10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2023

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

For the Transition Period from to

Commission File Number: 1-32001

APTOSE BIOSCIENCES INC.

(Exact Name of Registrant as Specified in Its Charter)


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)

647-479-9828

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

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.


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

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 ☒

As of November 9, 2023, the registrant had 7,816,923 common shares outstanding.

TABLE OF CONTENTS


		Page

PART I—FINANCIAL INFORMATION		4
	Item 1 – Financial Statements	4
	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3 – Qualitative and Quantitative Disclosures about Market Risk	31
	Item 4 – Controls and Procedures	31

PART II—OTHER INFORMATION		32
	Item 1 – Legal Proceedings	32
	Item 1A – Risk Factors
	Item 6 – Exhibits	33
	Signatures	34

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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:

•

our lack of product revenues and net losses and a history of operating losses;

•

our early stage of development, particularly the inherent risks and uncertainties associated with (i) developing new drug candidates generally, (ii) demonstrating the safety and efficacy of these drug candidates in clinical studies in humans, and (iii) obtaining regulatory approval to commercialize these drug candidates;

•

our need to raise substantial additional capital in the future and our ability to raise such funds when needed and on acceptable terms;

•

further equity financing, which may substantially dilute the interests of our existing shareholders;

•

clinical studies and regulatory approvals of our drug candidates are subject to delays, and may not be completed or granted on expected timetables, if at all, and such delays may increase our costs and could substantially harm our business;

•

our reliance on external contract research/manufacturing organizations for certain activities and if we are subject to quality, cost, or delivery issues with the preclinical and clinical grade materials supplied by contract manufacturers, our business operations could suffer significant harm;

•

clinical studies are long, expensive and uncertain processes and the FDA, or other similar foreign regulatory agencies that we are required to report to, may ultimately not approve any of our product candidates;

•

our ability to comply with applicable governmental regulations and standards;

•

our inability to achieve our projected development goals in the time frames we announce and expect;

•

our ability to meet certain milestones related to tuspetinib in order to complete the second tranche of the investment by Hanmi Pharmaceutical Co. Ltd. ("Hanmi") and our ability to find alternative financing if the full value of the investment is not received;

•

difficulties in enrolling patients for clinical trials may lead to delays or cancellations of our clinical trials;

•

our reliance on third parties to conduct and monitor our preclinical studies;

•

our ability to attract and retain key personnel, including key executives and scientists;

•

any misconduct or improper activities by our employees;

•

our exposure to exchange rate risk;

•

our ability to commercialize our business attributed to negative results from clinical trials;

•

the marketplace may not accept our products or product candidates due to the intense competition and technological change in the biotechnical and pharmaceuticals, and we may not be able to compete successfully against other companies in our industries and achieve profitability;

•

our ability to obtain and maintain patent protection;

•

our ability to afford substantial costs incurred with defending our intellectual property;

•

our ability to protect our intellectual property rights and not infringe on the intellectual property rights of others;

•

our business is subject to potential product liability and other claims;

•

potential exposure to legal actions and potential need to take action against other entities;

•

commercialization limitations imposed by intellectual property rights owned or controlled by third parties;

•

our ability to maintain adequate insurance at acceptable costs;

•

our ability to find and enter into agreements with potential partners;

•

extensive government regulation;

•

data security incidents and privacy breaches could result in increased costs and reputational harm;

•

our share price has been and is likely to continue to be volatile;

•

future sales of our common shares (the "Common Shares") by us or by our existing shareholders could cause our share price to drop;

•

changing global market and financial conditions;

•

changes in an active trading market in our Common Shares;

•

difficulties by non-Canadian investors to obtain and enforce judgments against us because of our Canadian incorporation and presence;

•

potential adverse U.S. federal tax consequences for U.S. shareholders because we are a “passive foreign investment company”;

•

our “smaller reporting company” status;

•

any failures to maintain an effective system of internal controls may result in material misstatements of our financial statements, or cause us to fail to meet our reporting obligations or fail to prevent fraud;

•

our ability to issue and sell Common Shares under the 2022 ATM Facility, or the 2023 Committed Equity Facility (as defined below);

•

our broad discretion in how we use the proceeds of the sale of Common Shares; and

•

our ability to expand our business through the acquisition of companies or businesses.

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.

PART I—FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Condensed Consolidated Interim Financial Statements

(Unaudited)

APTOSE BIOSCIENCES INC.

For the three months and nine months ended September 30, 2023 and 2022

APTOSE BIOSCIENCES INC.

Condensed Consolidated Interim Statements of Financial Position

(Expressed in thousands of US dollars)

(unaudited)


	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	15,720		$	36,970
Investments		1,997			9,989
Prepaid expenses		1,693			2,303
Other current assets		261			257
Total current assets		19,671			49,519

Non-current assets:
Property and equipment		170			211
Right-of-use assets, operating leases		1,035			1,297
Total non-current assets		1,205			1,508

Total assets	$	20,876		$	51,027
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	2,811		$	6,326
Accrued liabilities		9,129			5,657
Advance for equity issuances		50			-
Current portion of lease liability, operating leases		390			301
Total current liabilities		12,380			12,284

Non-current liabilities:
Lease liability, operating leases		720			1,002
Total liabilities		13,100			13,286

Shareholders’ equity:
Share capital:
Common shares, no par value, unlimited authorized shares, 7,542,760 and 6,157,749 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		443,938			437,520
Additional paid-in capital		71,735			68,869
Accumulated other comprehensive loss		(4,315	)		(4,318	)
Deficit		(503,582	)		(464,330	)
Total shareholders’ equity		7,776			37,741

Total liabilities and shareholders’ equity	$	20,876		$	51,027

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

Going concern, see Note 2.

Commitments, see Note 9.

Related party transactions, see Note 10.

Subsequent events, see Note 13.

APTOSE BIOSCIENCES INC.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Expressed in thousands of US dollars, except for per common share data)

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Revenue	$	-		$	-		$	-		$	-

Expenses:
Research and development		8,256			6,578			27,649			21,312
General and administrative		3,425			3,448			12,580			10,887
Operating expenses		11,681			10,026			40,229			32,199

Other income/(expense):
Interest income		232			254			980			387
Foreign exchange gain/(loss)		2			(5	)		(3	)		(11	)
Total other income		234			249			977			376

Net loss	$	(11,447	)	$	(9,777	)	$	(39,252	)	$	(31,823	)

Other comprehensive loss:
Unrealized gain/(loss) on available-for-sale securities		-			20			3			(17	)
Total comprehensive loss	$	(11,447	)	$	(9,757	)	$	(39,249	)	$	(31,840	)

Basic and diluted loss per common share	$	(1.76	)	$	(1.59	)	$	(6.14	)	$	(5.17	)

Weighted average number of common shares outstanding used in the calculation of (in thousands) Basic and diluted loss per common share		6,495			6,153			6,391			6,150

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

APTOSE BIOSCIENCES INC.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

(Expressed in thousands of US dollars, except for per common share data)

(unaudited)


	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 under the Hanmi Subscription Agreement		668		3,000		-			-			-			3,000
Common shares issued in exchange for RSUs		38		376		(376	)	-			-			-
Common shares issued under the 2023 Committed Equity Facility		336		1,185		-			-			-			1,185
Common shares issued under the 2022 ATM Facility		337		1,828		-			-			-			1,828
Stock-based compensation		-		-		3,242			-			-			3,242
Common shares issued under the ESPP plan		6		29		-			-			-			29
Other comprehensive gain		-		-		-			3			-			3
Net loss		-		-		-			-			(39,252	)		(39,252	)
Balance, September 30, 2023		7,543	$	443,938	$	71,735		$	(4,315	)	$	(503,582	)	$	7,776
Balance, December 31, 2021		6,148	$	437,386	$	63,673		$	(4,316	)	$	(422,507	)	$	74,236
Common shares issued under the 2020 ATM Facility		4		50		-			-			-			50
Common shares issued upon exercise of stock options		1		26		(11	)		-			-			15
Common shares issued under the ESPP plan		1		7		-			-			-			7
Stock-based compensation		-		-		4,346			-			-			4,346
Other comprehensive loss		-		-		-			(17	)		-			(17	)
Net loss		-		-		-			-			(31,823	)		(31,823	)
Balance, September 30, 2022		6,154	$	437,469	$	68,008		$	(4,333	)	$	(454,330	)	$	46,814

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

APTOSE BIOSCIENCES INC.

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in thousands of US dollars)

(unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Cash flows used in operating activities:
Net loss for the period	$	(11,447	)	$	(9,777	)	$	(39,252	)	$	(31,823	)
Items not involving cash:
Stock-based compensation		599			1,053			3,242			4,346
Depreciation and amortization		20			30			70			92
Loss on disposal of property and equipment	-				-		-				4
Amortization of right-of-use assets		91			111			286			336
Interest on lease liabilities		23			4			73			17
Unrealized (gain)/loss on short-term investment		(1	)		7			(3	)		10
Accrued interest on investments		(44	)		78			(56	)		85
Changes in non-cash operating assets and liabilities:
Prepaid expenses		29			825			646			1,638
Other current assets		(44	)		(225	)		(4	)		(213	)
Operating lease liabilities		(117	)		(134	)		(290	)		(411	)
Accounts payable		(690	)		23			(3,515	)		717
Accrued liabilities		1,045			1,026			3,472			1,531
Cash used in operating activities		(10,536	)		(6,979	)		(35,331	)		(23,671	)

Cash flows from financing activities:
Shares issuances to Hanmi under subscription agreement		3,000			-			3,000			-
Issuance of common shares under 2022 ATM Facility		694			-			1,837			-
Issuance of common shares under 2023 Committed Equity Facility		1,150			-			1,150			-
Share subscription advance under the 2023 Committed Equity Facility		50			-			50			-
Cost of offering		(5	)		-			(10	)		-
Issuance of common shares under the ESPP plan		13			-			29			-
Issuance of common shares under 2020 ATM Facility	-				21		-				50
Issuance of common shares upon exercise of stock options	-				-		-				15
Cash from financing activities		4,902			21			6,056			65

Cash flows from/(used in) investing activities:
Maturity /(acquisition) of investments, net		12,953			(5,078	)		8,051			12,517
Purchase of property and equipment		-			-			(29	)		(24	)
Cash from/(used in) investing activities		12,953			(5,078	)		8,022			12,493

Effect of exchange rate fluctuations on cash and cash equivalents		1			(7	)		3			(10	)
Increase /(decrease) in cash and cash equivalents	$	7,320		$	(12,043	)	$	(21,250	)	$	(11,123	)
Cash and cash equivalents, beginning of period	$	8,400		$	40,034		$	36,970		$	39,114
Cash and cash equivalents, end of period	$	15,720		$	27,991		$	15,720		$	27,991

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

APTOSE BIOSCIENCES INC.

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

Three months and nine months ended September 30, 2023 and 2022

(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. The Company's current cash, cash equivalents and investments will enable the support of operations through March 2024. 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 September 30, 2023, the Company had an accumulated deficit of approximately $503.6 million (December 31, 2022, $464.3 million); cash and cash equivalents and investment balances of approximately $17.7 million (December 31, 2022, $47.0 million); and working capital of approximately $7.3 million (December 31, 2022, $37.2 million). Management recognizes that in order to meet the capital requirements, and continue to operate, additional financing will be necessary. The Company plans to raise additional funds to fund our business operations through equity financing under the 2022 ATM Facility, 2023 Committed Equity Facility and the Hanmi Subscription Agreement, as further described in note 10. Management continues considering other options for raising capital including debt, equity, collaborations, and reorganization to reduce operational expenses. However, given the impact of the financial markets, the Company may be unable to access financing 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. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 ("CBCA") 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 September 30, 2023, the Company had an accumulated deficit of approximately $503.6 million (December 31, 2022, $464.3 million); cash and cash equivalents and investment balances of approximately $17.7 million (December 31, 2022, $47.0 million); and working capital of approximately $7.3 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 Company's current cash, cash equivalents and investments will enable the support of operations through March 2024. 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.

Basis of consolidation:

These condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions, balances, revenue, and expenses are eliminated on consolidation.

Significant accounting policies, estimates and judgments:

During the nine months ended September 30, 2023, there have been no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 24, 2023.

The preparation of the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from those estimates. The condensed consolidated interim financial statements include estimates, which, by their nature, are uncertain.

The impacts of such estimates are pervasive throughout the condensed consolidated interim financial statements and may require accounting adjustments based on future occurrences.

The estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

Recent Accounting Pronouncements

We have adopted no new accounting pronouncements during the nine months ended September 30, 2023. There were various accounting standards and interpretations issued recently, none of which are expected to have a material impact on our financial position, operations or cash flows.

Foreign currency:

The functional and presentation currency of the Company is the US dollar.

Concentration of risk:

The Company is subject to credit risk from the Company’s cash and cash equivalents and investments. The carrying amount of the financial assets represents the maximum credit exposure. The Company manages credit risk associated with its cash and cash equivalents and investments by maintaining minimum standards of R1‑low or A‑low investments and the Company invests only in highly rated corporations and treasury bills, which are capable of prompt liquidation.

Cash and cash equivalents:

Cash and cash equivalents as of September 30, 2023, consist of cash of $1.691 million (December 31, 2022 ‑ $596 thousand), deposits in high interest savings accounts, money market funds and accounts with maturities of less than 90 days totaling of $14.029 million (December 31, 2022 ‑ $36.374 million).

Prepaid expenses:

Prepaid expenses as of September 30, 2023 and December 31, 2022 are shown below. Other prepaid expenses primarily consist of subscriptions, software, conference deposits and deposits for general and administrative items.


	September 30,		December 31,
	2023		2022
Prepaid research and development expenses	$	1,069	$	1,271
Prepaid insurance		108		893
Deferred financing expenses		248		5
Other prepaid operating expenses		268		134
Total	$	1,693	$	2,303

Right-of-use assets:


	September 30,			December 31,
	2023			2022
Right-of-use assets, beginning of period	$	3,100		$	1,860
Additions to right-of-use assets		24			1,240
Right-of-use assets, end of period		3,124			3,100
Accumulated amortization		(2,089	)		(1,803	)
Right-of use assets, NBV	$	1,035		$	1,297

Investments:

Investments consisted of the following as of September 30, 2023 and December 31, 2022:


	September 30, 2023
	Cost		Unrealized gain/(loss)		Market value
Commercial Notes		1,996		1		1,997
Total	$	1,996	$	1	$	1,997


	December 31, 2022
	Cost		Unrealized gain/(loss)			Market value
United States Treasury Bills	$	9,991	$	(2	)	$	9,989
Total	$	9,991	$	(2	)	$	9,989

Fair value measurements and financial instruments:

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.

Level 1 ‑ inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 ‑ inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data or other means; and

Level 3 ‑ inputs are unobservable (supported by little or no market activity).

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

The following table presents the fair value of Company's assets that are measured at fair value on a recurring basis for the periods presented:


	September 30, 2023		Level 1		Level 2		Level 3
Assets
Money Market funds	$	2,005	$	-	$	2,005	$	-
High interest savings account		4,565		-		4,565		-
United States Treasury Bills		7,459		-		7,459		-
Commercial Note, classified as short-term investments		1,997		-		1,997		-
Total	$	16,026	$	-	$	16,026	$	-


	December 31, 2022		Level 1		Level 2		Level 3
Assets
Money Market accounts	$	165	$	-	$	165	$	-
Money Market funds		22,343		-		22,343		-
High interest savings accounts		13,866		-		13,866		-
United States Treasury Bills		9,989		-		9,989		-
Total	$	46,363	$	-	$	46,363	$	-

Accrued liabilities:

Accrued liabilities as of September 30, 2023 and December 31, 2022 consisted of the following:


	September 30,		December 31,
	2023		2022
Accrued personnel related costs	$	2,020	$	2,302
Accrued research and development expenses		6,830		3,122
Other accrued expenses		279		233
Total	$	9,129	$	5,657

Lease liability:

Aptose leases office space in San Diego, California and Toronto, Canada. On November 4, 2022, the lease for the San Diego office space was extended through May 31, 2026 (the "Third Amendment"). Management has determined that the Third Amendment represents a lease modification, as defined by ASC 842, Leases, does not meet the requirements for accounting as a separate contract and continues to meet the definition of an operating lease. The lease for the Toronto, Canada office space was extended for one year on February 23, 2023, with this extension expiring on September 30, 2024. The Company has not included any extension periods in calculating its right-to-use assets and lease liabilities. Aptose previously leased lab space in San Diego, which we exited prior to the expiration of the lease on February 28, 2023. The costs incurred in exiting this laboratory space were not material. The Company also enters into leases for small office equipment.

Minimum payments, undiscounted, under our operating leases are as follows:


Years ending December 31,
2023	$	116
2024		459
2025		462
2026		197
Total	$	1,234

The following table presents the weighted average remaining term of the leases and the weighted average discount rate:


	September 30, 2023			December 31, 2022
Weighted-average remaining term – operating leases (years)		2.6			3.3
Weighted-average discount rate – operating leases		7.38	%		6.62	%

Lease liability, current portion	$	390		$	301
Lease liability, long-term portion		720			1,002
Total	$	1,110		$	1,303

Operating lease costs and operating cash flows from our operating leases are as follows:


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	114	$	115	$	359	$	353
Operating cash flows from operating leases	$	117	$	134	$	290	$	411

10.

Related party transactions:

Hanmi Pharmaceutical Co. Ltd.

On November 4, 2021, Aptose entered a licensing agreement with the South Korean company Hanmi for the clinical and commercial development of tuspetinib (formerly HM43239). Under the terms of the agreement, Hanmi granted Aptose exclusive worldwide rights to tuspetinib for all indications. Hanmi received an upfront payment of $12.5 million, including $5 million in cash and $7.5 million in Common Shares. Aptose issued Hanmi 215,703 Common Shares in this upfront licensing payment. Hanmi will also receive up to $407.5 million in future milestone payments contingent upon achieving certain clinical, regulatory and sales milestones across several potential indications, as well as tiered royalties on net sales. The Hanmi milestone payments based on progression of research as outlined in Note 13 to the Annual report on Form 10-K for the year ended December 31, 2022. The term of the agreement will continue on a product-by-product and country-by-country basis until the expiration of the royalty period for such product in such country. The licenses to Aptose will survive and become non-exclusive, perpetual, irrevocable and fully paid-up on a product-by-product and country-by-country basis, upon their natural expiration under the terms of the agreement.

In 2022, the Company and Hanmi also entered into a separate supply agreement for additional production of new drug substance ("API") and drug product to support further tuspetinib clinical development, for which the Company pays Hanmi per batch of production. Expenses related to this supply agreement have been recognized by the Company, amounting to $3.1 million and $1.8 million for the nine months ended September 30, 2023 and 2022, respectively. Since inception to September 30, 2023, $6.7 million have been recognized for the period under the supply agreement.

The Company paid supply costs to Hanmi of $4.5 million and nil in the nine months ended September 30, 2023 and 2022, respectively. Since inception to September 30, 2023, payments of $4.5 million have been made under the supply agreement. At September 30, 2023, there was $2.2 million in accrued liabilities related to the supply agreement. (At December 31, 2022, there was $3 million in accounts payable and $572 thousand in accrued liabilities).

On August 10, 2023, the Company entered into a binding term sheet with Hanmi whereby Hanmi agreed at their sole discretion to invest, up to a maximum of $7 million in Aptose up to a total ownership of 19.99 percent of Aptose by Hanmi. On September 6, 2023, the Company entered into a subscription agreement with Hanmi, pursuant to which the Corporation agreed to sell 668,449 Common Shares to Hanmi for proceeds of $3 million. The issuance of shares, in exchange for proceeds of $3 million, is recorded in Common Shares on the balance sheet as of September 30, 2023. The second investment of up to $4 million or a maximum of 19.99

percent ownership interest in the Company by Hanmi is contingent on Aptose meeting certain manufacturing and data milestones related to tuspetinib by June 30, 2024.

Hanmi held 884,152 Common Shares of Aptose as of September 30, 2023.

11.

Share capital:

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 CBCA to give effect to 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.

The Company has authorized share capital of an unlimited number of Common Shares.

Equity issuances:

(i) Hanmi

On August 10, 2023, the Company entered into a binding term sheet with Hanmi whereby Hanmi agreed at their sole discretion to invest, up to a maximum of $7 million in Aptose up to a total ownership of 19.99 percent of Aptose by Hanmi. On September 6, 2023, the Company entered into a subscription agreement with Hanmi, pursuant to which the Corporation agreed to sell 668,449 Common Shares to Hanmi for proceeds of $3 million. The second investment of up to $4 million or a maximum of 19.99 percent ownership interest in the Company by Hanmi is contingent on Aptose meeting certain manufacturing and data milestones related to tuspetinib by June 30, 2024. Hanmi held 884,152 Common Shares of Aptose as of September 30, 2023.

(ii) 2023 Committed Equity Facility

On May 25, 2023, the Company and Keystone Capital Partners, LLC ("Keystone") entered into a committed equity facility, (the "2023 Committed Equity Facility"), which provides that subject to the terms and conditions set forth therein, we may sell to Keystone up to the lesser of (i) $25.0 million of the Common Shares and (ii) a number of Common Shares equal to 19.99% of the Common Shares outstanding immediately prior to the execution of the 2023 Committed Equity Facility Agreement with Keystone which respect to the 2023 Committed Equity Facility (subject to certain exceptions) (the “Total Commitment”), from time to time during the 24-month term of the 2023 Committed Equity Facility. Additionally, on May 25, 2023, the Company entered into a Registration Rights Agreement with Keystone, pursuant to which the Company agreed to file a registration statement with the SEC covering the resale of Common Shares that are issued to Keystone under the 2023 Committed Equity Facility. This registration statement became effective on June 30, 2023 and the 2023 Committed Equity Facility commencement date was July 12, 2023 (the "Commencement Date").

Upon entering into the 2023 Committed Equity Facility, the Company agreed to issue to Keystone an aggregate of 25,156 Common Shares (the “Commitment Shares”) as consideration for Keystone’s commitment to purchase Common Shares upon the Company’s direction under the 2023 Committed Equity Facility. The Company issued 7,547 Common Shares, or 30% of the Commitment Shares, on the date of the 2023 Committed Equity Facility Agreement (the “Initial Commitment Shares”). An additional 7,547 Common Shares, or 30% of the Commitment Shares, were to be issued to Keystone 90 days following the Commencement Date (the “First Back-End Commitment Shares”). The remaining 10,062 Common Shares, or 40% of the Commitment Shares, shall be issued to Keystone 180 days following the Commencement Date (the “Second Back-End Commitment Shares”, together with the First Back-End Commitment Shares, the “Back-End Commitment Shares”).

In the nine months ended September 30, 2023, the Company's issuance of Common Shares to Keystone comprised 328,438 Common shares sold to Keystone at an average price of $3.5 per Common share for cash proceeds of $ 1.15 million and the 7,547 Common Shares issued for nil cash proceeds as the Initial Commitment Shares on the Commencement Date. The Company raised a total of $1,150,000 in cash proceeds from issuing Common Shares to Keystone as of September 30, 2023. In addition, the Company received $50,000 in September for 17,857 Common Shares that were issued subsequent to September 30, 2023. See Note 13, Subsequent events.

(iii) 2022 At-The-Market Facility

On December 9, 2022, the Company entered into an equity distribution agreement pursuant to which the Company may, from time to time, sell Common Shares having an aggregate offering value of up to $50 million through Jones Trading Institutional Services LLC ("Jones Trading") on Nasdaq (the "2022 ATM Facility"). During the year ended December 31, 2022, the Company issued 4,836 Common Shares under this 2022 ATM Facility at an average price of $10.81 per Common Share for gross proceeds of $52 thousand ($51 thousand net of share issuance costs). During the nine months ended September 30, 2023, the Company issued 336,690 Common Shares under this 2022 ATM Facility at an average price of $5.62 for gross proceeds of $1.9 million ($1.8 million net of share issuance costs). The Company raised a total of $1.94 million in cash proceeds from issuing Common Shares under the 2022 ATM Facility as of September 30, 2023. Costs associated with the proceeds consisted of 3% cash commission.

(iv) 2020 At-The-Market Facility

On May 5, 2020, the Company entered an “at-the-market” equity distribution agreement with Piper Sandler & Co. (“Piper Sandler”) and Canaccord Genuity LLC (“Canaccord Genuity”) acting as co-agents (the “2020 ATM Facility”). Under the terms of the 2020 ATM Facility, the Company could, from time to time, sell Common Shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on Nasdaq. During the nine months ended September 30, 2022, the Company issued 3,646 Common Shares under the 2020 ATM Facility at an average price of $14.25 per Common Share for gross proceeds of $52 thousand ($50 thousand net of share issuance costs). As of October 31, 2022, the date the 2020 ATM Facility was terminated, the Company had raised a total of $89 thousand gross proceeds ($86 thousand net of share issuance costs) under the 2020 ATM Facility. Costs associated with the proceeds consisted of a 3% cash commission.

Loss per share:

Loss per share is calculated using the weighted average number of Common Shares outstanding and is presented in the table below:


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Net loss	$	(11,447	)	$	(9,777	)	$	(39,252	)	$	(31,823	)
Weighted-average common shares – basic and diluted (in thousands)		6,495			6,153			6,391			6,150
Net loss per share – basic and diluted	$	(1.76	)	$	(1.59	)	$	(6.14	)	$	(5.17	)

The effects of any potential exercise of the Company’s stock options outstanding during the three-month and nine-month periods ended September 30, 2023, and September 30, 2022 have been excluded from the calculation of diluted loss per share, since such securities would be anti‑dilutive.

12.

Stock‑based compensation:

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.

Stock option plan and employee stock purchase plan

Effective June 1, 2021, the Company adopted a new stock incentive plan (“New Incentive Plan”) and an employee stock purchase plan (“ESPP”).

The New Incentive Plan authorizes the Board of Directors to administer the New Incentive Plan to provide equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and dividend equivalents.

The Company currently maintains its existing Share Option Plan. Effective June 1, 2021, no further grants have been made under the Share Option Plan, though existing grants under the Share Option Plan remain in effect in accordance with their terms.

The aggregate number of our Common Shares, no par value, that may be issued under all awards under the New Incentive Plan is (i) 691,400, plus (ii) any of our Common Shares subject to any outstanding award under our prior plans that, after June 1, 2021, are not

purchased or are forfeited or reacquired by us, or otherwise not delivered to the participant due to termination, cancellation or cash settlement of such award subject to the share counting provisions of the New Incentive Plan.

Under both the Share Option Plan and the New Incentive Plan, the exercise price of each option equals the closing trading price of the Company’s stock on the day prior to the grant if the grant is made during the trading day or the closing trading price on the day of grant if the grant is issued after markets have closed. Vesting is provided for at the discretion of the Board of Directors and the expiration of options is to be no greater than ten years from the date of grant.

The Company uses the fair value-based method of accounting for employee awards granted under both plans. The Company calculates the fair value of each stock option grant using the Black-Scholes option pricing model at the grant date. The stock-based compensation cost of the options is recognized as stock-based compensation expense over the relevant vesting period of the stock options using an estimate of the number of options that will eventually vest.

The ESPP allows eligible employees of the Company to purchase Common Shares through accumulated payroll deductions up to a maximum 15% of eligible compensation. The ESPP was implemented by consecutive offering periods with a new offering period commencing on the first trading day on or after February 1 and August 1 each year, or on such other date as the Board of Directors will determine and continuing thereafter until terminated in accordance with the Plan. Unless the Board of Directors provides otherwise, the purchase price will be equal to eighty-five percent (85%) of the fair market value of a Common Share on the offering date or the exercise date, whichever is lower. The maximum number of Common Shares available for sale under the ESPP is 113,333 Common Shares. The first six-month offering period began on February 1, 2022, and ended on August 1, 2022. There were 724 Common Shares issued under the ESPP as of December 31, 2022. The second six-month period began on August 1, 2022, and ended on February 1, 2023. The third six-month period began on February 2, 2023, and ended on August 1, 2023. There were 5,991 and 724 Common Shares issued under the ESPP during the nine months ended September 30, 2023 and September 30, 2022, respectively.

Stock option transactions for the nine months ended September 30, 2023 and September 30, 2022 are summarized as follows:


				Nine months ended September 30, 2023
	Options (in thousands)			Weighted average exercise price		Weighted average remaining contractual life (years)
Outstanding, beginning of period		1,100		$	52.22
Granted		217		9.87
Exercised		-			-
Forfeited		(125	)		49.58
Outstanding, end of the period		1,192		$	44.76		7.1
Exercisable, end of the period		718			58.98		6.1
Vested and expected to vest, end of period		1,107		$	46.42		7.0


				Nine months ended September 30, 2022
	Options (in thousands)			Weighted average exercise price		Weighted average remaining contractual life (years)
Outstanding, beginning of period		1,007		$	68.30
Granted		420		17.82
Exercised		(1	)	16.25
Forfeited		(155	)		47.42
Outstanding, end of the period		1,271		$	54.00		6.3
Exercisable, end of the period		704			67.95		4.5
Vested and expected to vest, end of period		1,186		$	55.20		6.1

During the nine months ended September 30, 2022, the option agreements of one Company officer were modified as part of a separation and release agreement. 56,765 vested options, with exercise prices ranging from $20.10 to $103.65, were allowed to continue to be exercisable for an additional 12-month period, and also 31,810 options that would have expired unvested, were allowed to continue to vest for a 12-month period. As there was no service requirement, during the nine months ended September 30, 2022, the Company recorded $67 thousand in additional compensation related to these modifications.

As of September 30, 2023, there was $1.61 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over an estimated weighted-average period of 1.47 years. As of September 30, 2023, total compensation cost not yet recognized related to grants under the ESPP was approximately $4 thousand, which is expected to be recognized over four months.

The following table presents the weighted average assumptions that were used in the Black‑Scholes option pricing model to determine the fair value of stock options granted during the period, and the resulting weighted-average fair values:


	Nine months ended September 30, 2023			Nine months ended September 30, 2022
Risk-free interest rate		3.42	%		2.17	%
Expected dividend yield		-			-
Expected volatility		80.3	%		82.7	%
Expected life of options (years)		5			5
Grant date fair value	$	6.53		$	11.85

The Company uses historical data to estimate the expected dividend yield and expected volatility of its Common Shares in determining the fair value of stock options. The expected life of the options represents the estimated length of time the options are expected to remain outstanding.

The following table presents the vesting terms of options granted in the period:


	Nine months ended September 30, 2023		Nine months ended September 30, 2022
	Number of options (in thousands)		Number of options (in thousands)
3-year vesting (50%-25%-25%)		48		348
4-year vesting (50%-16 2/3%-16 2/3%-16 2/3%)		169		32
Performance-based vesting		-		40
Total stock options granted in the period		217		420

The Company has a stock incentive plan (SIP) pursuant to which the Board may grant stock-based awards comprised of restricted stock units or dividend equivalents to employees, officers, consultants, independent contractors, advisors and non-employee directors of the Company. Each restricted stock unit ("RSU") is automatically redeemed for one Common Share of the Company upon vesting. During the nine-month period ended September 30, 2023, the Company granted 38,000 RSUs with immediate vesting and an exercise price of $9.90 (the "2023 RSU Grant"). On February 6, 2023, all of these RSUs were redeemed for 38,000 Common Shares. No RSUs were granted in the nine months ended September 30, 2022. The following table presents the vesting and redemption of the RSUs granted in the three months and nine months ended September 30, 2023 and September 30, 2022.


	Nine months ended September 30, 2023						Nine months ended September 30, 2022
	Number of options (in thousands)			Weighted average grant date fair value			Number of options (in thousands)		Weighted average grant date fair value
Outstanding, beginning of period		-		$	-			-	$	-
Granted		38			9.90			-		-
Vested and redeemed		(38	)		(9.90	)		-		-
Outstanding, ending of period		-		$	-			-	$	-

Share-based payment expense

The Company recorded share-based payment expense related to stock options and RSUs as follows:


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Research and development	$	259	$	440	$	1,182	$	1,923
General and administrative		340		613		2,060		2,423
	$	599	$	1,053	$	3,242	$	4,346

13.

Subsequent events

Subsequent to September 30, 2023, the Company issued 274,163 Common Shares to Keystone under the 2023 Committed Equity Facility. 248,759 Common Shares were issued for $600,000 in cash proceeds received in October, 17,857 Common Shares were issued in October in exchange for $50,000 in cash proceeds received in September. The issuance of 7,547 First Back-End Commitment Shares was initiated in September and completed in October.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections. For more information, see “Cautionary Note Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

The following discussion should be read in conjunction with our condensed consolidated financial statements and accompanying notes thereto contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, and with our audited consolidated financial statements and accompanying notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.

All amounts are expressed in United States dollars unless otherwise stated.

OVERVIEW

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.

Aptose Programs

Aptose is advancing oral 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 under active development for the treatment of hematologic malignancies: tuspetinib (HM43239), an oral, potent myeloid kinase inhibitor, and luxeptinib (CG-806), an oral, dual lymphoid and myeloid kinase inhibitor.

Tuspetinib is an orally administered, highly potent myeloid kinase inhibitor that selectively targets a constellation of kinases operative in myeloid malignancies and known to be involved in tumor proliferation, resistance to therapy, and differentiation. This small molecule anticancer agent is currently being evaluated in an international Phase 1/2 clinical trial in patients with relapsed or refractory acute myeloid leukemia ("R/R AML") as a single agent therapy and in combination with the venetoclax BCL-2 inhibitor (TUS/VEN doublet combination therapy).

Luxeptinib is an orally administered, highly potent dual lymphoid and myeloid kinase inhibitor that selectively targets defined clusters of kinases that are operative in hematologic malignancies. This small molecule anticancer agent is currently being evaluated in a Phase 1a/b study for the treatment of patients having B-cell malignancies including classic chronic lymphocytic leukemia ("CLL"), small lymphocytic leukemia ("SLL") and certain non-Hodgkins lymphomas ("NHLs") that are resistant/refractory/intolerant to other therapies, and in a Phase 1 a/b study for the treatment of patients with R/R AML and high risk myelodysplastic syndromes ("HR MDS").

PROGRAM UPDATES

Tuspetinib

Indication and Clinical Trials:

Tuspetinib is an oral, highly potent, small molecule inhibitor of kinases operative in myeloid malignancies and known to be involved in tumor proliferation, resistance to therapy and differentiation. Preclinical in vitro and in vivo studies suggest that tuspetinib may be an effective monotherapy and combination therapy in patients with hematologic malignancies including AML. An international Phase 1/2 clinical trial in patients with R/R AML is ongoing. The dose escalation and exploration portions of this study have been

completed and evidence of robust clinical activity has been observed, including multiple complete responses in R/R AML patients with various disease genotypes, and a favorable safety profile.

The U.S. Food and Drug Administration ("FDA") granted orphan drug designation to tuspetinib for the treatment of patients with AML in October 2018. Orphan drug designation is granted by the FDA to encourage companies to develop therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States. Orphan drug status provides research and development tax credits, an opportunity to obtain grant funding, exemption from FDA application fees and other benefits. The orphan drug designation also provides us with seven additional years of marketing exclusivity in this indication. On May 3, 2022, the FDA granted Fast Track designation to tuspetinib for the treatment of patients with R/R AML with FLT3 mutation. Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need.

Manufacturing:

Following the tuspetinib licensing agreement between Aptose and Hanmi on November 4, 2021, Aptose received from Hanmi an existing inventory of drug product expected to support continuation of the current Phase 1/2 study. The Company and Hanmi also entered into a separate supply agreement in 2022 for additional production of API and drug product to support further clinical development. Additional batches of API and drug product have been manufactured during 2022 and 2023, including commercial tablet prototypes.

Program Updates at Recent Scientific Forums:

On October 29, 2023, Aptose presented two posters related to the clinical and preclinical activity of tuspetinib at the European School of Haematology (ESH) 6th International Conference: Acute Myeloid Leukemia "Molecular and Translational": Advances in Biology and Treatment, held October 29-31, 2023, in Estoril, Portugal. Clinical findings included 1) data from the APTO-TUS-HV01 clinical trial (Food Effect Study) evaluating the pharmacokinetic (PK) properties of tuspetinib in healthy human volunteers in which tuspetinib was administered with our without food, and 2) from an international Phase 1/2 study of tuspetinib as a single agent (TUS) and in combination with venetoclax (TUS/VEN combination) in patients with R/R AML from across clinical centers in the United States, South Korea, Spain, Australia and other sites. Data from the Fed vs Fasted Food Effect Study in healthy human volunteers demonstrated tuspetinib can be administered with or without food and foresee no clinically meaningful difference in exposure. This is an important finding for patient convenience, as venetoclax is dosed with food and now we can co-administer tuspetinib simultaneously with the venetoclax rather than require staggered dosing. Findings from the Phase 1/2 clinical trial demonstrated tuspetinib as a single agent (TUS) was well-tolerated and highly active among R/R AML patients with a diversity of adverse genotypes and delivered a 42% CR/CRh cross-evaluable venetoclax (VEN) naive patients at the 80mg daily RP2D. Tuspetinib in combination with venetoclax (TUS/VEN) in the APTIVATE international Phase 1/2 expansion trial in R/R AML patients has been well tolerated and achieved multiple responses in patients who previously failed venetoclax (Prior-VEN failure AML), including Prior-VEN failure patients who also previously failed FLT3 inhibitors, all of whom represent emerging populations of high unmet medical need. Notably, tuspetinib targets venetoclax resistance mechanisms that may re-sensitize Prior-VEN failure patients to venetoclax.

Separate from the clinical studies, the preclinical study (entitled: “Tuspetinib Oral Myeloid Kinase Inhibitor Creates Synthetic Lethal Vulnerability to Venetoclax”) presented by Aptose during the ESH Conference investigated the effects of tuspetinib on key elements of the phosphokinome and apoptotic proteome in both parental and TUS-resistant AML cells. In parental cells, tuspetinib inhibits key oncogenic signaling pathways and shifts the balance of pro- and anti-apoptotic proteins in favor of apoptosis, suggesting that it may generate vulnerability to venetoclax. In addition, acquired resistance in the AML cells to tuspetinib generated a synthetic lethal vulnerability to venetoclax of unusually high magnitude. Concurrent administration of TUS/VEN therefore may discourage the emergence of resistance to tuspetinib during treatment.

In conjunction with poster presentations at the ESH Conference, on October 30, 2023, Aptose held a “Clinical Update and KOL Data Review of AML Drug Tuspetinib” that was webcast and featured Dr. Naval Daver, MD, Professor, Director Leukemia Research Alliance Program, Department of Leukemia, The University of Texas MD Anderson Cancer Center, Houston, Texas. Dr. Daver is the lead investigator on Aptose’s APTIVATE trial and is recognized for significant achievements in the development of novel AML treatments, including several combination therapies. Aptose presented data in 49 patients who received the TUS/VEN doublet, showing an overall response rate (ORR) of 48% among all patients that had achieved an evaluable stage, as well as a 44% ORR among Prior-VEN failure AML patients, including FLT3-unmutated (wildtype) patients (43% ORR) and FLT3-mutated patients (60% ORR), some of whom also had failed prior therapy with FLT3 inhibitors. The TUS/VEN doublet was well tolerated with no unexpected safety signals. The TUS/VEN doublet may serve the Prior-VEN failure R/R AML patients that represent a rapidly growing population that is highly refractory to any salvage therapy. The compelling data with the TUS/VEN doublet in R/R AML patients suggest a TUS/VEN/HMA triplet may also serve the needs of frontline (1L) newly diagnosed AML patients.

Concurrent with the European Hematology Association (EHA) Annual Congress held June 8-11, 2023, Aptose held an interim clinical update webcast on June 10, 2023, to present highlights from the ongoing clinical development of tuspetinib. Aptose reported completion of the tuspetinib dose escalation and dose exploration Phase 1/2 trial in 77 R/R AML patients, tuspetinib demonstrated a favorable safety profile, and tuspetinib delivered monotherapy responses across four dose levels with no dose-limiting toxicity in mutationally diverse and difficult to treat R/R AML populations, including patients with highly adverse mutations that typically do not respond to monotherapy or combination therapy: TP53-mutated patients with a CR/CRh = 20% and RAS-mutated patients with a CR/CRh = 22%. Aptose also reported completion of a successful End of Phase 1 (EOP1) Meeting with the US FDA for tuspetinib, that a monotherapy recommended phase 2 dose (RP2D) was selected as 80mg daily, and that all development paths remain open, including the single arm accelerated path. Following completion of the dose escalation and dose exploration phases of the Phase 1/2 clinical program, Aptose focused attention on the tuspetinib APTIVATE expansion trial. The APTIVATE trial is designed to identify patient populations sensitive to tuspetinib monotherapy (TUS) that may serve as development paths for single arm accelerated approval and to place tuspetinib in combination with venetoclax (VEN) as a (TUS/VEN) doublet in R/R AML patients and identify patient populations of unmet need that are sensitive to the TUS/VEN doublet and can serve as development paths for accelerated and full approvals. We reported that patient enrollment in the APTIVATE expansion trial has been brisk and preliminary CR activity had already been reported in patients receiving the TUS/VEN doublet who previously failed therapy with venetoclax. During the interim clinical update webcast Aptose also reviewed clinical findings with the new "third generation" ("G3") formulation of luxeptinib (Lux). Aptose disclosed that continuous dosing with 50mg of the G3 formulation achieves roughly an equivalent pharmacokinetic profile as 900mg original (Generation 1, "G1") formulation, and that dose escalation with the G3 formulation was anticipated.

On March 23, 2023, Aptose announced the APTIVATE Phase 1/2 expansion trial with tuspetinib had been initiated and already had treated several R/R AML patients in the monotherapy arm, and that patient enrollment had been initiated in the doublet combination treatment arm of the APTIVATE trial with tuspetinib and venetoclax (TUS/VEN). Since then, patients have continued to enroll and receive tuspetinib on the monotherapy arm. Plus, enrollment and dosing of patients on the doublet arm (TUS/VEN) have been brisk. Clinical investigator interest for tuspetinib is evident, and early signs of antileukemic activity during the APTIVATE trial have fueled the level of excitement for the trial.

Clinical responses to monotherapy with tuspetinib have been observed in a broad range of mutationally defined populations, including those with mutated forms of NPM1, MLL, TP53, DNMT3A, RUNX1, wild-type FLT3, ITD or TKD mutated FLT3, various splicing factors, and other genes. In the March 23, 2023, announcement, Aptose also highlighted an unexpected observation of a 29% CR/CRh response rate with tuspetinib monotherapy in R/R AML patients having mutations in the RAS gene or other genes in the RAS pathway. Responses in RAS-mutated patients are important because the RAS pathway is often mutated in response to therapy by other agents as the AML cells mutate toward resistance to those other agents. Collectively, these observations of broad clinical activity of tuspetinib, along with its favorable safety profile, position tuspetinib for potential accelerated development paths, as well as for doublet, triplet and maintenance therapy indications.

On January 30, 2023, Aptose announced dosing of patients in the APTIVATE Phase 1/2 clinical trial of tuspetinib, and that another clinical response has been achieved by a R/R AML patient receiving 40 mg tuspetinib once daily orally in the original dose exploration trial, the second response at the recently launched low-dose 40 mg cohort. In addition, Aptose elucidated a rationale for the superior safety profile of tuspetinib. While several kinase inhibitors require high exposures that exert near complete suppression of a single target to elicit responses, those agents often cause additional toxicity because they also cause extensive inhibition of that target in normal cells. In contrast, tuspetinib simultaneously suppresses a small suite of kinase-driven pathways critical for leukemogenesis. Consequently, tuspetinib achieves clinical responses at lower exposures with less overall suppression of each pathway, thereby avoiding many of the toxicities observed with competing agents.

In December 2022, clinical data from an international Phase 1/2 study of tuspetinib in patients with R/R AML across clinical centers in the United States and South Korea were presented at the American Society of Hematology (ASH) Annual Meeting and presented during a Corporate Comprehensive Clinical Update Call held December 11, 2022. Data presented demonstrated that tuspetinib delivers single agent responses without prolonged myelosuppression or life-threatening toxicities in these very ill and heavily pretreated R/R AML patients. Responses were observed in a broad range of mutationally-defined populations, including those with mutated forms of NPM1, MLL, TP53, NRAS, KRAS, DNMT3A, RUNX1, wild-type FLT3, ITD or TKD mutated FLT3, various splicing factors, and other genes As of October 6, 2022, 60 heavily pretreated R/R AML patients were enrolled at multiple centers and treated at doses escalating from 20 mg to 200 mg, with further dose exploration at the 40 mg, 80 mg, 120 mg and 160 mg dose levels. Tuspetinib delivered multiple complete responses ("CRs") at 40 mg, 80 mg, 120 mg and 160 mg dose levels in which no dose-limiting toxicities ("DLT") were observed. Tuspetinib demonstrated clinically meaningful benefit in all responders, by either bridging successfully to hematopoietic stem cell transplant (HSCT) or leading to a durable response, as well as a favorable safety profile. In addition to 5 CRc and 1 PR reported at ASH 2021, 4 new CRc and 3 new PR had been generated during 2022. New responses during 2022 were achieved with 160 mg,120 mg, 80 mg, and 40 mg. Among efficacy evaluable patients treated with 80 mg, 120 mg, or 160mg, the following response rates ranging from 19% to 75% were achieved in specific genotypic subpopulations of r/r AML patients. Significant bone

marrow leukemic blast reductions were observed broadly in FLT3+ and FLT3 wildtype patients across multiple dose levels, comparable to reported gilteritinib data, but in more heavily pre-treated relapsed and refractory AML patients. Vignettes of patient experiences highlight the potency and breadth of tuspetinib to deliver complete remissions among several mutationally-defined populations with a diversity of adverse mutations. Tuspetinib continued to show a favorable safety profile with only mild AEs and no DLTs up to 160 mg per day, and no drug discontinuations from drug related toxicity. No drug related SAE, drug related deaths, differentiation syndrome, AE of QT prolongation or DLT were observed through the 160 mg level. Tuspetinib avoids many of the typical toxicities observed with other tyrosine kinase inhibitors. Aptose identified a safe therapeutic range with a broad therapeutic window, spanning the dose levels of 40, 80, 120 and 160 milligrams. Aptose also announced that enrollment had been initiated in the APTIVATE expansion trial for monotherapy and drug combination therapy with tuspetinib. For the APTIVATE expansion trial, Aptose selected 120 mg as the initiating single agent expansion dose and 80 mg as the initiating dose selected for combination with venetoclax.

At the EHA Annual Congress 2022 held June 9-12, 2022, Aptose presented preclinical data from tuspetinib in a poster entitled “Myeloid Kinome Inhibitor HM43239 Overcomes Acquired Resistance in Acute Myeloid Leukemia Models.” Oral HM43239 potently inhibits kinases that drive AML, including SYK, diverse forms of the FLT3, JAK1 and JAK2, and mutant forms of the c-KIT kinases. The SYK and JAK1/2 intracellular kinases and the FLT3 (mutated and wildtype) and cKIT (mutated) receptor kinases mediate oncogenic signaling pathways in AML that can drive malignant proliferation and promote drug resistance to certain drugs. Tuspetinib was developed to overcome shortcomings of other drugs, such as simple SYK inhibitors and approved inhibitors of FLT3. These preclinical findings support the continued clinical development of tuspetinib for the treatment of multiple AML populations, particularly those who have failed by other therapies.

Major conclusions include

•

Tuspetinib inhibits wild type and mutant forms of FLT3 at low nM concentrations

•

Tuspetinib inhibits SYK, JAK1, JAK2 and mutant forms of c-KIT at low nM concentrations

•

Tuspetinib inhibits phospho-FLT3, phospho-SYK, phospho-EKR1/2 and phospho-JAK/STAT5 that participate in signaling and rescue pathways

•

Tuspetinib has potential to kill cells and tumors resistant to other FLT3 inhibitors

•

Tuspetinib, at doses that are well tolerated, demonstrates in vivo efficacy on tumors resistant to other FLT3 inhibitors

Luxeptinib

Indication and Clinical Trials:

Luxeptinib is being developed with the intent to deliver the agent as an oral therapeutic for the treatment of R/R AML and for the treatment of a spectrum of B cell malignancies (including but not limited to CLL, SLL and NHL). Luxeptinib is a novel, oral, highly potent lymphoid and myeloid kinase inhibitor that selectively targets defined clusters of kinases operative in myeloid and lymphoid hematologic malignancies. This small molecule anticancer agent is currently being evaluated in a Phase 1a/b study for the treatment of patients having B-cell malignancies including classic CLL, SLL and certain NHLs that are resistant/refractory/intolerant to other therapies. Under a separate Investigational New Drug (“IND”), luxeptinib is being evaluated in a Phase 1a/b study for the treatment of patients with R/R AML or high risk MDS. It is hoped luxeptinib can serve patients across lymphoid and myeloid malignancies and combine well with other agents to extend its application to multiple lines of therapy.

During the fourth quarter of 2022, we completed dosing of the first, second, third, fourth, fifth, and sixth dose levels (150 mg, 300 mg, 450 mg, 600 mg, 750 mg, and 900 mg BID, respectively) of the original G1 formulation in the Phase 1 a/b trial in patients with B-cell leukemias and lymphomas. Among enrolled patients at that time with an array of B-cell malignancies, we had observed inhibition of phospho-BTK and “on-target” lymphocytosis in patients with classic CLL and modest tumor reductions in patients with different tumor types, indicating target engagement and pharmacologic activity of luxeptinib. During the ASH Annual Meeting in December 2022, we announced that a CR was achieved with a diffuse large B-cell lymphoma patient at the 900 mg dose level of the original G1 formulation, demonstrating luxeptinib is active in certain B-cell malignancies.

We also are advancing luxeptinib into myeloid malignancies, with an initial focus on AML and MDS, in a separate Phase 1a/b trial. Our strategy was to identify a starting dose of luxeptinib that we believe could be therapeutically active in critically ill patients with R/R AML. In our Phase 1a/b study in patients with CLL and other B-cell malignancies, 450 mg BID luxeptinib (original G1 formulations) delivered plasma levels that potently inhibited phospho-FLT3 in a plasma inhibitory activity reporter cell assay, suggesting that the 450 mg BID dose may be active in patients with AML. On June 29, 2020, we announced that we had received allowance from the FDA to proceed with a study in R/R AML with a starting dose of 450 mg BID, and subsequently on October 19, 2020, we announced

that we had initiated dosing of the first patient with AML. As of the date of this report we have initiated multiple clinical sites for the Phase 1a/b trial, and we have completed all planned dose levels of the G1 formulation (450 mg, 600 mg, 750 mg and 900 mg BID. To date, we have reported blast reductions in patients carrying the FLT3-ITD mutation, and a durable MRD-negative CR in a patient carrying the FLT3-ITD mutation, demonstrating luxeptinib is active in certain AML patients.

As part of the ongoing dose escalation of the current formulation of luxeptinib in patients with B-cell malignancies and AML, Aptose has made significant progress in the development of a G3 formulation that could reduce total API administered, reduce pill burden, improve absorption, and increase exposure. Aptose began testing this new G3 formulation of luxeptinib as a single dose with 72-hour pharmacokinetics ("PK") analysis in the ongoing studies in patients with hematologic malignancies in the first half of fiscal 2022. On March 22, 2022, we announced that the preliminary PK findings with the G3 formulation were encouraging, and the exploration of the G3 formulation was ongoing.

Exploration of the PK properties of single dose administration of 10mg, 20mg, 50mg, 100mg, and 200mg dose levels with the G3 formulation have been completed. On September 12, 2022 we announced that initial PK modeling studies predict up to an 18-fold improvement in plasma steady-state exposure by the G3 formulation relative to the original formulation, and that Aptose plans to move forward with the development of the G3 formulation in AML patients under continuous dosing conditions to determine if G3 can deliver desired exposures and clinical responses while continuing to demonstrate a favorable safety profile.

On March 23, 2023, Aptose announced that during the fourth quarter of 2022, continuous dosing had been initiated with the new G3 formulation of luxeptinib in the ongoing Phase 1 a/b clinical trial in patients with R/R AML. Initial PK data from continuous dosing of the 50 mg G3 formulation show plasma exposure levels roughly equivalent to the 900mg dose (18-fold greater dose) of the original G1 formulation. Aptose will be reviewing all data with the data monitoring committee and will make the determination to escalate and at what dose.

Concurrent with the EHA Annual Congress held June 8-11, 2023, Aptose held an interim clinical update webcast on June 10, 2023. During the update, Aptose reviewed clinical findings with the new G3 formulation of luxeptinib. Aptose confirmed that continuous dosing with 50mg of the G3 formulation in multiple patients achieves roughly an equivalent pharmacokinetic profile as 900mg original G1 formulation, and that dose escalation with the G3 formulation was anticipated.

Research on luxeptinib continues, and a non-clinical article was published during the first quarter of 2023 in PLoS One, a highly respected online scientific publication. Titled, “Luxeptinib interferes with LYN-mediated activation of SYK and modulates BCR signaling in lymphoma,” the article helps elucidate the mechanism by which luxeptinib suppresses the B-cell receptor pathway in a manner distinct from the BTK inhibitor ibrutinib. Luxeptinib was more effective than ibrutinib at reducing both steady state and anti-IgM-induced phosphorylation of the LYN and SYK kinases upstream of BTK where ibrutinib has little or no effect, suggesting luxeptinib can play a role in B-cell malignancies and inflammatory diseases distinct from ibrutinib and other BTK inhibitors.

In a separate line of non-clinical research with luxeptinib, a group from the University of Texas MD Anderson Cancer Center led by Dr. Michael Andreeff published an article in June 2023 in the journal Haematologica. The article was entitled “Concomitant targeting of FLT3 and BTK overcomes FLT3 inhibitor resistance in acute myeloid leukemia through the inhibition of autophagy,” and the findings highlight the potential for co-targeting of FLT3/BTK/aurora kinases by luxeptinib to overcome resistance to certain FLT3 targeted therapies in AML, which is urgently needed.

Other corporate matters

On May 23, 2023, our shareholders voted to approve special resolutions providing for an amendment to our articles of incorporation to effect the Reverse Stock Split 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 CBCA 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 Common Shares commenced trading on a post-Reverse Stock Split basis at market open on Tuesday, June 6, 2023. The Reverse Share Split was primarily intended to bring us into compliance with the minimum bid price requirement for maintaining the listing of the Common Shares on Nasdaq and to make the bid price more attractive to investors. On June 21, 2023, Nasdaq confirmed that we had regained compliance with the minimum bid price requirement. 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.

LIQUIDITY AND CAPITAL RESOURCES

Aptose is an early-stage development company, and we currently do not generate any revenues from our drug candidates. The continuation of our research and development activities and the commercialization of the targeted therapeutic products are dependent upon our ability to successfully finance and complete our research and development programs through a combination of equity financing and payments from strategic partners.

Sources of liquidity:

The following table presents our cash and cash equivalents, investments and working capital as of September 30, 2023 and December 31, 2022.


(in thousands)	Balances at September 30, 2023		Balances at December 31, 2022
Cash and cash equivalents	$	15,720	$	36,970
Investments		1,997		9,989
Total	$	17,717	$	46,959

Working capital	$	7,291	$	37,235

Working capital is a non-GAAP measure and represents primarily cash, cash equivalents, investments, prepaid expenses and other current assets less current liabilities. This financial measure provides a fuller understanding of the Company’s capital available to fund future operations.

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 in order to fund our business operations. We will seek access to financing 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. The Company's current cash, cash equivalents and investments will enable the support of operations through March 2024. 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.

All our cash is maintained at high-credit quality institutions. We minimize the cash levels above the insurance levels required by the Federal Deposit Insurance Corporation and the Canada Deposit Insurance Corporation, with excess cash invested in short-term investments with leading financial institutions.

Hanmi Equity Investment

On August 10, 2023, the Company entered into a binding term sheet with Hanmi whereby Hanmi agreed at their sole discretion to invest up to a maximum of $7 million in Aptose up to a total ownership of 19.99 percent of Aptose by Hanmi. On September 6, 2023, the Company entered into a subscription agreement with Hanmi, pursuant to which the Corporation agreed to sell 668,449 Common Shares to Hanmi for proceeds of $3 million. The second investment of up to $4 million or a maximum of 19.99 percent ownership interest in the Company by Hanmi is contingent on Aptose meeting certain manufacturing and data milestones related to tuspetinib by June 30, 2024, which milestones are anticipated to be achieved by year-end. Hanmi held 884,152 Common Shares of Aptose as of November 9, 2023.

2023 Committed Equity Facility

On May 25, 2023, we entered into the 2023 Committed Equity Facility Agreement, which provides that subject to the terms and conditions set forth therein, the Company has the right, but not the obligation, to sell to Keystone, and Keystone is obligated to purchase, up to the Total Commitment during the 24-month term of the 2023 Committed Equity Facility.

Under the 2023 Committed Equity Facility, and subject to its terms and conditions set forth, we may sell to Keystone up to the lesser of (i) $25.0 million of the Common Shares and (ii) a number of Common Shares equal to 19.99% of the Common Shares outstanding immediately prior to the execution of the 2023 Committed Equity Facility (subject to certain exceptions) (the “Total Commitment”), from time to time during the 24-month term of the 2023 Committed Equity Facility. Additionally, on May 25, 2023, we entered into a Registration Rights Agreement with Keystone, pursuant to which the Company agreed to file a registration statement with the SEC covering the resale of Common Shares that are issued to Keystone under the 2023 Committed Equity Facility. This registration statement became effective on June 30, 2023 and the 2023 Committed Equity Facility commencement date was July 12, 2023 (the “Commencement Date”).

Upon entering into the 2023 Committed Equity Facility, the Company agreed to issue to Keystone an aggregate of 25,156 Commitment Shares as consideration for Keystone’s commitment to purchase Common Shares upon the Company’s direction under the 2023 Committed Equity Facility. The Company issued 7,547 Common Shares, or 30% of the Commitment Shares, on the date of the 2023 Committed Equity Facility and an additional 7,547 First Back-End Commitment Shares, or 30% of the Commitment Shares, were issued to Keystone 90 days following the Commencement date for nil cash proceeds. The remaining 10,062 Second Back-End Commitment Shares, or 40% of the Commitment Shares, shall be issued to Keystone 180 days following the Commencement Date.

In the nine months ended September 30, 2023, the Company's issuance of Common Shares to Keystone comprised 328,438 Common Shares sold to Keystone for cash proceeds and the 7,547 Common Shares issued for nil cash proceeds as the Initial Commitment Shares on the Commencement Date. The Company raised a total of $1,150,000 in cash proceeds from issuing Common Shares to Keystone as of September 30, 2023. In addition, the Company received $50,000 in September for 17,857 Common Shares that were issued subsequent to September 30, 2023.

At-The-Market Facilities

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.

On December 9, 2022, the Company entered into an equity distribution agreement with respect to the 2022 ATM Facility pursuant to which the Company may, from time to time, sell Common Shares having an aggregate offering value of up to $50 million through Jones Trading on Nasdaq. During the year ended December 31, 2022, the Company issued 4,836 Common Shares under the 2022 ATM Facility at an average price of $10.81 per Common Share for gross proceeds of $52 thousand ($51 thousand net of share issuance costs).

During the nine months ended September 30, 2023, the Company issued 336,690 Common Shares under the 2022 ATM Facility at an average price of $5.62 per Common Share for gross proceeds of $1.9 million ($1.8 million net of share issuance costs). On a cumulative basis to September 30, 2023, the Company has raised a total of $1.9 million gross proceeds ($1.9 million, net of share issue costs) under the 2022 ATM Facility. Costs associated with the proceeds consisted of 3% cash commission.

On May 5, 2020, the Company entered an “at-the-market” equity distribution agreement with Piper Sandler & Co. and Canaccord Genuity acting as co-agents with respect to the 2020 ATM Facility. Under the terms of the 2020 ATM Facility, the Company could, from time to time, sell Common Shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on Nasdaq. During the nine months ended September 30, 2022, the Company issued 3,646 Common Shares under the 2020 ATM Facility at an average price of $14.25 for gross proceeds of $52 thousand ($50 thousand net of share issue costs). As of October 31, 2022, the date the Agreement was terminated, the Company had raised a total of $89 thousand gross proceeds ($86 thousand net of share issuance costs) under the 2020 ATM Facility. Costs associated with the proceeds consisted of a 3% cash commission.

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 clinical trials, and various other factors and we may be unable to raise capital when needed, or on terms favorable to us. If the necessary funds are not available, we may need 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.

Cash flows:

The following table presents a summary of our cash flows for the three-month and nine-month periods ended September 30, 2023 and 2022:


(in thousands)	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Net cash provided by (used in):
Operating activities	$	(10,536	)	$	(6,979	)	$	(35,331	)	$	(23,671	)
Investing activities		12,953			(5,078	)	$	8,022			12,493
Financing activities		4,902			21			6,056			65
Effect of exchange rates changes on cash and cash equivalents		1			(7	)	$	3			(10	)
Net increase/(decrease) in cash and cash equivalents	$	7,320		$	(12,043	)	$	(21,250	)	$	(11,123	)

Cash used in operating activities:

Our cash used in operating activities for the three-month periods ended September 30, 2023 and 2022 was approximately $10.5 million and $7.0 million, respectively. Our cash used in operating activities for the nine-month periods ended September 30, 2023 and 2022 was approximately $35.3 million and $23.7 million, respectively.

Net cash used in operating activities was higher in the three-month and nine-month periods ended September 30, 2023, as compared to the three-month and nine-month periods ended September 30, 2022, due primarily to higher operating expenses, as discussed further below (see “Results of Operations”). Our uses of cash for operating activities for both periods consisted primarily of salaries and wages for our employees, facility and facility-related costs for our offices and laboratories, fees and pass-through expenses paid in connection with preclinical and clinical studies, drug manufacturing costs, laboratory supplies and materials, and professional fees.

We do not expect to generate positive cash flow from operations for the foreseeable future as we incur additional research and development costs, including costs related to drug discovery, preclinical testing, clinical trials and manufacturing, as well as operating expenses associated with supporting these activities, and potential milestone payments to our collaborators. It is expected that negative cash flows 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.

Cash flow from (used in) investing activities:

Our cash provided by investing activities for the three-month period ended September 30, 2023 was $13.0 million, and consisted of net maturities of investments. Our cash used in investing activities for the three-month period ended September 30, 2022 was $5.1 million, and consisted of net acquisitions of investments. Our cash provided by investing activities for the nine-month period ended September 30, 2023, was $8.0 million, and consisted of net maturities of investments, with purchase of equipment of $29 thousand. Our cash provided by investing activities for the nine-month period ended September 30, 2022 was $12.5 million, with purchases of equipment of $24 thousand.

The composition and mix of cash, cash equivalents and investments is based on our evaluation of conditions in financial markets and our near-term liquidity needs. We have exposure to credit risk, liquidity risk and market risk related to our investments. The Company manages credit risk associated with its cash and cash equivalents and investments by maintaining minimum standards of R1‑low or A‑low investments. The Company invests only in highly rated financial instruments which are capable of prompt liquidation. The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows. The Company is subject to interest rate risk on its cash and cash equivalents and investments. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to interest rates on the investments, owing to the relative short‑term nature of the investments.

Cash flow from financing activities:

Our cash flow from financing activities for the three months ended September 30, 2023, was $4.9 million, consisting of $3 million, $1.2 million and $694 thousand resulting from Common Shares issued from the Hanmi subscription agreement, the 2023 Committed Equity Facility, and the 2022 ATM Facility, respectively, $50 thousand from a stock subscription advance under the 2023 Committed Equity Facility and $13 thousand in cash proceeds from issuance of shares under the Employee Stock Purchase Plan ("ESPP"). Our

cash flow from financing activities for the three months ended September 30, 2022, was $21 thousand from Common Shares issued from the 2020 ATM Facility. Our cash flow from financing activities for the nine months ended September 30, 2023 was $6 million, consisting of $3 million, $1.8 million and $1.2 million resulting from Common Shares issued from the Hanmi subscription agreement, the 2022 ATM Facility and the 2023 Committed Equity Facility, respectively, $50 thousand from a stock subscription advance under the 2023 Committed Equity Facility and $29 thousand in cash proceeds from issuance of shares under the Employee Stock Purchase Plan. Our cash flow from financing activities for the nine months ended September 30, 2022 was $65 thousand, consisting of $50 thousand from Common Shares issued from the 2020 ATM Facility and $15 thousand from the exercise of stock options.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS DESCRIBED UNDER ITEM 7

There were no material changes to our contractual obligations and commitments described under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which can be found on EDGAR at www.sec.gov/edgar.shtml and on SEDAR+ at www.sedarplus.ca.

RESULTS OF OPERATIONS

A summary of the results of operations for the three-month and nine-month periods ended September 30, 2023 and 2022 is presented below:


	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2023			2022			2023			2022
Revenues	$	-		$	-		$	-		$	-
Research and development expenses		8,256			6,578			27,649			21,312
General and administrative expenses		3,425			3,448			12,580			10,887
Other income, net		234			249			977			376
Net loss	$	(11,447	)	$	(9,777	)	$	(39,252	)	$	(31,823	)
Other comprehensive income/(loss)		-			20			3			(17	)
Comprehensive loss	$	(11,447	)	$	(9,757	)	$	(39,249	)	$	(31,840	)
Basic and diluted loss per common share	$	(1.76	)	$	(1.59	)	$	(6.14	)	$	(5.17	)

Net loss for the three-month period ended September 30, 2023 increased by $1.7 million to $11.4 million, as compared to $9.8 million for the comparable period in 2022. Net loss for the nine-month period ended September 30, 2023 increased by $7.4 million to $39.3 million, as compared to $31.8 million for the comparable period in 2022. Components of net loss are presented below:

Research and Development

Research and development expenses consist primarily of costs incurred related to the research and development of our product candidates and include:

•

External research and development expenses incurred under agreements with third parties, such as contract research organizations, consultants, members of our scientific advisory boards, external labs and contract manufacturing organizations; and

•

Employee-related expenses, including salaries, benefits, travel, and stock-based compensation for personnel directly supporting our clinical trials, manufacturing and development activities.

We have ongoing clinical trials for our product candidates tuspetinib and luxeptinib. Tuspetinib was licensed to Aptose in the fourth quarter of 2021, and we assumed sponsorship, and the related costs, of the tuspetinib study effective January 1, 2022. In the fourth quarter of 2021, we discontinued the APTO-253 program.

We expect our research and development expenses to be higher than current period expenses for the foreseeable future as we advance tuspetinib into larger clinical trials.

The research and development expenses for the three-month and nine-month periods ended September 30, 2023, and 2022 were as follows:


	Three months ended September 30,				Nine months ended September 30,

(in thousands)	2023		2022		2023		2022
Program costs – Tuspetinib	$	5,814	$	3,049	$	18,659	$	6,570
Program costs – Luxeptinib		648		1,390		2,643		6,624
Program costs – APTO-253		2		66		28		345
Personnel-related expenses		1,523		1,627		5,107		5,821
Stock-based compensation		259		440		1,183		1,923
Depreciation of equipment		10		6		29		29
Total	$	8,256	$	6,578	$	27,649	$	21,312

Research and development expenses increased by $1.7 million to $8.3 million for the three-month period ended September 30, 2023, as compared to $6.6 million for the comparative period in 2022. Changes to the components of our research and development expenses presented in the table above are primarily as a result of the following events:

•

Program costs for tuspetinib were $5.8 million for the three-month period ended September 30, 2023. The higher program costs for tuspetinib in the current period represent the enrollment of patients in our APTIVATE clinical trial, our healthy volunteer trial, manufacturing activities to support clinical development, and related expenses.

•

Program costs for luxeptinib decreased by approximately $742 thousand, primarily due to lower clinical trial costs and lower manufacturing costs as a result of the current formulation requiring less API than the prior formulation.

•

Program costs for APTO-253 decreased by approximately $64 thousand, due to the Company’s decision on December 20, 2021 to discontinue further clinical development of APTO-253.

•

Personnel-related expenses decreased by $104 thousand, related to fewer employees in the current three-month period, partially offset by salary increases.

•

Stock-based compensation decreased by approximately $181 thousand in the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to stock options granted with lower grant date fair values, in the current period.

Research and development expenses increased by $6.3 million to $27.6 million for the nine-month period ended September 30, 2023, as compared to $21.3 million for the comparative period in 2022. Changes to the components of our research and development expenses presented in the table above are primarily as a result of the following events:

•

Program costs for tuspetinib were $18.7 million for the nine-month period ended September 30, 2023, an increase of $12.1 million compared with $6.6 million in the corresponding period in 2022. The higher program costs for tuspetinib in the current period represent the enrollment of patients in our APTIVATE clinical trial, our healthy volunteer trial, manufacturing activities to support clinical development, and related expenses.

•

Program costs for luxeptinib decreased by approximately $4.0 million from $6.6 million in the nine months ended September 30, 2022 to $2.6 million in the current period, primarily due to lower clinical trial costs and lower manufacturing costs as a result of the current formulation requiring less API than the prior formulation.

•

Program costs for APTO-253 decreased by approximately $317 thousand, due to the Company’s decision on December 20, 2021 to discontinue further clinical development of APTO-253.

•

Personnel-related expenses decreased by $714 thousand, related to fewer employees in the current nine-month period and partially offset by salary increases.

•

Stock-based compensation decreased by approximately $740 thousand in the nine months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to stock options granted with lower grant date fair values, in the current period.

General and Administrative

General and administrative expenses consist primarily of salaries, benefits and travel, including stock-based compensation for our executive, finance, business development, human resources, and support functions. Other general and administrative expenses are professional fees for auditing and legal services, investor relations and other consultants, insurance and facility-related expenses.

We expect that our general and administrative expenses will increase for the foreseeable future as we incur additional costs to support the expansion of our pipeline of activities. We also expect our intellectual property related legal expenses to increase as our intellectual property portfolio expands.

The general and administrative expenses for the three-month and nine-month periods ended September 30, 2023, and 2022 were as follows:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)
General and administrative, excluding items below	$	3,075	$	2,811	$	10,479	$	8,401
Stock-based compensation		340		613		2,060		2,423
Depreciation of equipment		10		24		41		63
	$	3,425	$	3,448	$	12,580	$	10,887

General and administrative expenses for the three-month period ended September 30, 2023 were $3.4 million, as compared to $3.4 million for the comparative period in 2022, a decrease of approximately $23 thousand. The decrease was primarily due to the following:

•

General and administrative expenses, other than stock-based compensation and depreciation of equipment, increased by approximately $264 thousand in the three months ended September 30, 2023, primarily as a result of higher salaries expenses and higher professional fees.

•

Stock-based compensation decreased by approximately $273 thousand in the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, due to stock options granted with lower grant date fair values in the current period.

General and administrative expenses for the nine-month period ended September 30, 2023 were $12.6 million, as compared to $10.9 million for the comparative period in 2022, an increase of approximately $1.7 million. The increase was primarily due to the following:

•

General and administrative expenses, other than stock-based compensation and depreciation of equipment, increased by approximately $2.1 million in the nine months ended September 30, 2023, primarily as a result of higher salaries expenses and higher professional fees.

•

Stock-based compensation decreased by approximately $363 thousand in the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, mostly as a result of lower grant date fair values in the current period, partially offset by the 2023 RSU Grant.

CRITICAL ACCOUNTING POLICIES

Critical Accounting Policies and Estimates

We periodically review our financial reporting and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business environment. As part of this process, we have reviewed our selection, application and communication of critical accounting policies and financial disclosures. Management has discussed the development and selection of the critical accounting policies with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure relating to critical accounting policies in this Management’s Discussion and Analysis.

Significant Accounting Judgments and Estimates

A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For additional information, please see the discussion of our significant accounting policies in Note 2 to the

Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 24, 2023. There were no material changes to our critical accounting policies and estimates during the three months ended September 30, 2023.

The Company records expenses for research and development activities based on management’s estimates of services received and efforts expended pursuant to contracts with vendors that conduct research and development on the Company’s behalf. The financial terms vary from contract to contract and may result in uneven payment flows as compared to services performed or products delivered. As a result, the Company is required to estimate research and development expenses incurred during the period, which impacts the amount of accrued expenses and prepaid balances related to such costs as of each balance sheet date. Management estimates the amount of work completed through discussions with internal personnel and the contract research and contract manufacturing organizations as to the progress or stage of completion of the services. The Company’s estimates are based on a number of factors, including the Company’s knowledge of the status of each of the research and development project milestones, and contract terms together with related executed change orders. Management makes significant judgments and estimates in determining the accrued balance at the end of each reporting period.

Although management does not expect our estimates to be materially different from amounts actually incurred, if the estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in the Company reporting amounts that are too high or too low in any particular period. As of September 30, 2023, the Company has recorded $1.1 million in prepaid expenses and approximately $6.8 million in accrued liabilities related to its research and development activities. If the estimates are too high or too low by a factor of 10% this would mean that prepaid expenses would be over or understated by approximately $110 thousand, and accrued liabilities would be over or understated by approximately $680 thousand. On a combined basis, this could mean an increase or decrease in research and development expenses by approximately $790 thousand. To date, there have been no material differences between the estimates of such expenses and the amounts actually incurred.

Other important accounting policies and estimates made by management are the valuation of contingent liabilities, the valuation of tax accounts, and the assumptions used in determining the valuation of share-based compensation, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Management’s assessment of our ability to continue as a going concern involves making a judgment, at a particular point in time, about inherently uncertain future outcomes and events or conditions. Please see the “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q for a discussion of the factors considered by management in arriving at its assessment.

Updated share information

As of November 9, 2023, we had 7,816,923 Common Shares issued and outstanding. In addition, there were 1,188,289 Common Shares issuable upon the exercise of outstanding stock options.

ITEM 3 – QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Under SEC rules and regulations, as a smaller reporting company, we are not required to provide this information.

ITEM 4 – CONTROLS AND PROCEDURES

As of the end of our fiscal quarter ended September 30, 2023, evaluation of the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the United States Exchange Act of 1934, as amended (the “Exchange Act”)), was carried out by our management, with the participation of our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that as of the end of our fiscal quarter ended September 30, 2023, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

It should be noted that while our principal executive officer and principal financial officer believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

We are not involved in any material active legal actions. However, from time to time, we may be subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of our business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time.

ITEM 1A – RISK FACTORS

FOR INFORMATION REGARDING FACTORS THAT COULD AFFECT APTOSE’S RESULTS OF OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY, SEE THE RISK FACTORS DISCUSSED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2022, UNDER ITEM 1A – RISK FACTORS. THERE HAVE BEEN NO MATERIAL CHANGES TO THE RISK FACTORS DISCLOSED UNDER ITEM 1A – RISK FACTORS OF THE ANNUAL REPORT.

ITEM 6 – EXHIBITS


Exhibit Number	Description of Document

10.1	Subscription Agreement, dated September 6, 2023, by and between the Company and Hanmi Pharmaceutical Co., Ltd. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 12, 2023)
10.2	Investor Rights Agreement, dated September 6, 2023, by and between the Company and Hanmi Pharmaceutical Co., Ltd. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 12, 2023)
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**	The following consolidated financial statements from the Aptose Biosciences Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) statements of operations and comprehensive loss, (ii) balance sheets, (iii) statements of changes of shareholders’ equity, (iv) statements of cash flows, and (v) the notes to the financial statements.
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*	Filed herewith.
**	In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of November, 2023.


	APTOSE BIOSCIENCES INC.

	By:	/s/ William G. Rice, Ph.D.
		William G. Rice, Ph.D. President and Chief Executive Officer