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Derivative Financial Instruments - Warrants

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments - Warrants

Derivative Financial Instruments — Warrants

Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”) or ASC Topic 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”), Cardiff Oncology determined that certain warrants issued in connection with the execution of certain equity financings must be recorded as derivative liabilities. In accordance with ASC 815-40 and ASC 480-10, the warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant change in fair value is being recorded in the Company’s condensed statements of operations. The Company estimates the fair value of these warrants using the Black-Scholes option pricing model.

The assumptions used to determine the fair value of the warrants using the Black-Scholes option pricing model were:

			As of June 30, 2021						As of December 31, 2020
Fair value of Cardiff Oncology common stock			$	6.65					$	17.99
Expected warrant term			1.6 years						2.1 years
Risk-free interest rate			0.16		%				0.13		%
Expected volatility of Cardiff Oncology common stock			110		%				116		%
Dividend yield			0		%				0		%

Expected volatility is based on historical volatility of Cardiff Oncology’s common stock. The warrants have a transferability provision, accordingly, Cardiff Oncology used the remaining contractual term as the expected term of the warrants. The risk-free rate is based on the U.S. Treasury security rates consistent with the expected remaining term of the warrants at each balance sheet date.

The following table sets forth the components of changes in the Company’s derivative financial instruments—warrants liability balance, valued using the Black-Scholes option pricing method, for the periods indicated.

(in thousands, except for number of warrants)
Date						Description						Number of Warrants						Derivative Instrument Liability
December 31, 2020						Balance of derivative financial instruments—warrants liability						64,496						$	285
						Change in fair value of derivative financial instruments—warrants during the period recognized as a gain in the condensed statements of operations						—						(268)
June 30, 2021						Balance of derivative financial instruments—warrants liability						64,496						$	17

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- References

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- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-URI http://asc.fasb.org/topic&trid=2229140

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