10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

This Report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities law, which we collectively refer to as “forward-looking statements”. Such forward-looking statements reflect our current beliefs and are based on information currently available to us. In some cases, forward-looking statements can be identified by terminology such as “may,” “would,” “could,, “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “hope,” “foresee” or the negative of these terms or other similar expressions concerning matters that are not historical facts.

Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others:

More detailed information about risk factors and their underlying assumptions are included in our Annual Report on Form 10-K for the year ended December 31, 2022, under Item 1A – Risk Factors. Except as required under applicable securities legislation, we undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

The accompanying notes are an integral part of these condensed consolidated interim financial statements (unaudited).

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

Reporting entity:

Aptose Biosciences Inc. (“Aptose,” the “Company,” “we,” “us,” or “our”) is a science-driven, clinical-stage biotechnology company committed to the development and commercialization of precision medicines addressing unmet clinical needs in oncology, with an initial focus on hematology. The Company's small molecule cancer therapeutics pipeline includes products designed to provide single agent efficacy and to enhance the efficacy of other anti-cancer therapies and regimens without overlapping toxicities. The Company’s executive offices are located in San Diego, California, and our head office is located in Toronto, Canada.

We are advancing targeted agents to treat life-threatening hematologic cancers that, in most cases, are not elective for patients and require immediate treatment. We have two clinical-stage investigational products for hematological malignancies: tuspetinib, an oral, potent myeloid kinase inhibitor, and luxeptinib, an oral, dual lymphoid and myeloid kinase inhibitor.

Since our inception, we have financed our operations and technology acquisitions primarily from equity financing, proceeds from the exercise of warrants and stock options, and interest income on funds held for future investment. Our uses of cash for operating activities have primarily consisted of salaries and wages for our employees, facility and facility-related costs for our offices and laboratories, fees paid in connection with preclinical and clinical studies, licensing fees, drug manufacturing costs, laboratory supplies and materials, and professional fees.

Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We plan to raise additional funds to fund our business operations but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern, see Note 2(a). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our ability to raise additional funds could be affected by adverse market conditions, the status of our product pipeline, possible delays in enrollment in our trial, and various other factors and we may be unable to raise capital when needed, or on terms favorable to us. If necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying the time to market for any of our product candidates.

We do not expect to generate positive cash flow from operations for the foreseeable future due to the early stage of our clinical trials. It is expected that negative cash flow will continue until such time, if ever, that we receive regulatory approval to commercialize any of our products under development and/or royalty or milestone revenue from any such products exceeds expenses.

Our cash needs for the next twelve months include estimates of the number of patients and rate of enrollment of our clinical trials, the amount of drug product that we will require to support our clinical trials, and our general corporate overhead costs to support our operations, and our reliance on our manufacturers. We have based these estimates on assumptions and plans which may change and which could impact the magnitude and/or timing of operating expenses and our cash runway, See Note 2(a).

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of June 30, 2023, the Company had an accumulated deficit of approximately $492.1 million (December 31, 2022, $464.3 million); cash and cash equivalents and investment balances of approximately $23.3 million (December 31, 2022, $47.0 million); and working capital of approximately $13.3 million (December 31, 2022, $37.2 million).

On May 23, 2023, during the Aptose Annual and Special Meeting of Shareholders, our shareholders voted to approve special resolutions providing for an amendment to our articles of incorporation to effect a reverse share split of our outstanding Common Shares, at a ratio in the range of 1-for-10 to 1-for-20. Our Board of Directors then approved a ratio of 1-for-15 on May 23, 2023. On May 24, 2023, we filed articles of amendment under the Canada Business Corporations Act to give effect to the reverse stock split (consolidation) of our Common Shares on the basis of one post-consolidation Common Share for each 15 pre-consolidation Common Shares (the “Reverse Stock Split”). The Common Shares commenced trading on a post-Reverse Stock Split basis at market open on Tuesday, June 6, 2023. All references in this report to historical Common Share prices, numbers of Common Shares, and earnings per share calculations have been presented to reflect the effect of the Reverse Stock Split.

Significant accounting policies

Basis of presentation - Going concern

These unaudited consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP and the rules and regulations of the Securities and Exchange Commission, or SEC, related to quarterly reports filed on Form 10-Q, assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company's ability to continue as a going concern exists.

As of June 30, 2023, the Company had an accumulated deficit of approximately $492.1 million (December 31, 2022, $464.3 million); cash and cash equivalents and investment balances of approximately $23.3 million (December 31, 2022, $47.0 million); and working capital of approximately $13.3 million (December 31, 2022, $37.2 million). In order for the Company to meet its capital requirements, and continue to operate, additional financing will be necessary. The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, debt financing, committed equity facilities or other financing instruments and restructuring of operations to decrease expenses. However, given the impact of the economic downturn on the U.S. and global financial markets, the Company may be unable to access further equity when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. The consolidated financial statements do not reflect any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. Such adjustments may be material.


Canada (State or other jurisdiction of incorporation or organization)		98-1136802 (I.R.S. Employer Identification No.)

251 Consumers Road, Suite 1105 Toronto, Ontario, Canada		M2J 4R3
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value	APTO	Nasdaq Capital Market


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒	Emerging growth company ☐


		Page

PART I—FINANCIAL INFORMATION		5
	Item 1 – Financial Statements	5
	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3 – Qualitative and Quantitative Disclosures about Market Risk	30
	Item 4 – Controls and Procedures	30

PART II—OTHER INFORMATION		31
	Item 1 – Legal Proceedings	31
	Item 1A – Risk Factors
	Item 6 – Exhibits	32
	Signatures	33


	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	8,400		$	36,970
Investments		14,906			9,989
Prepaid expenses		1,736			2,303
Other current assets		217			257
Total current assets		25,259			49,519

Non-current assets:
Property and equipment		190			211
Right-of-use assets, operating leases		1,126			1,297
Total non-current assets		1,316			1,508

Total assets	$	26,575		$	51,027
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	3,501		$	6,326
Accrued liabilities		8,084			5,657
Current portion of lease liability, operating leases		387			301
Total current liabilities		11,972			12,284

Non-current liabilities:
Lease liability, operating leases		817			1,002
Total liabilities		12,789			13,286

Shareholders’ equity:
Share capital:
Common shares, no par value, unlimited authorized shares, 6,375,983 and 6,157,749 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		439,100			437,520
Additional paid-in capital		71,136			68,869
Accumulated other comprehensive loss		(4,315	)		(4,318	)
Deficit		(492,135	)		(464,330	)
Total shareholders’ equity		13,786			37,741

Total liabilities and shareholders’ equity	$	26,575		$	51,027


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
Revenue	$	-		$	-		$	-		$	-

Expenses:
Research and development		10,582			7,341			19,393			14,734
General and administrative		3,870			3,332			9,155			7,439
Operating expenses		14,452			10,673			28,548			22,173

Other income/(expense):
Interest income		326			111			748			133
Foreign exchange loss		(3	)		(3	)		(5	)		(6	)
Total other income		323			108			743			127

Net loss	$	(14,129	)	$	(10,565	)	$	(27,805	)	$	(22,046	)

Other comprehensive loss:
Unrealized (loss)/gain on available-for-sale securities		(1	)		(37	)		3			(37	)
Total comprehensive loss	$	(14,130	)	$	(10,602	)	$	(27,802	)	$	(22,083	)

Basic and diluted loss per common share	$	(2.27	)	$	(1.72	)	$	(4.47	)	$	(3.59	)

Weighted average number of common shares outstanding used in the calculation of (in thousands) Basic and diluted loss per common share		6,234			6,150			6,219			6,149


	Common Shares				Additional			Accumulated other
	Shares (in thousands)		Amount		paid-in capital			comprehensive loss			Deficit			Total
Balance, December 31, 2022		6,158	$	437,520	$	68,869		$	(4,318	)	$	(464,330	)	$	37,741
Common shares issued in exchange for RSUs		38		376		(376	)	-			-			-
Common shares issued under the 2022 ATM Facility		171		1,138		-			-			-			1,138
Common shares issued under the ESPP plan		1		16		-			-			-			16
Commitment Shares, 2023 Equity Facility		8		50		-			-			-			50
Stock-based compensation		-		-		2,643			-			-			2,643
Other comprehensive gain		-		-		-			3			-			3
Net loss	-		-		-			-				(27,805	)		(27,805	)
Balance, June 30, 2023		6,376	$	439,100	$	71,136		$	(4,315	)	$	(492,135	)	$	13,786
Balance, December 31, 2021		6,148	$	437,386	$	63,673		$	(4,316	)	$	(422,507	)	$	74,236
Common shares issued under the 2020 ATM Facility		2		29		-			-			-			29
Common shares issued upon exercise of stock options		1		26		(11	)		-		-				15
Stock-based compensation		-		-		3,293		-			-				3,293
Other comprehensive loss		-		-		-			(37	)	-				(37	)
Net loss	-		-		-			-				(22,046	)		(22,046	)
Balance, June 30, 2022		6,151	$	437,441	$	66,955		$	(4,353	)	$	(444,553	)	$	55,490