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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 June 30, 2024

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.)

66 Wellington Street West
Suite 5300
, TD Bank Tower Box 48

Toronto, Ontario, Canada

M5K 1E6

(Address of principal executive offices)

(Zip Code)

 

(310) 849-8060

(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 August 8, 2024, the registrant had 18,109,393 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

20

Item 3 – Qualitative and Quantitative Disclosures about Market Risk

36

Item 4 – Controls and Procedures

36

 

PART II—OTHER INFORMATION

37

Item 1 – Legal Proceedings

37

Item 1A – Risk Factors

37

Item 6 – Exhibits

38

Signatures

39

 

 

 

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 risk of imminent bankruptcy;
we need to obtain substantial funding immediately in order to continue operations and our exploration of strategic alternatives;
if a financing is completed, it may not be a large enough financing to fully fund the company operations, as such the use of proceeds used during a subsequent bankruptcy proceeding to settle existing liabilities;
our suppliers or clinical sites may choose to implement work stoppage on key programs, change the terms of contracts or terminate contracts for key programs;  
our conversations with partners to renegotiate existing product license agreements may not be successful;
our lack of product revenues and net losses and a history of operating losses;
our compliance plans to address various notifications from Nasdaq and whether such compliance plans will be accepted by Nasdaq;
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 near 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 U.S. Food and Drug Administration ("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;
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;

 

2

 

 


 

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 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 is included in our Annual Report on Form 10-K for the year ended December 31, 2023, 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

 

img239728486_0.jpg 

 

 

Condensed Consolidated Interim Financial Statements

 

(Unaudited)

 

APTOSE BIOSCIENCES INC.

 

For the three months and six months ended June 30, 2024 and 2023

 

4

 

 


 

APTOSE BIOSCIENCES INC.

Condensed Consolidated Interim Statements of Financial Position

(Expressed in thousands of US dollars)

(unaudited)

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,330

 

 

$

9,252

 

Prepaid expenses

 

 

1,236

 

 

 

2,042

 

Other current assets

 

 

593

 

 

 

600

 

Total current assets

 

 

10,159

 

 

 

11,894

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

Property and equipment

 

 

34

 

 

 

152

 

Right-of-use assets, operating leases

 

 

756

 

 

 

943

 

Total non-current assets

 

 

790

 

 

 

1,095

 

Total assets

 

$

10,949

 

 

$

12,989

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable to related parties

 

 

 

 

$

2,554

 

Accounts payable

 

 

7,111

 

 

 

3,492

 

Accrued liabilities

 

 

5,196

 

 

 

8,829

 

Current portion of lease liability, operating leases

 

 

404

 

 

 

394

 

Total current liabilities

 

 

12,711

 

 

 

15,269

 

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

Lease liability, operating leases

 

 

414

 

 

 

621

 

Total liabilities

 

 

13,125

 

 

 

15,890

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Share capital:

 

 

 

 

 

 

Common shares, no par value, unlimited authorized shares, 18,109,393  and 7,942,363 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

 

452,294

 

 

 

444,806

 

Additional paid-in capital

 

 

82,275

 

 

 

72,146

 

Accumulated other comprehensive loss

 

 

(4,316

)

 

 

(4,316

)

Deficit

 

 

(532,429

)

 

 

(515,537

)

Total shareholders’ equity

 

 

(2,176

)

 

 

(2,901

)

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

10,949

 

 

$

12,989

 

 

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

Going concern, see Note 2.

Commitments, see Note 8.

Related party transactions, see Note 9.

Subsequent events, see Note 12.

 

 

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
June 30,

 

 

Six moths ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue

 

$

 

 

$

 

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,413

 

 

 

10,582

 

 

 

10,858

 

 

 

19,393

 

General and administrative

 

 

2,932

 

 

 

3,870

 

 

 

6,247

 

 

 

9,155

 

Operating expenses

 

 

7,345

 

 

 

14,452

 

 

 

17,105

 

 

 

28,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income/(expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

93

 

 

 

326

 

 

 

214

 

 

 

748

 

Foreign exchange loss

 

 

 

 

 

(3

)

 

 

(1

)

 

 

(5

)

Total other income

 

 

93

 

 

 

323

 

 

 

213

 

 

 

743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(7,252

)

 

$

(14,129

)

 

$

(16,892

)

 

$

(27,805

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

 

1

 

 

 

(1

)

 

 

 

 

 

3

 

Total comprehensive loss

 

$

(7,251

)

 

$

(14,130

)

 

$

(16,892

)

 

$

(27,802

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per common share

 

$

(0.43

)

 

$

(2.27

)

 

$

(1.13

)

 

$

(4.47

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding used in the calculation of
 (in thousands)
     Basic and diluted loss per common share

 

 

16,755

 

 

 

6,234

 

 

 

14,944

 

 

 

6,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023

 

 

7,942

 

 

$

444,806

 

 

$

72,146

 

 

$

(4,316

)

 

$

(515,537

)

 

$

(2,901

)

Shares and warrants issued under the Registered Direct Offering

 

 

1,800

 

 

 

1,018

 

 

$

3,122

 

 

 

 

 

 

 

 

 

4,140

 

Common shares and warrants issued under the Hanmi Subscription Agreement

 

 

2,105

 

 

 

2,043

 

 

 

1,659

 

 

 

 

 

 

 

 

 

3,702

 

Common shares and warrants issued in S-1 financing

 

 

5,649

 

 

 

3,595

 

 

 

4,532

 

 

 

 

 

 

 

 

 

8,127

 

Common shares issued under the 2023 Committed Equity Facility

 

 

520

 

 

 

717

 

 

 

(82

)

 

 

 

 

 

 

 

 

635

 

Common shares issued under the 2022 ATM

 

 

82

 

 

 

97

 

 

 

(118

)

 

 

 

 

 

 

 

 

(21

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,016

 

 

 

 

 

 

 

 

 

1,016

 

Common shares issued under the ESPP plan

 

 

11

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

18

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,892

)

 

 

(16,892

)

Balance, June 30, 2024

 

 

18,109

 

 

$

452,294

 

 

$

82,275

 

 

$

(4,316

)

 

$

(532,429

)

 

$

(2,176

)

Balance, December 31, 2022

 

 

6,158

 

 

$

437,520

 

 

$

68,869

 

 

$

(4,318

)

 

$

(464,330

)

 

$

37,741

 

Common shares issued in exchange for RSUs

 

 

38

 

 

 

376

 

 

 

(376

)

 

 

 

 

 

 

 

 

 

Common shares issued under the 2022 ATM Facility

 

 

171

 

 

 

1,138

 

 

 

 

 

 

 

 

 

 

 

 

1,138

 

Common shares issued under the 2023 Committed Equity Facility

 

 

8

 

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

50

 

Common shares issued under the ESPP plan

 

 

1

 

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

16

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,643

 

 

 

 

 

 

 

 

 

2,643

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,805

)

 

 

(27,805

)

Balance, June 30, 2023

 

 

6,376

 

 

$

439,100

 

 

$

71,136

 

 

$

(4,315

)

 

$

(492,135

)

 

$

13,786

 

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
June 30,

 

 

Six moths ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

$

(7,252

)

 

$

(14,129

)

 

$

(16,892

)

 

$

(27,805

)

Items not involving cash:

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

207

 

 

 

769

 

 

 

1,016

 

 

 

2,643

 

Depreciation and amortization

 

 

8

 

 

 

22

 

 

 

24

 

 

 

50

 

Loss on disposal of property and equipment

 

 

66

 

 

 

 

 

 

76

 

 

 

-

 

Amortization of right-of-use assets

 

 

94

 

 

 

92

 

 

 

187

 

 

 

195

 

Interest on lease liabilities

 

 

18

 

 

 

25

 

 

 

37

 

 

 

50

 

Unrealized (gain)/loss on short-term investment

 

 

1

 

 

 

2

 

 

 

 

 

 

(2

)

Accrued interest on investments

 

 

(9

)

 

 

(17

)

 

 

 

 

 

(12

)

Deferred financing expenses

 

 

 

 

 

50

 

 

 

 

 

 

50

 

Changes in non-cash operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

560

 

 

 

311

 

 

 

806

 

 

 

567

 

Other current assets

 

 

81

 

 

 

(55

)

 

 

7

 

 

 

40

 

Operating lease liabilities

 

 

(119

)

 

 

(45

)

 

 

(234

)

 

 

(173

)

Accounts payable to related parties

 

 

 

 

 

(1,389

)

 

 

(2,554

)

 

 

(93

)

Accounts payable

 

 

4,690

 

 

 

(629

)

 

 

3,619

 

 

 

(2,732

)

Accrued liabilities

 

 

(4,123

)

 

 

1,490

 

 

 

(3,633

)

 

 

2,427

 

Cash used in operating activities

 

 

(5,778

)

 

 

(13,503

)

 

 

(17,541

)

 

 

(24,795

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Issuances of common shares and warrants under the Registered Direct Offering

 

 

4,140

 

 

 

 

 

 

4,140

 

 

 

 

Issuance of common shares and warrants under the S-1 Filing

 

 

 

 

 

 

 

 

8,127

 

 

 

 

Shares issuances to Hanmi under subscription agreement

 

 

 

 

 

 

 

 

3,702

 

 

 

 

Issuance of common shares under 2023 CMPO

 

 

694

 

 

 

 

 

 

694

 

 

 

 

Issuance of common shares under 2022 ATM Facility

 

 

97

 

 

 

1,109

 

 

 

97

 

 

 

1,143

 

Cost of offering

 

 

(177

)

 

 

(5

)

 

 

(177

)

 

 

(5

)

Issuance of common shares under the ESPP plan

 

 

-

 

 

 

 

 

 

18

 

 

 

16

 

Cash from financing activities

 

 

4,754

 

 

 

1,104

 

 

 

16,601

 

 

 

1,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from/(used in) investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Disposal/(purchase) of property and equipment, net

 

17

 

 

 

(29

)

 

 

18

 

 

 

(29

)

Maturity /(acquisition) of investments, net

 

 

1,992

 

 

 

(1,931

)

 

 

 

 

 

(4,902

)

Cash from/(used in) investing activities

 

 

2,009

 

 

 

(1,960

)

 

 

18

 

 

 

(4,931

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents

 

 

(1

)

 

 

(3

)

 

 

 

 

 

2

 

Increase/(decrease) in cash and cash equivalents

 

$

984

 

 

$

(14,362

)

 

$

(922

)

 

$

(28,570

)

Cash and cash equivalents, beginning of period

 

$

7,346

 

 

$

22,762

 

 

$

9,252

 

 

$

36,970

 

Cash and cash equivalents, end of period

 

$

8,330

 

 

$

8,400

 

 

$

8,330

 

 

$

8,400

 

 

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 six months ended June 30, 2024 and 2023

(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 address has been changed to 66 Wellington Street West, Suite 5300, TD Bank Tower Box 48, Toronto, Ontario, 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 and cash equivalents are estimated to support operations through August 2024. 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).

Our ability to raise additional funds has been 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. The raising of additional capital, and/or the trade sale of some of the Company’s operations to make bulk payments to repay accounts payable, if successful, would potentially alleviate any significant doubt on the Company’s ability to continue as a going concern. In the event that debt and/or capital financing is unable to be secured or contemplated trade sale fail to materialize, the Company may need to resolve to other means of protecting its assets in the best interests of its shareholders, including foreclosure or forced liquidation and/or seeking creditors’ protection.

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.

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. However, the use of the going concern assumption on which these unaudited condensed interim consolidated financial statements are prepared may not be appropriate based on the factors described in Note 2(a). 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 other financing activities, as further described in Note 10 and Note 12. Management continues considering other options for raising capital including debt, equity, collaborations, and reorganization to reduce operational expenses. However, given the decrease in the share price, difficulty for micro-cap market capitalization companies to raise significant capital and the matter in Note 10, Share capital and Note 12, Subsequent events, that may impact the Company's ability to raise significant financing in the capital 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, see Note 2(a). 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 condensed consolidated interim 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 discharge of liabilities in the normal course of operations as they come due. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting year. The Company is in substantial doubt to continue as a going concern; As of June 30, 2024, the Company had negative shareholder's equity of $2.2 million (December 31, 2023 negative shareholder's equity of $2.9 million); an accumulated deficit of approximately $532.4 million (December 31, 2023, $515.5 million); during the six months period ended June 30, 2024, the Company incurred a net loss of $16.9 million (2023 - $27.8 million) and as of June 30, 2024 we had a negative working capital of approximately $2.6 million (December 31, 2023, negative working capital of $3.4 million), including approximately $8.3 million (December 31, 2023, $9.3 million) in cash and cash equivalent balance, and current liabilities of approximately $12.7 million (December 31, 2023, $15.3 million).

The Company faces increasingly challenging financial and business conditions, including an inability to raise sufficient equity and equity-linked financing to fully fund execution of its business plans and to satisfy its $2.5 million Nasdaq shareholder's equity requirement. The Company has financed its activities to date through the issuance of Common Shares and continues to seek capital through various means including the issuance of equity and/or debt. During this year to June 30, 2024, the Company has explored numerous alternatives to ensure the funding of the Company’s clinical trials, services and repay its outstanding vendors and increase its equity level, which level has resulted in a major hurdle for the Company to secure required financing.

Management recognizes that in order to meet the 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 volatile financial markets on micro-cap market capitalization companies such as the Company and the matter in Note 12, Subsequent events, the Company may be unable to access further equity when needed. As the Company is primarily pursuing one compound that is licensed from a related party with significant licensing payments who will have influence on the Company, other investors may not be willing to invest in the Company. 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 and cash equivalents will enable the support of operations through August 2024. 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. The unaudited condensed consolidated interim 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 could 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 six months ended June 30, 2024, 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, 2023 filed with the SEC on March 26, 2024.

The preparation of the unaudited 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

 

10

 

 


 

the unaudited condensed consolidated interim financial statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from those estimates. The unaudited condensed consolidated interim financial statements include estimates, which, by their nature, are uncertain.

The impacts of such estimates are pervasive throughout the unaudited 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 three months and six months ended June 30, 2024. 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.

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 June 30, 2024, consist of cash of $3,316 thousand (December 31, 2023 ‑ $2,764 thousand) and of deposits in high interest savings accounts, money market funds and accounts with maturities of less than 90 days totaling of $5,014 thousand (December 31, 2023 ‑ $6,488 thousand)].

 

4.
Prepaid expenses:

Prepaid expenses as of June 30, 2024 and December 31, 2023 are shown below. Other prepaid expenses primarily consist of subscriptions, software, conference deposits and deposits for general and administrative items.

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Prepaid research and development expenses

 

$

676

 

 

$

720

 

Prepaid insurance

 

 

336

 

 

 

882

 

Other prepaid operating expenses

 

 

224

 

 

 

440

 

Total

 

$

1,236

 

 

$

2,042

 

 

5.
Right-of-use assets:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Right-of-use assets, beginning of period

 

$

3,124

 

 

$

3,100

 

Additions to right-of-use assets

 

 

 

 

 

24

 

Right-of-use assets, end of period

 

 

3,124

 

 

 

3,124

 

Accumulated amortization

 

 

(2,368

)

 

 

(2,181

)

Right-of use assets, NBV

 

$

756

 

 

$

943

 

 

 

11

 

 


 

6.
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:

 

 

 

June 30,
2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

High interest savings account

 

$

5,014

 

 

 

 

 

$

5,014

 

 

 

 

Total

 

$

5,014

 

 

 

 

 

$

5,014

 

 

 

 

 

 

 

 

December 31,
2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

High interest savings accounts

 

$

2,002

 

 

 

 

 

$

2,002

 

 

 

 

United States Treasury Bills

 

 

4,486

 

 

 

 

 

 

4,486

 

 

 

 

Total

 

$

6,488

 

 

 

 

 

$

6,488

 

 

 

 

 

7.
Accrued liabilities:

Accrued liabilities as of June 30, 2024 and December 31, 2023 consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accrued personnel related costs

 

$

1,024

 

 

$

1,989

 

Accrued research and development expenses

 

 

4,054

 

 

 

6,527

 

Other accrued expenses

 

 

118

 

 

 

313

 

Total

 

$

5,196

 

 

$

8,829

 

8.
Lease liability:

Aptose leases office space in San Diego, California. The lease for the San Diego office space is scheduled to expire in May 31, 2026. We leased office space in Toronto, Ontario, Canada, which lease expired on June 30, 2024. The Company has not included any extension periods in calculating its right-to-use assets and lease liabilities. The Company also enters into leases for small office equipment.

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

 

Years ending December 31,

 

 

 

2024

 

$

225

 

2025

 

 

462

 

2026

 

 

197

 

Total

 

$

884

 

 

 

12

 

 


 

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

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Weighted-average remaining term – operating leases (years)

 

 

1.9

 

 

 

2.4

 

Weighted-average discount rate – operating leases

 

 

7.90

%

 

 

7.38

%

 

 

 

 

 

 

 

Lease liability, current portion

 

$

404

 

 

$

394

 

Lease liability, long-term portion

 

 

414

 

 

 

621

 

Total

 

$

818

 

 

$

1,015

 

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

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2024

 

 

2023

 

2024

 

 

2023

 

Operating lease cost

 

$

112

 

 

$

117

 

$

224

 

 

$

245

 

Operating cash flows from operating leases

 

$

119

 

 

$

45

 

$

234

 

 

$

173

 

 

9.
Related party transactions:

Hanmi Pharmaceutical Co. Ltd.

On November 4, 2021, Aptose entered a licensing agreement (the "Hanmi Licensing Agreement") with the South Korean company Hanmi Pharmaceutical Co. Ltd. ("Hanmi") for the clinical and commercial development of tuspetinib. Under the terms of the Hanmi Licensing 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 under 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 are based on the progression of research as outlined in Note 14, Collaborative Agreements, to the Annual report on Form 10-K for the year ended December 31, 2023. 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 pursuant to the Hanmi Licensing Agreement 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 Hanmi Licensing 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 nil and $1.5 million for the six months ended June 30, 2024 and 2023, respectively. Since inception to June 30, 2024, $7.1 million has been recognized for the period under the supply agreement.

The Company paid supply costs to Hanmi of $2.6 million and $3.1 million in the six months ended June 30, 2024 and 2023, respectively. Since inception to June 30, 2024, payments of $7.1 million have been made under the supply agreement. At June 30, 2024, the Company did not have either accounts payable or accrued liabilities related to the Hanmi supply agreement. At December 31, 2023, there was $2.6 million in accounts payable and nil in accrued liabilities.

See Note 10, Share capital, for share capital transactions with Hanmi.

 

10.
Share capital:

On April 2, 2024, the Company received a letter (the “Notification Letter”) from Nasdaq stating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”) because the stockholders’ equity of the Company as of December 31, 2023, as reported in the Company’s Annual Report on Form 10-K, was below the minimum requirement of $2.5 million (the "Stockholders’ Equity Requirement"). The Company's stockholder's equity as of June 30, 2024 was negative $2.2 million. As of the date of this report, the Company does not have a market value of listed securities of $35 million, or net income from continued operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years, the alternative quantitative standards for continued listing on the Nasdaq Capital Market. The Notification Letter received has no immediate effect on the Company's continued listing on the Nasdaq Capital Market, subject to the Company's compliance with the other continued listing

 

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requirements. Pursuant to Nasdaq’s Listing Rules, the Company had 45 calendar days to submit a plan to evidence compliance with the Rule (a “Compliance Plan”). The Company submitted a Compliance Plan on May 17, 2024.

 

On June 28, 2024 , the Company received a letter from Nasdaq stating that Nasdaq had granted the Company an extension of time to regain compliance with the Rule. The Company must timely file Form 10-Q and disclose the status of the Company's progress on compliance with the initial financing targets as well as on the Company's expense reductions. If the Company fails to evidence compliance upon filing its periodic report on or before September 30, 2024, with the SEC and Nasdaq, the Company may be subject to delisting.

Further steps were taken to meet the Nasdaq Compliance Plan requirements in August. Beginning on August 1, 2024, the Company began its process to meet its Compliance Plan requirements with Nasdaq. On August 1, 2024 the Company filed a preliminary S-1 prospectus to raise financing as part of its Compliance Plan, in addition to funds raised in the 10a.(i), June 2024 Registered Direct Offering, and see Note 12, Subsequent events notes. 

 

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

a.
Equity issuances:

(i) June 2024 Registered Direct Offering

On June 3, 2024, the Company closed a registered direct offering priced at-the-market under Nasdaq rules of 1,800,000 Common Shares at a purchase price of $1.15 per share and 2,055,000 Pre-Funded Warrants at a purchase price of $1.149 per pre-funded warrant. Additionally, in a concurrent private placement, Aptose issued unregistered series A warrants to purchase up to 3,855,000 Common Shares and series B warrants to purchase up to 3,855,000 Common Shares, each at an exercise price of $1.15 per share. The series A and series B unregistered warrants will be exercisable beginning on the effective date of shareholder approval of the issuance of the shares issuable upon exercise of the warrants. The series A warrants will expire five years from the date of shareholder approval and the series B warrants will expire eighteen months from the date of shareholder approval. The gross proceeds to the Company from the offering were approximately $4.43 million, before deducting the placement agent’s fees and other offering expenses. Financing costs of approximately $408 thousand included underwriting costs of 7% and professional fees. In addition, the underwriter received 192,750 warrants, each at an exercise price of $1.44. The unregistered warrants will be exercisable on the effective date of shareholder approval for the issuance of the shares issuable upon exercise of the warrants and will expire five years from the date of shareholder approval.

(ii) January 2024 Public Offering and Private Placement

On January 31, 2024, the Company announced the closing of a $9.7 million public offering (the “Public Offering”) and a $4 million private placement (the “Private Placement”) with Hanmi. The Public Offering comprised 5,649,122 Common Shares and warrants at a combined offering price of $1.71. This included 736,842 Common Shares and warrants pursuant to a full exercise by the underwriter of its over-allotment option. The Private Placement comprised 2,105,263 Common Shares sold at a price of $1.90, representing an 11% premium over the price of the Common Shares issued as part of the Public Offering. Nasdaq subsequently issued a letter to the Company regarding the value and the date of the Private Placement, as discussed in this note, below. Financing costs of approximately $1.4 million included underwriting costs of 7% and approximately $0.4 million in professional fees. The Company also issued Hanmi warrants to purchase Common Shares at an exercise price of $1.71 per Share.

On February 29, 2024, the Company received a deficiency letter (the “February Deficiency Letter”) from the Nasdaq Listing Qualifications Department of Nasdaq notifying the Company that the Company’s Private Placement violated Nasdaq Listing Rule 5635(d) because the Company did not obtain shareholder approval prior to such issuance. Nasdaq stated that the Private Placement involved the issuance of greater than 20% of the issued and outstanding Common Shares of the Company at a discount to the Nasdaq official closing price on January 25, 2024, the date of the subscription agreement between the Company and Hanmi. The February Deficiency Letter had no immediate effect on the listing of the Company’s Common Shares. In accordance with the Nasdaq Listing Rules, the Company was given 45 calendar days to submit a plan to regain compliance. The approval of the potential issuance of Common Shares in connection with the Hanmi investment, which would exceed 19.99% of the Corporation’s outstanding shares as of the closing date of the Hanmi investment, as required by Nasdaq listing rules, was approved at the June 2024 Annual and General meeting.

In response to a Deficiency Letter from Nasdaq received on February 29, 2024 regarding the private placement with Hanmi and the resulting claimed violation of Nasdaq Listing Rule 5635(d), the Company submitted a plan to regain compliance on

 

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April 15, 2024. On April 25, 2024, the Company received a letter from the Listing Qualifications Department (the “Staff”) of Nasdaq notifying the Company of the Staff’s determination that the Company had regained compliance with Nasdaq Listing Rule 5635(d) and the Staff has determined that the matter is now closed. Pursuant to the Company's plan to regain compliance, on April 26, 2024, the Company announced that it had amended the warrant agreement with Hanmi to prohibit the exercise of the Hanmi warrants in excess of the Nasdaq 19.99% limitation (the "Nasdaq 19.99% Cap"), unless shareholder approval is first obtained to exceed the Nasdaq 19.99% Cap.

(iii) Hanmi 2023 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% 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.

(iv) 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. An additional 7,547 Common Shares, or 30% of the Commitment Shares, were issued to Keystone in October 2023. In the six months ended June 30, 2024, the Company's issuance of Common Shares to Keystone consisted of 10,062 Commitment Shares.

In the year ended December 31, 2023, the Company's issuance of Common Shares to Keystone comprised 720,494 Common shares sold to Keystone at an average price of $2.91 per Common share for cash proceeds of $2.1 million and 15,094 Commitment Shares. During the six months ended June 30, 2024, the Company issued 510,101 Common Shares to Keystone at an average price of $1.36 per Common Share for cash proceeds of $694 thousand and 10,062 Commitment Shares. The Company recognized $82 thousand of financing costs associated with professional fees during the six months ended June 30, 2024. Since inception to April 2024, the time the Committed Equity Facility was terminated, the Company's issuance of Common Shares to Keystone comprised of an aggregate of 1,230,595 Common Shares at an average price of $2.27 per Common Share for aggregate gross cash proceeds of $2.8 million and 25,156 Commitment Shares. From inception to the termination of the Committed Equity Facility, the Company recognized $168 thousand of financing costs associated with professional fees. In April 2024, the Company's issuances of Common Shares to Keystone reached the Total Commitment of the Committed Equity Facility, i.e. 19.99% of the Common Shares outstanding immediately prior to the execution of the 2023 Committed Equity Facility Agreement.

(v) 2022 At-The-Market Facility ("ATM")

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 three months and six months ended June 30, 2024, the Company issued 81,591 Common Shares under this 2022 ATM Facility at an average price of $1.22 per share for gross proceeds of $100 thousand ($97 thousand net of share issuance costs). On May 30, 2024, the Company terminated the 2022 At-The-Market Facility. Since inception to May 30, 2024, the date the Company terminated the 2022 ATM Facility, the Company raised a total of $2.1 million of gross proceeds ($2.0 million net of share issuance costs) under the 2022 ATM Facility. Costs associated with the proceeds consisted of a 3% cash commission.

 

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