PART I:  FINANCIALI - FINANCIAL INFORMATION

Item 1.  Financial Statements

Oncternal Therapeutics, Inc.

ITEM 1.FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets

GTx, Inc.

CONDENSED BALANCE SHEETS

(in thousands, except share data)par value)

TheSee accompanying notes are an integral partnotes.

Oncternal Therapeutics, Inc.

Condensed Consolidated Statements of these condensed financial statements.

GTx, Inc.Operations

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except share and per share data)

(unaudited)

TheSee accompanying notes are an integral part of these condensed financial statements.

GTx, Inc.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

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

GTx, Inc.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)notes.

1.  BusinessOncternal Therapeutics, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and BasisStockholders' Equity (Deficit)

(Unaudited; in thousands)

See accompanying notes.

Oncternal Therapeutics, Inc.

Condensed Consolidated Statements of PresentationConvertible Preferred Stock and Stockholders' Equity (Deficit)

(Unaudited; in thousands)

See accompanying notes.

Oncternal Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

See accompanying notes.

BusinessOncternal Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Description of Business

Oncternal Therapeutics, Inc. (the “Company,” “Oncternal,” or the “combined company”), formerly known as GTx, Inc., was incorporated in Tennessee in September 1997 and reincorporated in Delaware in 2003 and is based in San Diego, California. The Company is a clinical-stage biopharmaceutical company focused on developing first-in-class product candidates for cancers with critical unmet medical need. The Company’s clinical pipeline consists of its lead program, cirmtuzumab, a humanized monoclonal antibody that binds to ROR1 (Receptor-tyrosine kinase-like Orphan Receptor 1), and TK216, a small molecule inhibiting the biological activity of ETS-family transcription factor oncoproteins targeting patients with Ewing sarcoma. The Company is also developing a CAR-T (chimeric antigen receptor T-cells) product candidate that targets ROR1.

Merger

On March 6, 2019, the Company, then operating as GTx, Inc. (“GTx” or the “Company”), a Delaware corporation incorporated on September 24, 1997 and headquartered in Memphis, Tennessee, is a biopharmaceutical company dedicated to the discovery, development and commercialization of medicines to treat serious medical conditions, including stress urinary incontinence and prostate cancer.

The Company is developing selective androgen receptor modulators (“SARMs”), including its lead product candidate, enobosarm (GTx-024).  SARMs are a class of drugs that the Company believes has the potential to treat serious medical conditions where unmet medical needs in muscle-related diseases may benefit from increasing muscle mass, such as stress urinary incontinence (“SUI”) and Duchenne muscular dystrophy (“DMD”).

In 2016, the Company initiated a Phase 2 open-label, non-placebo controlled, proof-of-concept clinical trial of enobosarm to treat postmenopausal women with SUI.  Based on the emerging data from this ongoing proof-of-concept clinical trial, the Company initiated a placebo-controlled Phase 2 clinical trial of enobosarm to treat postmenopausal women with SUI in the third quarter of 2017.

The Company commenced enrollment in 2015 in a Phase 2 clinical trial designed to evaluate the efficacy and safety of a 9 mg and 18 mg dose of enobosarm in patients whose advanced breast cancer is both estrogen receptor (“ER”) positive and androgen receptor (“AR”) positive.  The Company announced in November 2016 that enobosarm achieved the pre-specified primary efficacy endpoint in the 9 mg dose cohort and announced in November 2017 that the pre-specified primary efficacy endpoint was also achieved in the 18 mg dose cohort.   After evaluating the breast cancer environment where the treatment paradigms are shifting to immunotherapies and/or combination therapies, along with the time and cost of conducting the necessary clinical trials for approval, the Company has decided not to pursue additional clinical development of enobosarm for this indication.

The Company has also evaluated several SARM compounds, including enobosarm, in preclinical models of DMD where a SARM’s ability to increase muscle mass may prove beneficial to patients suffering from DMD.  The Company is actively seeking potential collaboration partners to further develop a SARM for the treatment of DMD.

In 2015, the Company entered into an exclusive license agreementAgreement and Plan of Merger and Reorganization, as amended (the “Merger Agreement”), with the Universityprivately-held Oncternal Therapeutics, Inc. (“Private Oncternal”) and Grizzly Merger Sub, Inc., a wholly-owned subsidiary of Tennessee Research Foundation (“UTRF”) to develop UTRF’s proprietary selective androgen receptor degrader (“SARD”) technology which may have the potential to provide compounds that can degrade multiple forms of AR to treat those patients who do not respond or are resistant to current therapies by inhibiting tumor growth in patients with progressive castration-resistant prostate cancer (“CRPC”).  The Company has ongoing mechanistic preclinical studies to select the most appropriate compound to potentially move into a first-in-human clinical trial.

On September 29, 2017, the Company completed(“Merger Sub”). Under the Merger Agreement, Merger Sub merged with and into Private Oncternal, with Private Oncternal surviving as a private placementwholly-owned subsidiary of units consistingthe Company (the “Merger”). On June 7, 2019, the Merger was completed.  GTx changed its name to Oncternal Therapeutics, Inc., and Private Oncternal, which remains as a wholly-owned subsidiary of an aggregatethe Company, changed its name to Oncternal Oncology, Inc. On June 10, 2019, the combined company’s common stock began trading on The Nasdaq Capital Market under the ticker symbol “ONCT.”

Except as otherwise indicated, references herein to “Oncternal,” “the Company,” the “combined company,” “we,” “us,” and “our,” refer to Oncternal Therapeutics, Inc. on a post-Merger basis, and the term “Private Oncternal” refers to the business of 5,483,320privately-held Oncternal Therapeutics, Inc., prior to completion of the Merger.  References to GTx refer to GTx, Inc. prior to completion of the Merger.  

Pursuant to the terms of the Merger Agreement, each outstanding share of Private Oncternal common stock outstanding immediately prior to the closing of the Merger was converted into approximately 0.073386 shares of Company common stock (the “Exchange Ratio”), after taking into account the Reverse Stock Split, as defined below. Immediately prior to the closing of the Merger, all shares of Private Oncternal preferred stock then outstanding were exchanged into shares of common stock of Private Oncternal. In addition, all outstanding options exercisable for common stock of Private Oncternal and warrants to purchase an aggregateexercisable for convertible preferred stock of 3,289,988Private Oncternal became options and warrants exercisable for the same number of shares of its common stock for net proceeds of $45,648, after deducting placement agent fees and other offering expenses.

Basisthe Company multiplied by the Exchange Ratio. Immediately following the Merger, stockholders of Presentation

Private Oncternal owned approximately 77.5% of the outstanding common stock of the combined company.

The accompanying unaudited condensed financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessarytransaction was accounted for as a fair presentation of GTx’s financial position, results of operations and cash flows for each period presentedreverse asset acquisition in accordance with generally accepted accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, Private Oncternal was deemed to be the accounting acquirer for interim financial informationreporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) Private Oncternal’s stockholders owned a substantial majority of the voting rights in the combined company, (ii) Private Oncternal designated a majority of the members of the initial board of directors of the combined company, and with(iii) Private Oncternal’s senior management holds all key positions in the instructions to Form 10-Q and Article 10senior management of Regulation S-X.  Accordingly, information and footnote disclosures normally includedthe combined company. As a result, as of the closing date of the Merger, the net assets of the Company were recorded at their acquisition-date relative fair values in the condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from the accompanying condensed financial statements.  These interim condensed financial

GTx, Inc.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)

statements should be read in conjunction with the audited financial statements and related notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.  Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the Company and the reported operating results that mayprior to the Merger will be expected for the entire fiscal year ending December 31, 2017.those of Private Oncternal.  

Reverse Stock Split and Exchange Ratio

On December 5, 2016,June 7, 2019, in connection with, and prior to the completion of, the Merger, the Company effected a one-for-tenone-for-seven reverse stock split of its then outstanding common stock through an amendment to its restated certification of incorporation.  As(the “Reverse Stock Split”). The par value and the authorized shares of the effective timecommon stock were not adjusted as a result of the reverse stock split, every ten sharesReverse Stock Split. All of the Company’s issued and outstanding common stock were automatically combined and reclassified into onehave been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. All issued and outstanding share ofPrivate Oncternal common stock, without any change in par value per share.  The amendment to the Company’s restated certification of incorporation also reduced the number of authorized shares of commonpreferred stock, from 400,000,000 to 60,000,000 shares.  The reverse stock split affected all shares of the Company’s common stock outstanding immediatelyoptions and warrants prior to the effective timedate of the reverse stock split.  Additionally, as a resultMerger have been retroactively adjusted to reflect the Exchange Ratio for all periods presented.

Principles of Consolidation

The condensed consolidated financial statements include the reverse stock split, proportionate adjustments were made to the per share exercise price and/or the numberaccounts of shares issuable upon the exercise or vesting of all stock options, restricted stock units and warrants issued by the Company and outstanding immediately prior to the effective time, which resulted in a proportionate decreaseits wholly-owned subsidiaries, Oncternal Oncology, Inc. and Oncternal, Inc. All intercompany accounts and transactions have been eliminated in the numberpreparation of sharesthe condensed consolidated financial statements.

Liquidity and Going Concern

From its inception through June 30, 2019, the Company has devoted substantially all of its efforts to organizational activities including raising capital, building infrastructure, acquiring assets, developing intellectual property, and conducting preclinical studies, clinical trials and product development activities. The Company has a limited operating history and the sales and income potential of the Company’s common stock reserved for issuance upon exercise or vestingbusiness and market are unproven. Since inception, the Company has experienced recurring net losses and negative cash flows from operating activities and expects to continue to incur losses into the foreseeable future. At June 30, 2019, the Company had an accumulated deficit of such stock options, restricted stock units$56.5 million and warrants,had cash and incash equivalents of $28.5 million. The Company believes that its existing cash and cash equivalents will be sufficient to fund its operations into the casesecond quarter of stock options2020. The Company will need to continue to raise a substantial amount of funds until it is able to generate revenues to fund its development activities and warrants, a proportionate increase in the exercise price of all such stock options and warrants.  In addition, the number of shares reserved for issuance under the Company’s equity compensation plans immediately prior to the effective time was reduced proportionately.  No fractional shares were issued as a result of the reverse stock split.  Stockholders who have otherwise been entitled to receive a fractional share received a cash payment in lieu thereof.  All references to shares of common stock, all per share data, and all warrant, stock option and restricted stock unit (“RSU”) activity for all periods presented in theseoperations. The accompanying condensed financial statements and notes to the condensedconsolidated financial statements have been adjustedprepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. However, based on the Company’s current working capital, anticipated operating expenses and net losses and the uncertainties surrounding its ability to reflectraise additional capital as needed, as discussed below, the reverse stock splitCompany believes that there is substantial doubt about its ability to continue as a going concern for one year after the date these condensed consolidated financial statements are issued.

The Company plans to continue to fund its losses from operations and capital funding needs through a combination of equity offerings, debt financings, government funding, or other sources, including, potentially, collaborations, licenses and other similar arrangements. There can be no assurance that the Company will be able to obtain any sources of financing on a retroactive basis.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 significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’s ability to conduct its business.

UseUnaudited Interim Financial Information

The unaudited condensed consolidated financial statements at June 30, 2019, and for the three and six months ended June 30, 2019 and 2018, have been prepared in accordance with the rules and regulations of Estimates

the Securities and Exchange Commission (“SEC”) and with GAAP. These unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities the disclosureand disclosures of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts and results could differ materially from those estimates. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 filed with the SEC on Form S-4/A on May 6, 2019.

Use of Estimates

The Warrant LiabilityCompany’s

In November 2014, condensed consolidatedfinancialstatements are prepared in accordance with GAAP. The preparation oftheCompany’s condensed consolidatedfinancialstatementsandaccompanyingnotes requires it to make estimates and assumptions that impact the Company issued warrantsreported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates consist of those used to purchase 6,430,948 shares of its common stock. The Company classified these warrants as a liability on its balance sheet since determine the warrants contained certain terms that could have required the Company (or its successor) to purchase the warrants for cash in an amount equal to the fair value (as calculated utilizing a contractually-agreed Black-Scholes-Merton option pricing valuation model (“Black-Scholes Model”)) of the unexercised portion of the warrants in connection with certain change of control transactions occurring on or priorCompany’s preferred stock, preferred stock warrant liability and stock-based awards, and those used to December 31, 2016, with such cash payment capped at an amount equal to $1.25 per unexercised share underlying each warrant.  As a result of the provision of the warrants requiring cash settlement upon certain change of control transactions, the Company was required to accountdetermine grant revenue and accruals for research and development costs. Although these warrants as a liability at fair value and the estimated warrant liability was required to be revalued at each balance sheet date until the earlier of the exercise of the warrants, the modification to remove the provision that could require cash settlement upon certain change of control transactions or the expiration of such provision on December 31, 2016.  Effective March 25, 2016, each of the warrants was amended by agreement of the warrant holders to remove the provision that could require cash settlement upon certain change of control transactions. These warrants were no longer accounted for as a liability subsequent to March 25, 2016.  The Company recorded a non-cash reclassification of the warrant fair value to stockholders’ equityestimates are based on the warrants’ fair value as Company’sknowledgeof current eventsandactions it may undertake in the March 25, 2016 modification date, with no further adjustments to the fair value of future, actual results may ultimately materially differ from these warrants being required.

estimates GTx, Inc.andassumptions.

NOTES TO THE CONDENSED FINANCIAL STATEMENTSCash and Cash Equivalents

(in thousands, except share and per share data)

(unaudited)

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments (which include cash, cash equivalents, short-term investments, and accounts payable) approximate their fair values.  The Company’s financial assets and liabilities are classified within a three-level fair value hierarchy that prioritizes the inputs used to measure fair value, which is defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date

Level 2 – Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly

Level 3 – Inputs that are unobservable for the asset or liability

As the Company has the positive intent and ability to hold its certificates of deposit classified as short-term investments until maturity, these investments have been classified as held to maturity investments and are stated at cost, which approximates fair value. The Company considers theseall highly liquid investments with maturities of three months or less when purchased to be Level 2cash equivalents. Cash and cash equivalents include cash in readily available checking accounts and money market accounts.

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 deposits in federally insured financial institutions 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 balances due to the financial position of the depository institution in which those deposits are held. Additionally, the Company established guidelines regarding approved investments as the fair values of these investments are determined using third-party pricing sources, which generally utilize observable inputs, such as interest rates and maturities of similar assets.investments, which are designed to maintain safety and liquidity.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Research and Development Expenses

and Accruals

Research and development expenses include, but are not limited to,consist of costs incurred for the Company’s expensesown and for personnel, supplies,sponsored and facilitiescollaborative research and development activities. Research and development costs are expensed as incurred and include manufacturing process development costs, manufacturing costs, costs associated with research activities, screening and identification of product candidates, formulation and synthesis activities, manufacturing, preclinical studies toxicology studies,and clinical trials, regulatory and medical affairs activities, quality assurance activities, salaries and benefits, including stock-based compensation, fees paid to third-party consultants, license fees.  fees and overhead.

The Company expenses these costs in the period in which they are incurred. The Company estimates its liabilities forhas entered into various research and development contracts with research institutions, clinical research organizations, clinical manufacturing organizations and other companies. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying condensed consolidated balance sheets as prepaid expenses and other or accrued liabilities. The Company records accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in order to matchdetermining the recognitionprepaid or accrued balances at the end of expensesany reporting period. Actual results could differ from the Company’s estimates.

Preferred Stock Warrant Liability

Prior to the periodMerger, Private Oncternal had outstanding freestanding warrants to purchase shares of its Series B-2 convertible preferred stock (the “Series B-2 warrants”). Because the underlying Series B-2 convertible preferred stock was classified as temporary equity, the Series B-2 warrants were classified as a liability in the accompanying condensed consolidated balance sheets. Private Oncternal adjusted the carrying value of such Series B-2 warrants to their estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as an increase or decrease to other income (expense) in the condensed consolidated statements of operations. Upon the completion of the Merger, the Series B-2 warrants were amended such that they were converted into warrants to purchase the Company’s common stock. As amended, warrant liability accounting is no longer required and the fair value of the warrant liability has been reclassified into stockholders’ equity.

Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the actual servicesreporting entity to develop its own assumptions.

The carrying amounts of the Company’s current financial assets and liabilities are received. considered to be representative of their respective fair values because of the short-term nature of those instruments. The Company has no financial assets or liabilities, other than the preferred stock warrant liability described below, measured at fair value on a recurring basis. No transfers between levels have occurred during the periods presented.

Liabilities measured at fair value on a recurring basis are as follows (in thousands):

As such, accrued liabilities relatedof December 31, 2018, the preferred stock warrant liability was recorded at fair value utilizing the Black-Scholes option pricing model using significant unobservable inputs consistent with the inputs used for the Company’s stock-based compensation expense adjusted for the preferred stock warrants’ expected term and the fair value of the underlying preferred stock.

The Company calculated the final remeasurement of the preferred stock warrant liability on June 7, 2019, the Merger closing date, using the closing price of GTx’s common stock on that date to third partydetermine the fair value of the warrants, and recorded a $1.3 million change in the fair value of the preferred stock warrant liability for the three and six months ended June 30, 2019.

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the preferred stock warrant liability as of December 31, 2018 were as follows:

The following table provides a reconciliation of the preferred stock warrant liability measured at fair value using Level 3 significant unobservable inputs (in thousands):

Revenue Recognition

The Company currently generates revenue from a research subaward agreement from the California Institute for Regenerative Medicine (see Note 4), which provides the Company with payments in return for certain research and development activities over a contractually defined period. Revenue from such subaward is recognized in the period during which the related qualifying services are recognized based uponrendered and costs are incurred, provided that the applicable conditions under the subaward agreement have been met.

The subaward agreement is on a best-effort basis and does not require scientific achievement as a performance obligation. All fees received under the agreement are non-refundable. The costs associated with the agreement are expensed as incurred and reflected as a component of research and development expense in the accompanying condensed consolidated statements of operations.

Funds received from the subaward agreement are recorded as revenue as the Company is the principal participant in the arrangement because the activities under the subaward are part of the Company’s estimatedevelopment programs. In those instances where the Company first receives consideration in advance of providing underlying services, receivedthe Company classifies such consideration as deferred revenue until (or as) the Company provides the underlying services. In those instances where the Company first provides the underlying services prior to its receipt of consideration, the consideration is recorded as a grant receivable. At June 30, 2019, the Company had deferred grant revenue of $2.4 million and degreeat December 31, 2018, the Company had a grant receivable of completion of the services in accordance with the specific third party contract.

Cash, Cash Equivalents and Short-term Investments

$0.1 million. The Company considers highly liquid investments with initial maturities of three months or lessthe grant receivable to be cash equivalents.fully collectible; accordingly, no allowance for doubtful amounts has been established.

Stock-Based Compensation

At September 30, 2017 and December 31, 2016, short-term investments consistedStock-based compensation expense represents the fair value of Federal Deposit Insurance Corporation insured certificatesequity awards, on the grant date, recognized in the period using the Black- Scholes option pricing model. The Company recognizes expense for awards with graded vested schedules over the requisite service period of deposit with original maturitiesthe awards (usually the vesting period) on a straight-line basis. For equity awards for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when the achievement of greater than three months and less than one year.the milestone is probable or the performance condition has been achieved.

Income Taxes

The Company accounts for deferredincome taxes byunder the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.statements. Under this method, deferred tax assets and liabilities are determined based on the differencebasis of the differences between the financial statementstatements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowanceThe effect of a change in tax rates on deferred tax assets and liabilities is provided when it isrecognized in income in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that some portion or allthe Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax assets will not be realized.  Accordingly, at Septemberasset valuation allowance, which would reduce the provision for income taxes.

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 and manages its business in one operating segment in the United States.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities and adjusted for the weighted-average number of common shares outstanding that are subject to repurchase. The Company has excluded weighted-average shares subject to repurchase of 59,114 shares and 72,997 shares from the weighted-average number of common shares outstanding for the three and six months ended June 30, 20172019, respectively, and December 31, 2016,has excluded weighted-average shares subject to repurchase of 180,724 shares and 194,545 shares from the weighted-average number of common shares outstanding for the three and six months ended June 30, 2018, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. 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 valuation allowance, the net deferred tax assets were reduced to zero.  Income taxes are described more fully in Notepotentially dilutive securities would be antidilutive.

GTx, Inc.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)

8 to the Company’s financial statementsPotentially dilutive securities not included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 24, 2017.calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

Other Income, net

Other income, net consistsRecently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of foreign currency transactionthe specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements. The amendments relate to disclosures regarding unrealized gains and losses, interest earnedthe range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty and are to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the timing and impact of the adoption of this guidance on the Company’s cash, cash equivalentscondensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. The Company adopted this standard on January 1, 2019 using the modified retrospective approach. As the Company has elected the practical expedient for short-term investments,leases, the adoption of this standard had no impact on the condensed consolidated financial statements on the date of adoption as the Company’s only lease was on a month-to-month basis for a contract period of less than one year and other non-operating income or expense.expired in May 2019.  Subsequent to its adoption, the Company entered into a new office lease agreement and has applied the provisions of this guidance (See Note 3).

Accrued liabilities consist of the following (in thousands):

Rent expense was $24,000 and $1,000 for the three months ended June 30, 2019 and 2018, respectively. Rent expense was $33,000 and $4,000 for the six months ended June 30, 2019 and 2018, respectively. Until May 31, 2019, the Company subleased its office space in San Diego, California on a month-to-month basis.

On May 22, 2019, the Company entered into a sublease agreement for office space of 4,677 square feet in San Diego, California (“San Diego Lease”) which expires on March 31, 2021. Base rent is approximately $166,000 annually and the monthly rent expense is being recognized on a straight-line basis over the term of the lease.

The San Diego Lease is included in the accompanying condensed consolidated balance sheet at the present value of the lease payments. As the San Diego Lease does not have an implicit interest rate, the present value reflects a 10.0% discount rate which is the estimated rate of interest that the Company would have to pay in order to borrow an amount equal to the lease payments on a collateralized basis over a similar term and in a similar economic environment. The Company recognized an operating lease right-of-use asset and an aggregate lease liability of $0.3 million as of June 30, 2019, in the accompanying condensed consolidated balance sheet. The weighted average remaining lease term was 1.75 years.  

Loan AgreementMaturities of lease liabilities due under this lease agreement as of June 30, 2019 are as follows (in thousands):

In June 2019, the Company engaged Newfront Insurance as its broker to obtain director and officer liability insurance for the Company effective as of the Merger. The son of Richard Vincent, the Company’s Chief Financial Officer, acted as the Company’s agent at Newfront Insurance. The Company paid a premium of approximately $1.0 million in June 2019, for which the son will derive a commission of approximately $87,000. See Notes 4 and 6.

Between April 10 and May 1, 2019, three putative class action lawsuits and one individual lawsuit were filed in the U.S. District Court for the District of Delaware: Wheby  v. GTx, Inc. et al., Miller v. GTx, Inc. et al., Tabb v. GTx, Inc. et al., and Living Seas LLC v. GTx, Inc. et al. (collectively, the “Delaware Actions”) On August 10,April 11 and 23, 2019, two putative class actions were filed in the U.S. District Court for the Southern District of New York: Kopanic v. GTx, Inc. et al. and Cooper  v. GTx, Inc. et al. (collectively, the “New York Actions” and, together with the Delaware Actions, the “Actions”).  The Actions name as defendants us and our former board of directors, and, in the case of the Wheby and Miller actions, Private Oncternal and Merger Sub.  The Actions allege that defendants violated Sections 14(a) and 20(a) of the Exchange Act, as well as Rule 14a-9 promulgated thereunder, in connection with our filing of the Registration Statement in connection with the Merger.  Three of the Delaware Actions have now been voluntarily dismissed with prejudice: the Wheby action on June 12, 2019; the Miller action on July 15, 2019; and the Living Seas action on June 26, 2019. At June 30, 2019, the Company cannot predict the outcome of or estimate the possible loss or range of loss from any of these matters.

Georgetown University (“Georgetown”)

In March 2014, the Company entered into an Exclusive License Agreement (the “Georgetown License Agreement”) with Georgetown, pursuant to which the Company: (i) licensed the exclusive worldwide right to patents and technologies for the development and commercialization of certain product candidates targeting EWS-FLI1 as an anti-tumor therapy for therapeutic, diagnostics, or research tool purposes, (ii) is solely responsible for all development and commercialization activities and costs, and (iii) is responsible for all costs related to the filing, prosecution and maintenance of the licensed patent rights.

Under the terms of the Georgetown License Agreement, commencing in 2015, the Company: (i) shall pay and has paid an annual license maintenance fee of $10,000 until the first commercial sale occurs, (ii) is required to make up to $0.2 million in aggregate milestone payments upon the achievement of certain regulatory milestones, and (iii) will be required to pay low single digit royalties based on annual net product sales. The Company accounted for the licensed technology as an asset acquisition because it did not meet the definition of a business. All milestone payments under the Georgetown License Agreement will be recognized as research and development expense upon completion of the required events, as the triggering events are not considered to be probable until they are achieved. As of June 30, 2019, the Company had not triggered or made any milestone payments under the Georgetown License Agreement.

The Georgetown License Agreement may be terminated by either party upon material breach or may be terminated by the Company as to one or more countries with 90 days written notice of termination. The term of the Georgetown License Agreement will continue until the expiration of the last valid claim within the patent rights covering the product. Georgetown may terminate the agreement in the event: (i) the Company fails to pay any amount and fails to cure such failure within 30 days after receipt of notice, (ii) the Company defaults in its obligation to obtain and maintain insurance and fails to remedy such breach within 60 days after receipt of notice, or (iii) the Company declares insolvency or bankruptcy. The Company may terminate the Georgetown License Agreement at any time upon at least 60 days’ written notice.

In 2017, the Company entered into a loanresearch agreement with J.R. Hyde, III and The Pyramid Peak Foundation (the “Loan Agreement”) to borrowGeorgetown for up to a total of $15,000 (the “Loans”).  Each of Mr. Hyde and The Pyramid Peak Foundation (the “Lenders”) are significant stockholders, and Mr. Hyde serves on the Company’s board of directors.$150,000. The Company did not borrow any amounts under the Loan Agreementrecorded research and the Loan Agreement terminated in accordance with its terms on September 29, 2017 as on that date, the Company completed a private placementdevelopment expenses of its equity securities resulting in gross proceeds of $48,500 (described more fully in Note 4, Stockholders’ Equity). Under the terms of the Loan Agreement, the Loan Agreement terminated on the date that the Company consummated an equity financing resulting in gross proceeds of at least $15,000.

Subsequent Events

The Company has evaluated all events or transactions that occurred after September 30, 2017 up through the date the condensed financial statements were issued.  There were no material recognizable or nonrecognizable subsequent events during the period evaluated.

2.  Share-Based Compensation

Share-based payments include stock option grants$13,000 and RSUs under the Company’s stock option and equity incentive plans and deferred compensation arrangements for the Company’s non-employee directors.  The Company recognizes compensation expense for its share-based payments based on the fair value of the awards over the period during which an employee or non-employee director is required to provide service in exchange for the award.  The Company’s share-based compensation plans are described more fully in Note 3 to the Company’s financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 24, 2017.

During the first quarter of 2017, the Company adopted the Financial Accounting Standards Board Accounting Standards Update 2016-09, Improvements to Employee Share Based Payment Accounting. This guidance addresses the income tax effects of stock-based payments and eliminates the windfall pool concept, as all of the tax effects related to stock-based payments will now be recorded at settlement (or expiration) through the income statement. The new guidance also permits entities to make an accounting policy election for the impact of forfeitures on the recognition of expense for stock-based payment awards, allowing for forfeitures to be estimated or recognized when they occur. The Company elected to prospectively adopt the policy that forfeitures be recorded when they occur.  The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

GTx, Inc.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)

The following table summarizes share-based compensation expense included within the condensed statements of operations for the three and nine months ended September 30, 2017 and 2016:

Share-based compensation expense recorded as general and administrative expense$19,000 for the three months ended SeptemberJune 30, 20172019 and 2016 included share-based compensation expense related to deferred compensation arrangements2018, and $32,000 for each of the six months ended June 30, 2019 and 2018.  

The University of Texas MD Anderson Cancer Center (“MD Anderson”)

In December 2014, the Company entered into a collaboration agreement (as amended, the “Collaboration”) with MD Anderson, which provides for the Company’s non-employee directorsconduct of $41preclinical and $33, respectively.  Share-based compensation expenseclinical research for TK216 in exchange for certain program payments. If MD Anderson successfully completes all the requirements of the Collaboration in full and the program is successfully commercialized, the Company will be required to pay aggregate milestone payments of $1.0 million based on net product sales. The Company recorded as generalno research and administrativedevelopment expense for the ninethree and six months ended SeptemberJune 30, 20172019 and 2018.

Agreements with the Regents of the University of California (the “Regents”)

In March 2016, included share-based compensation expenseand as amended and restated in August 2018 in connection with the spin-off transactions described below, the Company entered into a license agreement (as amended, the “Regents License Agreement”) for the development, manufacturing and distribution rights related to deferred compensation arrangementsthe development and commercialization of ROR1 related naked antibodies, antibody fragments or synthetic antibodies, and genetically engineered cellular therapy. The Regents License Agreement was amended on March 25, 2019 and May 15, 2019, to update the patents covered under the agreement.  The Regents License Agreement provides for the Company’s non-employee directorsfollowing: (i) in May 2016, an upfront license fee of $124$0.5 million was paid and $92, respectively.

The Company uses the Black-Scholes Model to value stock options.  The expected life of options is determined by calculating the average of the vesting term and the contractual term of the options.  The expected price volatility is based on the Company’s historical stock price volatility.  The risk-free interest rate is determined using U.S. Treasury rates where the term is consistent with the expected life of the stock options.  Expected dividend yield is not considered as the Company has not made any dividend payments and has no plans of doing so in the foreseeable future.

The fair value of options granted was estimated using the following assumptions for the periods presented:

There were no options granted during the three months ended September 30, 2017.  Options granted during the three months ended September 30, 2016 were valued using the following assumptions: expected volatility of 89.4%, risk free interest rate of 1.2%, and an expected life of six years.

The following is a summary of stock option transactions for all of the Company’s stock option and equity incentive plans since the Company’s most recent fiscal year end:

GTx, Inc.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)

The Company estimates the fair value of RSUs using the closing price of its stock on the grant date.  The fair value of RSUs is amortized on a straight-line basis over the requisite service period of the awards.

The following is a summary of the RSU transactions for all of the Company’s equity incentive plans since the Company’s most recent fiscal year end:

3.Basic and Diluted Net Loss Per Share

Basic and diluted net income (loss) per share attributable to common stockholders is calculated based on the weighted average number of common shares outstanding during the period.  Diluted net income (loss) per share gives effect to the dilutive potential of common stock consisting of stock options, unvested RSUs and common stock warrants.

Weighted average potential107,108 shares of common stock were issued, (ii) $25,000 in annual license maintenance fees commencing in 2017, (iii) reimbursement of 8,741,251up to $30,000 in annual patent costs, (iv) certain development and 8,151,501 regulatory milestones aggregating from $10.0 million to $12.5 million, on a per product basis, (v) certain worldwide sales milestones based on achievement of tiered revenue levels aggregating $75.0 million, (vi) low single-digit royalties, including potential future minimum annual royalties, on net sales of each target, and (vii) minimum diligence to advance licensed assets consisting of at least $1.0 million in development spend annually through 2021. Under the Regents License Agreement, the Company recorded: (i) no licensemaintenance fees as research anddevelopmentexpense for the three and six months ended June 30, 2019 and 2018, and (ii) $0.1 millionand $23,000 in patentcosts as general and administrative expense for the three months ended SeptemberJune 30, 20172019 and 2016,2018, respectively, and 8,574,822$0.2 million and 8,169,793$44,000 for the ninesix months ended SeptemberJune 30, 20172019 and 2018, respectively. As of June 30, 2019, the Company believes it has met its obligations under the Regents License Agreement.

In July 2016, respectively, were excluded fromand as modified by the calculationsamended and restated Regents License Agreement in August 2018, the Company entered into a Research Agreement (the “Research Agreement”) with the Regents for further research on a ROR1 therapeutic development program. Under this five-year agreement, the Regents will have an aggregate budget of diluted net loss per share as inclusion$3.6 million, with $125,000 payable quarterly. The Company recorded research and development expense under this Agreement of $0.1 million for each of the potential shares would have had an anti-dilutive effect onthree months ended June 30, 2019 and 2018, and $0.3 million for each of the net loss per share for the periods.

4.Stockholders’ Equity

Common Stock

On September 29, 2017, the Company completed a private placement of units consisting of an aggregate of 5,483,320 shares of common stocksix months ended June 30, 2019 and warrants to purchase an aggregate of 3,289,988 shares of its common stock for net proceeds of $45,648, after deducting placement agent fees and other offering expenses. The purchasers in the registered direct offering consisted solely of accredited investors that included certain institutional and existing stockholders, including a member2018. Such costs are includable as part of the Company’s boardannual diligence obligations under the Regents License Agreement.

The Regents License Agreement will expire upon the later of directors.the expiration date of the longest-lived patent rights or the 15th anniversary of the first commercial sale of a licensed product. The warrants, which have five year terms expiring on September 29, 2022,Regents may terminate the Regents License Agreement if: (i) a material breach by the Company is not cured within a reasonable time, (ii) the Company files a claim asserting the Regents licensed patent rights are immediately exercisableinvalid or unenforceable and have a per share exercise price of $9.02.(iii) the Company files for bankruptcy. The Company assessed whethermay terminate the warrants require accounting as derivatives. The Company determined that the warrants were indexed to the Company’s own stock.  As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and are classified in stockholders’ equity.  The fair value of the warrants was estimatedagreement at $21,069 using the Black-Scholes Model with the following assumptions: expected volatility of 97%, risk free interest rate of 1.92%, expected life of five years and no dividends.  The net proceeds from the private placement were allocated to the common stock and warrants basedany time upon their relative fair values.at least 60 days’ written notice.

On October 14, 2016, the Company completed a registered direct offering of its common stock, in which it sold 1,728,395 shares of its common stock for net proceeds of $13,692.  The purchasers in the registered direct offering consisted of certain existing GTx stockholders and certain members of the GTx management team and board of directors.

GTx, Inc.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

(unaudited)

On November 14, 2014, the Company completed a private placement of units consisting of an aggregate of 6,431,111 shares of common stock and warrants to purchase an aggregate of 6,430,948 shares of its common stock for net proceeds of $42,814, after deducting offering expenses.  The purchasers in the private placement included certain existing GTx stockholders and certain members of the GTx management team and board of directors. The net proceeds from the private placement were allocated to the common stock and warrants based upon the fair value method.  Similarly, the offering expenses were allocated between the common stock and warrants with the portion allocated to common stock offset against the proceeds allocated to stockholders’ equity, whereas the portion allocated to the warrants was expensed immediately. The warrants have a per share exercise price of $8.50, became exercisable on May 6, 2015 and will continue to be exercisable for four years thereafter.  Prior to May 6, 2015, each warrant was subject to net cash settlement if, at the time of any exercise, there was then an insufficient number of authorized and reserved shares of common stock to effect a share settlement of the warrant.  Under the terms of the warrants, as of May 6, 2015, the net cash settlement feature of the warrants automatically became inoperative; accordingly, the warrants are exercisable only for shares of the Company’s common stock.  The warrants, however, also contained certain terms that could have required the Company (or its successor) to purchase the warrants for cash in an amount equal to the value (as calculated utilizing a contractually-agreed Black-Scholes Model) of the unexercised portion of the warrants in connection with certain change of control transactions occurring on or prior to December 31, 2016, with the cash payment capped at an amount equal to $1.25 per unexercised share underlying each warrant.  Due to the provision of the warrants that could have required cash settlement upon certain change of control transactions, the Company was required to account for these warrants as a liability at fair value using the Black-Scholes Model and the estimated warrant liability was required to be revalued at each balance sheet date until the earlier of the exercise of the warrants, the modification to remove the provision that could require cash settlement upon certain change of control transactions or the expiration of such provision on December 31, 2016.  Effective March 25, 2016, each of the warrants was amended by agreement of the warrant holders to remove the provision that could require cash settlement upon certain change of control transactions.  These warrants were no longer accounted for as a liability at March 31, 2016.  The Company recorded a non-cash reclassification of the warrant fair value to stockholders’ equity based on the warrants’ fair value as of the March 25, 2016 modification date, with no further adjustments to the fair value of these warrants being required.  The fair value of the warrants on the March 25, 2016 modification date of $19,186 was estimated using the Black-Scholes Model with the following assumptions: expected volatility of 101%, risk-free interest rate of 1.1%, expected life of approximately 3.1 years and no dividends.

5.University of Tennessee Research Foundation License Agreements

The Company and the University of Tennessee Research Foundation (“UTRF”) are parties to

In July 2007, the Company and UTRF entered into a consolidated, amended and restated license agreement (the “SARM License Agreement”), pursuant to which the Company was granted exclusive worldwide rights in all existing SARMselective androgen receptor modulator (“SARM”) technologies owned or controlled by UTRF, including all improvements thereto, and exclusive rights to future SARM technology that may be developed by certain scientists at the University of Tennessee or subsequently licensed to UTRF under certain existing inter-institutional agreements with The Ohio State University.  Under the SARM License Agreement, the Company is obligated to pay UTRF annual license maintenance fees, low single-digit royalties on net sales of products and mid-single-digit royalties on sublicense revenues.

The Company and UTRF also entered into a license agreement (the “SARD License Agreement”) in March 2015 pursuant to which the Company was granted exclusive worldwide rights in all existing SARDselective androgen receptor degrader (“SARD”) technologies owned or controlled by UTRF, including all improvements thereto.  Under the SARD License Agreement, the Company is obligated to employ active, diligent efforts to conduct preclinical research and development activities for the SARD program to advance one or more lead compounds into clinical development.  The Company is also obligated to pay UTRF annual license maintenance fees, low single-digit royalties on net sales of products and additional royalties on sublicense revenues, depending on the state of development of a clinical product candidate at the time it is sublicensed.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSVelos Biopharma Holdings, LLC (“VBH”) and VelosBio, Inc. (“VelosBio”) Spin-off Transactions

In November 2017, the Company formed VBH and in December 2017, made an in-kind tax-free distribution of 100% of its interest in VBH to the Company’s stockholders, option holders and warrant holders of record. On February 6, 2018, the Company licensed and assigned its rights to two preclinical product candidates, previously under the Regents License Agreement, to VBH. In consideration for the license, the Company: (i) received a promissory note receivable from VBH of $0.1 million, with an annual interest rate of 2.64% and a due date of 10 years, and (ii) made a partial assignment of its March 2016 Regents License Agreement. Pursuant to the partial assignment, VBH assumed certain obligations related to the licensed Products under the Regents License Agreement as follows: (i) reimbursement of certain historical and future patent costs related to the Products, (ii) certain development and sales milestones for advancing licensed Products targets, (iii) low single-digit royalties, including potential future minimum annual royalties, on net sales of each licensed Product target are to be allocated between the Company and VBH, (iv) certain third party agreements and related obligations specifically related to the licensed Products, (v) minimum diligence requirements to advance licensed assets consistingof a minimumof $0.5 million in developmentspendannuallythrough2021,and (vi) Research Agreement obligationsequal to $0.5 million annually commencing January 1, 2018. Due to the high uncertainty of the success of VBH ever repaying the note receivable and associated interest, theCompanyhasprovided a full valuationallowance for theseamounts as of June 30, 2019.

TheIn December 2017, VelosBio was incorporated with VBH being its sole stockholder. On February 6, 2018, VBH sublicensed and assigned its intellectual property rights to its two preclinical product candidates to VelosBio. In consideration for the license, VelosBio agreed to use commercially reasonable efforts to develop the licensed products as well as the following discussion should be read in conjunctionpayment obligations: (i) the assumption of each of the VBH assumed obligations under the partial assignment between the Company and VBH as outlined above, and (ii) certain tiered development milestone and royalty payments to VBH. In August 2018, the Company entered into the amended and restated Regents License Agreement and VelosBio entered into their own license agreement directly with the Regents. There is no common control overlap between the companies.

Also on February 6, 2018, the Company and VelosBio entered into: (i) an asset purchase agreement whereby VelosBio purchased the Company’s right, title and interest in the Company’s nominal assets related to the two preclinical product candidates and assumed the Company’s $0.2 million convertible note payable and related $16,000 of accrued interest which has been recorded as other income, and (ii) a transition services agreement whereby the Company agreed to provide VelosBio with certain transition services, as follows: (a) access to certain common laboratory equipment at the Company’s lab facility, (b) certain named employees were to devote up to 80% of their time supporting VelosBio related activities, (c) cirmtuzumab manufacturing, process optimization and ancillary activities until VelosBio was able to establish their own, and (d) agreement to cost share the purchase of certain antibody materials with VelosBio. Such services were to be provided at cost or cost plus. During the three and six months ended June 30, 2018, the Company incurred $2.6 million and $2.7 million, respectively, of costs on behalf of VelosBio that were substantially reimbursed and recorded on a net basis within operating expenses in the accompanying condensed financialconsolidated statements and the notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year endedoperations. As of December 31, 2016.2018, there were no ongoing rights or commitments under the asset purchase or transition services agreements.

The California Institute for Regenerative Medicine (“CIRM”) Award

Forward-Looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements.  The forward-looking statements are contained principally inIn August 2017, CIRM awarded an $18.3 million grant to researchers at the sections entitled “Management’s Discussion and AnalysisUniversity of Financial Condition and ResultsCalifornia San Diego School of Operations” and “Risk Factors.”  These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.  Forward-looking statements include statements about, among other things:

·                  the implementation of our business strategies, including our ability to preserve or realize any significant value from our selective androgen receptor modulator, or SARM, and selective androgen receptor degrader, or SARD, programs;

·                  the therapeutic and commercial potential of, and our abilityMedicine (“UC San Diego”) to advance the development of, SARMs and our SARD program;

·               ��  the timing, scope and anticipated initiation, enrollment and completion of our ongoing clinical trials and any other future clinical trials that we may conduct;

·                  our ability to establish and maintain potential new collaborative, partnering or other strategic arrangements for the development and commercialization of our preclinical and clinical product candidates;

·                  the anticipated progress of our preclinical and clinical programs, including whether our ongoing clinical trials will achieve clinically relevant results;

·                  the timing of regulatory discussions and submissions, and the anticipated timing, scope and outcome of related regulatory actions or guidance;

·                  our ability to obtain and maintain regulatory approvals of our product candidates and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

·                  our ability to market, commercialize and achieve market acceptance for our product candidates;

·                  our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and

·                  our estimates regarding the sufficiency of our cash resources, expenses, capital requirements and needs for additional financing, and our ability to obtain additional financing.

Forward-looking statements are statements other than historical facts and often address future events and our future performance. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “envisions,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” and similar expressions intended to identify forward-looking statements.  Forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks, uncertainties and other important factors.  We discuss many of these risks in this Quarterly Report on Form 10-Q in greater detail in the section entitled “Risk Factors” under Part II, Item 1A below.  Given these risks, uncertainties and other important factors, you should not place undue reliance on these forward-looking statements.  Also, forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q.  You should read this Quarterly Report on Form 10-Q and the documents that we incorporate by reference in and have filed as exhibits to this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect.  Except as required

by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Overview

Business Overview

We are a biopharmaceutical company dedicated to the discovery, development and commercialization of medicines to treat serious medical conditions, including stress urinary incontinence and prostate cancer. Our current strategy is focused on the further development of selective androgen receptor modulators, or SARMs, a class of drugs that we believe has the potential to treat serious medical conditions where unmet medical needs in muscle-related diseases may benefit from increasing muscle mass, such as stress urinary incontinence, or SUI, and Duchenne muscular dystrophy, or DMD.  In 2015, we entered into an exclusive worldwide license agreement with the University of Tennessee Research Foundation, or UTRF, to develop its proprietary selective androgen receptor degrader, or SARD, technology, which we believe has the potential to provide compounds that can degrade multiple forms of androgen receptor, or AR, by inhibiting tumor growth in patients with progressive castration-resistant prostate cancer, or CRPC, including those patients who do not respond to or are resistant to current therapies.

Business Highlights

Our lead SARM candidate, enobosarm (GTx-024), has to date been evaluated in 25 completed or ongoing clinical trials, including in sevenCompany’s Phase 1/2 and two Phase 3 clinical trials, enrolling over 1,700 subjects, of which approximately 1,200 subjects were treated with enobosarm. Enobosarm is the generic name given to the compound by the USAN Council and the World Health Organization and is the first compound to receive the SARM stem in its name, recognizing enobosarm as the first in this class of compounds.

In 2016, we initiated a Phase 2 open-label, non-placebo controlled, proof-of-concept clinical trial of enobosarm to treat postmenopausal womenevaluating cirmtuzumab in combination with SUI.  This is the first clinical trial to evaluate a SARMibrutinib for the treatment of SUI.  Inpatients with B-cell lymphoid malignancies, including chronic lymphocytic leukemia and mantle cell lymphoma. The Company: (i) is conducting this ongoing Phase 2 proof-of-concept clinical trial, enobosarm 3 mgstudy in collaboration with UC San Diego, (ii) estimates it will receive $16.1 million in development milestones under research subaward agreements throughout the award project period, estimated to be from October 1, 2017 to March 31, 2022, (iii) is being assessed as a potential treatmentcommitted to certain co-funding requirements, (iv) received subaward payments of $2.4 million and $0 in three months ended June 30, 2019 and 2018, respectively, and $3.7 million and $0.5 million the for post-menopausal women who have demonstrated SUI symptoms for more than six months with an averageended June 30, 2019 and 2018, respectively, and (v) is required to provide UC San Diego progress and financial update reports throughout the award period. The subaward does not bear a royalty payment commitment, nor is the subaward otherwise refundable. For the three months ended June 30, 2019 and 2018, the Company recorded revenue of 3 to 15 reported SUI episodes per day over a three-day period,$0.7 million and a positive bladder stress test. The primary endpoint$1.5 million, respectively, and recorded revenue of $1.1 million and $1.7 million for the clinical trial issix months ended June 30, 2019 and 2018, respectively. Related qualifying subaward costs for the average numberthree months ended June 30, 2019 and 2018 was $1.2 million and $2.8 million, respectively, and $2.1 million and $3.1 million for the six months ended June 30, 2019 and 2018, respectively. As of SUI episodes per day onJune 30, 2019, the 3-day voiding diary at 12 weeks, comparedCompany believes it has met its obligations under the CIRM award and UC San Diego subawards.