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on

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

OR

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

 

 

 

1

 

 


 

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;

 

2

 

 


 

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.

 

 

3

 

 


 

PART I—FINANCIAL INFORMATION

 

ITEM 1FINANCIAL STATEMENTS

 

img238807848_0.jpg 

 

 

Condensed Consolidated Interim Financial Statements

 

(Unaudited)

 

APTOSE BIOSCIENCES INC.

 

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

 

4

 

 


 

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.

 

 

5

 

 


 

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).

 

6

 

 


 

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).

 

7

 

 


 

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).

 

8

 

 


 

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)

1.
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.

 

9

 

 


 

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.

2.
Significant accounting policies:
a.
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.

b.
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.

c.
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.

d.
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.

 

10

 

 


 

e.
Foreign currency:

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

f.
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.

3.
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).

4.
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

 

 

5.
Right-of-use assets:

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Right-of-use assets, beginning of period

 

$