorn Bioventures LP ("Acorn"), CDK Associates, L.L.C. (“CDK”) and Third Street Holdings LLC (“Third Street”), pursuant to which the Company agreed to offer, issue and sell to Acorn, CDK and Third Street, (i) in a registered direct offering, an aggregate of 1,984,328 shares of common stock and (ii) in a concurrent private placement, (a) an aggregate of 865,824 shares of Series E Preferred Stock (“Series E Preferred Stock”) and (b) Series N warrants to purchase up to 2,213,115 shares of Common Stock. The Series E Preferred Stock is convertible at any time determined by dividing the $10 stated value per share of the Series E Preferred Stock by a conversion price of $2.44 per share, subject to adjustment in accordance with the Certificate of Designation. The Series N Warrants will be exercisable six months following the date of issuance at an exercise price of $2.39 per share and will expire on December 16, 2025. Certain investors converted 210,780 shares of Series E Convertible Preferred stock to 863,852 shares of Common Stock during December 2020.

The conversion feature of the Series E Convertible Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series E Convertible Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from inception, the Company immediately recorded a non-cash deemed dividend of $2.7 million related to the beneficial conversion feature arising from the issuance of Series E Convertible Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders and net loss per share.

In conjunction with the June 15, 2020 offering, we issued 184,426 warrants as an advisory fee. These warrants are exercisable six months following the date of issuance at an exercise price of $3.05 per share and will expire 5.5 years following the date of issuance. These warrants are classified as equity and its estimated fair value of $370,666 was recognized as additional paid in capital on the issuance date. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

Securities Purchase Agreements with Lincoln Park Capital Fund, LLC

On March 30, 2020, the Company entered into a Securities Purchase Agreement with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company agreed to offer, issue and sell to LPC, (i) in a registered direct offering, an aggregate of (a) 800,000 shares of common stock and (b) Series I warrants to purchase up to 131,967 shares (the “Series I Warrant Shares”) of common stock. In a concurrent private placement, the Company also sold to LPC Series J warrants (the “Series J Warrants”) to purchase one share of common stock for each Share and for each Series I Warrant purchased for cash in the registered direct offering. The Series J Warrants are exercisable six months following the date of issuance at an exercise price of $0.948 per share and will expire 5.5 years following the date of issuance. The gross proceeds from this purchase were $1.0 million.

On April 9, 2020, the Company entered into a Securities Purchase Agreement with LPC, pursuant to which the Company agreed to offer, issue and sell to LPC, (i) in a registered direct offering, an aggregate of (a) 904,970 shares of common stock and (b) Series K warrants to purchase up to 255,000 shares (the “Series K Warrant Shares”) of common stock. In a concurrent private placement, the Company also sold to LPC Series L warrants (the “Series L Warrants”) to purchase one share of Common Stock for each Share and for each Series K Warrant purchased for cash in the registered direct offering. The Series L Warrants are exercisable six months following the date of issuance at an exercise price of $0.81 per share and will expire 5.5 years following the date of issuance. The gross proceeds from this purchase were $1.1 million.

Securities Purchase Agreement with Certain Directors and Executives

On May 11, 2020 and May 14, 2020, the Company entered into Securities Purchase Agreements with certain directors and executives of the Company pursuant to which the Company sold 447,761 shares of common stock at a purchase price of $1.34 per share and 146,854 shares of common stock at a purchase price of $1.43 per share. The gross proceeds from these purchases were $810,000.

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Securities Purchase Agreement with Acorn Bioventures LP

On May 26, 2020, the Company entered into a Securities Purchase Agreement with Acorn, pursuant to which the Company agreed to offer, issue and sell to Acorn, (i) in a registered direct offering, an aggregate of 1,205,400 shares of common stock and (ii) in a concurrent private placement, Series M warrants to purchase up to 482,160 shares of common stock. The Series M Warrants are exercisable six months following the date of issuance at an exercise price of $2.024 per share and will expire 5.5 years following the date of issuance. The gross proceeds from this purchase were $2.5 million.

Underwritten Public Offering

On October 2, 2020 the Company completed an underwritten public offering of 6,500,000 shares of its common stock at a price to the public of $13.50 per share. In addition, the underwriters exercised in full an option to purchase an additional 975,000 shares of common stock at the public offering price, less the underwriting discounts and commissions. All of the shares in the offering were sold by the Company, with gross proceeds of approximately $100.9 million, and net proceeds of approximately $94.0 million, after deducting underwriting discounts, commissions and estimated offering expenses.

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6. Stock-Based Compensation

The Cardiff Oncology, Inc. 2014 Equity Incentive Plan (the “2014 EIP”), authorizing up to 34,722 shares of common stock for issuance under the 2014 EIP, was approved by the Board in June 2014 and approved by the stockholders of the Company at the September 17, 2014 Annual Meeting of Stockholders. The total number of authorized shares was increased to 243,056 between the inception of the 2014 EIP through December 31, 2018. At the June 6, 2019 Annual Meeting of Stockholders, the stockholders approved the increase of number of authorized shares in the 2014 EIP to 1,243,056. At the April 6, 2020 Annual meeting of Stockholders, the stockholders approved the increase of number of authorized shares in the 2014 EIP to 2,243,056

As of December 31, 2020, there were 260,446 shares available for issuance under the 2014 EIP.

Stock-based compensation has been recognized in operating results as follows:

Years ended December 31,

Stock Options

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 assumptions during the years indicated below:

Years ended December 31,

Dividend yield 0% 0%

Expected volatility (weighted-average) 105% 96%

Expected term (in years) 5.9 years 5.9 years

Risk-free interest rate — Based on the daily yield curve rates for U.S. Treasury obligations with maturities that correspond to the expected term of the Company’s stock options.

Dividend yield — Cardiff Oncology has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility — Based on the historical volatility of Cardiff Oncology’s common stock.

Expected term — The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method, which averages an award’s weighted-average vesting period and expected term for “plain vanilla” share options. Options are considered to be “plain vanilla” if they have the following basic characteristics: (1) are granted “at-the-money”; (2) exercisability is conditioned upon service through the vesting date; (3) termination of service prior to vesting results in forfeiture; (4) limited exercise period following termination of service; and (5) are non-transferable and non-hedgeable.

Forfeitures — The Company estimates forfeitures based on its historical experience.

The weighted-average fair value per share of all options granted during the years ended December 31, 2020 and 2019, estimated as of the grant date using the Black-Scholes option valuation model, was $2.09 and $1.91 per share, respectively.

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The unrecognized compensation cost related to non-vested stock options outstanding at December 31, 2020 was $1,519,004. The weighted-average remaining amortization period at December 31, 2020 for non-vested stock options was 1.9 years.

The total fair value of shares vested during the years ended December 31, 2020 and 2019 was $1,522,984 and $386,654, respectively.

The intrinsic value of stock options exercised during the year ended December 31, 2019 was $0.

A summary of stock option activity and of changes in stock options outstanding is presented below:

Restricted Stock Units

RSU's are measured at the grant date based on the closing market price of the Company’s common stock at the grant date and recognized ratably over the service period through the vesting date. All RSU's were granted with no purchase price. Vesting of the RSU's is generally subject to service conditions.

A summary of the RSU's activity is presented below:

Number of Shares Weighted AverageGrant Date Fair ValuePer Share IntrinsicValue

The total fair values of RSU's vested during the year ended December 31, 2020 and 2019 were $101,290 and $191,436, respectively.

7. Derivative Financial Instruments — Warrants

Certain warrants issued in connection with the Company’s equity financings are accounted for as derivative liabilities. Accordingly, the warrants are remeasured at each balance sheet date based on their estimated fair value using the Black-Scholes option pricing model. Changes in fair value are recorded within Company’s statements of operations.

The range of assumptions used to determine the fair value of the warrants valued using the Black-Scholes option pricing model during the periods indicated was:

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Year ended December 31,

Fair value of Cardiff Oncology common stock $1.01 - $17.99 $1.24 - $3.75

Expected warrant term 2.1 - 3.1 years 3.1 - 4.1 years

Dividend yield —% —%

Weighted Average(1)(2):

Fair value of Cardiff Oncology common stock $17.99

Expected warrant term 2.1 years

Risk-free interest rate 0.13 %

Expected volatility of Cardiff Oncology common stock 116 %

Dividend yield 0 %

(1) Weighted average is only disclosed for periods after January 1, 2020 under the adoption of ASU 2018-13.

(2) The weighted average was calculated using the relative fair value method.

Expected volatility is based on the historical volatility of Cardiff Oncology’s common stock. The warrants have a transferability provision and based on guidance for instruments issued with such a provision, Cardiff Oncology used the remaining contractual term as the expected term of the warrants. The risk-free interest 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.

Date Description Number of Warrants DerivativeInstrumentLiability

The remaining contractual term of the warrants outstanding at December 31, 2020 and 2019 was approximately 2.1 and 3.1 years, respectively.

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8. 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 December 31, 2020 and 2019:

Fair Value Measurements atDecember 31, 2020

Assets:

Liabilities:

Derivative financial instruments—warrants $ — $ — $ 284,971 $ 284,971

Fair Value Measurements atDecember 31, 2019

Assets:

Liabilities:

Derivative financial instruments—warrants $ — $ — $ 4,127 $ 4,127

Total Liabilities $ — $ — $ 4,127 $ 4,127

(1)Included as a component of cash and cash equivalents on the accompanying balance sheet.

The change in the fair value of the “derivative financial instruments—warrants” is recorded as a gain or loss in the Company’s statement of operations. 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, the Company reviews the assets and liabilities that are subject to ASC Topic 815-40 and ASC Topic 480-10. 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.

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9. Income Taxes

At December 31, 2020, Cardiff Oncology had federal net operating loss carryforwards (“NOLs”) of approximately $128.9 million which, if not used, will continue to expire through 2037, and federal net operating loss carryforwards of approximately $48.4 million, which do not expire. Cardiff Oncology also has California NOLs of approximately $70.7 million which, if not used, will begin to expire in 2029. Cardiff Oncology has Federal and California capital loss carryforwards of $0.7 million which, if not used, will begin to expire in 2022. Cardiff Oncology also has research and development tax credits available for federal and California purposes of approximately $2.5 million and $1.8 million, respectively. The federal research and development tax credits will begin to expire on January 31, 2025. The California research and development tax credits do not expire.

Pursuant to the Internal Revenue Code of 1986, as amended (the “Code”) Sections 382 and 383, annual use of a company’s NOL and research and development credit carryforwards may be limited if there is a cumulative change in ownership of greater than 50% within a three-year period. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. If limited, the related tax asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. The Company has not completed such an analysis pursuant to Sections 382 and 383 and therefore has established a valuation allowance as the realization of such deferred tax assets has not met the more likely than not threshold requirement. Due to the existence of the valuation allowance, further changes in the Company’s unrecognized tax benefits will not impact the Company’s effective tax rate.

The provision for income taxes based on losses from continuing operations consists of the following at December 31 (in thousands):

Years ended December 31,

Current:

State $ 1 $ 1

Total current provision 1 1

Deferred:

Total deferred (benefit) expense (4,135) (2,782)

Total income tax provision $ — $ —

Significant components of the Company’s taxes and the rates as of December 31 are shown below (in thousands, except percentages):

Years ended December 31,

Tax computed at the federal statutory rate $ (4,054) 21 % $ (3,447) 21 %

State tax, net of federal tax benefit (122) 1 % (177) 1 %

Stock options true-up 81 (1) % 875 (5) %

Valuation allowance increase (decrease) 4,134 (22) % 2,780 (17) %

Provision for income taxes $ — — % $ — — %

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Significant components of the Company’s deferred tax assets and liabilities from federal and state income taxes as of December 31 are shown below (in thousands):

Years ended December 31,

Deferred tax assets:

Research and development credits and other tax credits 3,904 3,710

Stock-based compensation 684 531

Deferred tax liabilities:

Operating lease right-of-use assets (74) (154)

Total deferred tax liabilities (80) (166)

Net deferred tax assets before valuation allowance 47,955 43,821

Net deferred tax asset $ — $ —

Since inception the Company has incurred continuing losses and expects to continue to incur losses for the foreseeable future. The Company has recorded a full valuation allowance against its net deferred tax assets as it is more likely than not they will not be realized.

Cardiff Oncology does not have any unrecognized tax benefits. Cardiff Oncology’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense, and none have been incurred to date. The Company does not anticipate a significant change in unrecognized tax benefits over the next 12 months. The Company is subject to taxation in the U.S. and California. Due to net operating losses all tax years since inception remain open to examination.

10. 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 is an oral, investigative drug and a highly-selective adenosine triphosphate competitive inhibitor of the serine/threonine PLK1. The Company plans to develop onvansertib in patients with leukemias/lymphomas and solid tumor cancers. Upon execution of the agreement, the Company paid $2.0 million in license fees which were expensed to research and development costs. 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. To date, 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

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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.

11. Employee Benefit Plan

The Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Service ("IRS") Code covering its employees. The plan allows employees to defer, up to the maximum allowed, a percentage of their income through contributions to the plan as allowed by IRS Code. The Company does not currently make matching contributions.

12. Related Party Transactions

Leucadia Life Sciences

In November 2018, the Company entered into a Material Transfer Agreement (“MTA”) with Leucadia Life Sciences (“Leucadia”) pursuant to which Leucadia will develop a PCR-based assay for onvansertib for Acute Myeloid Leukemia (“AML”). One of the Company’s Directors, Dr. Thomas Adams, is 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 years ended December 31, 2020 and 2019, the Company incurred and recorded approximately $1,083,000 and $1,005,000, respectively, of research and development expenses for services performed by Leucadia and Tommy Adams. The assay was completed in December 2020.

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 (see Note 5).

13. 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 financial statements for the twelve months ended December 31, 2020, 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 twelve months ended December 31, 2020. We continue to monitor changes and revisions of the CARES Act and its impact on our financial position, results of operations and cash flows.

Repayment of Small Business Administration Payroll Protection Program Loan

On April 15, 2020, the Company was granted a loan (the “Loan”) from JPMorgan Chase Bank, N.A. in the aggregate amount of $305,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act with an interest rate of 0.98% per annum. On October 19, 2020 the Company repaid in full the outstanding principal and interest of the PPP Loan.

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