Aptose Biosciences(APTO) - 2019 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION This section provides the interim financial statements and management's analysis of the company's financial performance and position Financial Statements This section details the company's interim financial position, comprehensive loss, equity changes, and cash flows for the reported periods Condensed Consolidated Interim Statements of Financial Position Total assets nearly doubled to $32.46 million by September 2019, driven by increased cash and investments from financing activities Condensed Consolidated Interim Statements of Financial Position (in thousands of US dollars) | | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total current assets | $30,608 | $16,486 | | Total assets | $32,460 | $16,870 | | Total current liabilities | $3,908 | $2,789 | | Total liabilities | $5,032 | $2,789 | | Total shareholders' equity | $27,428 | $14,081 | Condensed Consolidated Interim Statement of Loss and Comprehensive Loss Net loss decreased to $18.57 million for the nine months ended September 2019, primarily due to lower R&D and G&A expenses Statement of Loss and Comprehensive Loss Highlights (in thousands of US dollars, except per share data) | | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | | :--- | :--- | :--- | | Revenue | $0 | $0 | | Research and development | $11,582 | $14,549 | | General and administrative | $7,391 | $8,233 | | Operating Expenses | $18,973 | $22,782 | | Net loss | $(18,568) | $(22,607) | | Basic and diluted loss per common share | $(0.39) | $(0.71) | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Shareholders' equity significantly increased to $27.43 million, driven by public offerings and share purchase agreements, offset by net loss - Total shareholders' equity increased to $27,428 thousand at September 30, 2019, from $14,081 thousand at December 31, 2018[8] - Key drivers of the equity increase include proceeds from a public offering ($19.6 million) and a share purchase agreement ($10.0 million), which were partially offset by the period's net loss ($18.6 million)[8] Condensed Consolidated Interim Statements of Cash Flows Cash and equivalents increased by $5.39 million, with financing activities providing $29.81 million, offsetting operating and investing outflows Cash Flow Summary (in thousands of US dollars) | | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | | :--- | :--- | :--- | | Cash used in operating activities | $(15,327) | $(17,705) | | Cash provided by (used in) investing activities | $(9,092) | $98 | | Cash provided by financing activities | $29,808 | $22,032 | | Increase in cash and cash equivalents | $5,387 | $4,425 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides an overview of clinical programs, financial condition, and operational results, highlighting progress and funding into 2021 Overview and Program Updates Aptose advances two oncology drug candidates, CG-806 and APTO-253, through Phase 1 trials, securing global rights and patents - CG-806 is in a Phase 1a/b study for B-cell malignancies (CLL/SLL/NHL), with patient enrollment completed for the first two dose levels and escalation to the third dose level (450mg BID) approved[58][64][65] - APTO-253 is in a Phase 1b trial for R/R AML and high-risk MDS. The trial has successfully completed the first three dose cohorts, and the company plans to begin enrollment for the fourth cohort at 100mg/m2[61][79][80] - The company secured worldwide rights to CG-806 (excluding Korea) and has obtained patents in the U.S., Japan, Europe, and Australia, providing protection until late 2033[69][70][71] - The clinical hold on APTO-253, related to manufacturing issues, was lifted by the FDA in June 2018, allowing the Phase 1b trial to be re-initiated[83][84] Liquidity and Capital Resources The company holds $30.2 million in cash and investments, with financing activities providing $29.8 million, sufficient to fund operations into 2021 Liquidity Position (in thousands) | | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $20,686 | $15,299 | | Investments | $9,528 | $440 | | Total | $30,214 | $15,739 | | Working capital | $26,700 | $13,697 | - The company believes its current cash, investments, and available financing facilities will be sufficient to fund planned operations into 2021[100] - In June 2019, the company completed a public offering, raising gross proceeds of approximately $21.3 million[113] - The company established a new $40 million At-The-Market (ATM) facility in May 2019 and a new $20 million share purchase agreement with Aspire Capital[97][98] Results of Operations Net loss decreased to $18.6 million due to the absence of a 2018 license fee and lower stock-based compensation, despite increased program costs Net Loss Summary (in thousands) | | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | | :--- | :--- | :--- | | Research and development expenses | $11,582 | $14,549 | | General and administrative expenses | $7,391 | $8,233 | | Net loss | $(18,568) | $(22,607) | Research and Development Expenses Breakdown (in thousands) | | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | | :--- | :--- | :--- | | License fees – CG-806 | $0 | $5,000 | | Program costs – CG-806 | $5,287 | $4,164 | | Program costs – APTO-253 | $3,296 | $3,085 | | Personnel related expenses | $2,666 | $1,448 | | Stock-based compensation | $309 | $826 | | Total R&D Expenses | $11,582 | $14,549 | General and Administrative Expenses Breakdown (in thousands) | | Nine months ended Sep 30, 2019 | Nine months ended Sep 30, 2018 | | :--- | :--- | :--- | | G&A, excluding non-cash items | $5,515 | $4,726 | | Aspire share purchase agreement fees | $360 | $600 | | Stock-based compensation | $1,425 | $2,869 | | Total G&A Expenses | $7,391 | $8,233 | Critical Accounting Policies The company adopted new lease accounting standards, recognizing a right-of-use asset and lease liability, with no material impact on the statement of loss - Effective January 1, 2019, the company adopted the new lease accounting standard, ASU No. 2016-02 (Topic 842)[135] - Upon adoption, the company recorded a right-of-use asset of approximately $1.570 million and a lease liability of approximately $1.647 million[136] Qualitative and Quantitative Disclosures About Market Risk The company is exempt from providing market risk disclosures as it qualifies as a smaller reporting company - The company is not required to provide this information as it qualifies as a smaller reporting company[140] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal controls - Management concluded that as of September 30, 2019, the company's disclosure controls and procedures were effective[141] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[144] PART II—OTHER INFORMATION This section provides information on legal proceedings, risk factors, and exhibits filed with the report Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently party to any material legal proceedings[146] Risk Factors The company is exempt from providing risk factor disclosures as it qualifies as a smaller reporting company - The company is not required to provide this information as it qualifies as a smaller reporting company[147] Exhibits This section lists the exhibits accompanying the quarterly report, including required Sarbanes-Oxley certifications - The report includes certifications from principal officers as required by the Sarbanes-Oxley Act of 2002[148]