EXHIBIT 99.1

 

 

Aptose Biosciences Inc.

Condensed Consolidated Interim Statements of Financial Position

(unaudited)

 

       
(amounts in 000's of Canadian Dollars) as at September 30, 2015  December 31, 2014
ASSETS          
Current          
Cash and cash equivalents (note 4(a))  $15,147   $14,365 
Investments (note 4(b))   8,205    16,180 
Prepaid expenses and other assets   588    855 
Total Current Assets   23,940    31,400 
Non-current          
Equipment   400    200 
Total Non-Current Assets   400    200 
Total Assets  $24,340   $31,600 
           
LIABILITIES          
Current          
Accounts payable  $136   $256 
Accrued liabilities   1,566    1,662 
Convertible promissory notes   -    410 
Total Current Liabilities   1,702    2,328 
           
SHAREHOLDERS' EQUITY          
Share capital (note 6)          
Common shares   223,238    221,259 
Equity portion of convertible promissory notes   -    64 
Stock options (note 7)   5,754    4,078 
Contributed surplus   21,773    21,653 
Warrants   351    501 
Deficit   (228,478)   (218,283)
Total Equity   22,638    29,272 
Total Liabilities and Equity  $24,340   $31,600 

 

See accompanying notes to the condensed consolidated interim financial statements (unaudited)

Commitments, contingencies and guarantees (Note 10)

 

1
 

Aptose Biosciences Inc.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(unaudited)

 

   Three  Four  Nine  Ten
   months ended  months ended  months ended  months ended
(amounts in 000's of Canadian Dollars except for per common share data)  Sept. 30, 2015  Sept. 30, 2014  Sept. 30, 2015  Sept. 30, 2014
REVENUE  $-   $-   $-   $- 
                     
EXPENSES                    
Research and development  (note 9)   1,722    1,311    3,914    2,920 
General and administrative (note 9)   2,248    2,988    7,481    7,931 
Operating expenses   3,970    4,299    11,395    10,851 
Finance expense (note 9)   8    49    43    225 
Finance income (note 9)   (717)   (161)   (1,243)   (235)
Net financing income   (709)   (112)   (1,200)   (10)
Net loss and comprehensive loss for the period   3,261    4,187    10,195    10,841 
Basic and diluted loss per common share  $0.27   $0.36   $0.86   $1.58 
                     
Weighted average number of common shares                    
outstanding used in the calculation of                    
basic and diluted loss per common share (000's) (note 6(d))   11,909    11,610    11,852    6,849 

 

See accompanying notes to the condensed consolidated interim financial statements (unaudited)

 

2
 

Aptose Biosciences Inc.

Condensed Consolidated Interim Statement of Changes in Equity

(unaudited)

 

(amounts in 000's of Canadian Dollars)  Common Shares  Stock Options  Warrants  Contributed Surplus 

Equity Portion

of Convertible

Promissory

Notes

  Deficit  Total
                                    
Balance, January 1, 2015  $221,259   $4,078   $501   $21,653   $64   $(218,283)  $29,272 
                                    
Warrant and stock option exercises   1,531    (493)   (150)   -    -    -    888 
Common shares issued under the ATM (note 6(a))   10    -    -    -    -    -    10 
Stock-based compensation (note 7)   -    2,235    -    -    -    -    2,235 
Promissory note conversion (note 6(e))   438    -    -    54    (64)   -    428 
Expiry of vested stock options   -    (66)   -    66    -    -    - 
Net loss   -    -    -    -    -    (10,195)   (10,195)
                                    
Balance, September 30, 2015  $223,238   $5,754   $351   $21,773   $-   $(228,478)  $22,638 
                                    
Balance, December 1, 2013  $176,923   $1,983   $2,000   $21,280   $88   $(203,858)  $(1,584)
Public equity offerings   32,511    -    350    -    -    -    32,861 
Stock-based compensation (note 7)   -    1,907    -    -    -    -    1,907 
Warrant and stock option exercises   11,259    (18)   (1,648)   -    -    -    9,593 
Expiry of warrants   -    -    (190)   190    -    -    - 
Cancellation/Expiry of stock options   -    (175)   -    175         -    - 
Net loss   -    -    -    -    -    (10,841)   (10,841)
                                    
Balance, September 30, 2014  $220,693   $3,697   $512   $21,645   $88   $(214,699)  $31,936 

 

See accompanying notes to the condensed consolidated interim financial statements (unaudited)

3
 

Aptose Biosciences Inc.

Condensed Consolidated Interim Statements of Cash Flows

(unaudited)

 

   Three  Four  Nine  Ten
   months ended  months ended  months ended  months ended
(amounts in 000's of Canadian Dollars)  Sept. 30, 2015  Sept. 30, 2014  Sept. 30, 2015  Sept. 30, 2014
Cash flows from operating  activities:                    
Net loss for the period  $(3,261)  $(4,187)  $(10,195)  $(10,841)
Items not involving cash and other adjustments:                    
Stock-based compensation   651    1,084    2,235    1,907 
Depreciation of equipment   29    8    64    21 
Finance income   (717)   (161)   (1,243)   (235)
Finance expense   8    49    43    225 
Other   -    -    -    1 
Change in non-cash operating working capital (note 8)   723    (719)   51    (1,100)
Cash used in operating activities   (2,567)   (3,926)   (9,045)   (10,022)
Cash flows from financing activities:                    
Public equity offerings   10    -    10    32,861 
Exercise of warrants and stock options   40    6,600    888    9,593 
Repayment of promissory notes   -    -    -    (1,068)
Interest on promissory notes   (5)   (20)   (25)   (94)
Cash provided by financing activities   45    6,580    873    41,292 
Cash flows from investing activities:                    
(Acquisitions) divestiture of short-term investments   (40)   (5,089)   7,975    (16,108)
Purchase of fixed assets   (52)   (134)   (264)   (153)
Interest received   56    161    232    235 
Cash (used in) provided by investing activities   (36)   (5,062)   7,943    (16,026)
Foreign exchange gains (losses) on cash and cash equivalents   661    (12)   1,011    (35)
(Decrease) increase in cash and cash equivalents during the period   (1,897)   (2,420)   782    15,209 
Cash and cash equivalents, beginning of period   17,044    19,367    14,365    1,738 
Cash and cash equivalents, end of period  $15,147   $16,947   $15,147   $16,947 

 

See accompanying notes to the condensed consolidated interim financial statements (unaudited)

4
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

1.Reporting Entity

Aptose Biosciences Inc. ("Aptose" or the "Company") is a clinical-stage biotechnology company committed to discovering and developing personalized therapies addressing unmet medical needs in oncology. Aptose is a publicly listed company incorporated under the laws of Canada. The Company's shares are listed on the Nasdaq Capital Markets and the Toronto Stock Exchange. The head office, principal address and records of the Company are located at 5955 Airport Road, Suite 228, Mississauga, Ontario, Canada, L4N 1R9.

 

Aptose changed its name from Lorus Therapeutics Inc. effective August 28, 2014.

 

Effective July 17, 2014 the Company changed its fiscal year end from May 31 to December 31. As a result of that change the current reporting fiscal period is for the three and nine months ended September 30, 2015 while the prior year comparative period is for the four and ten months ended September 30, 2014 and therefore are not directly comparable to the current period.

 

2.Basis of presentation

(a) Statement of Compliance

 

These unaudited condensed consolidated interim financial statements of the Company as at September 30, 2015 were prepared in accordance with International Financial Reporting Standards (“IFRS”) and International Accounting Standard (“IAS”) 34, Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”) and does not include all of the information required for full annual financial statements. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying notes.

 

The unaudited condensed consolidated interim financial statements of the Company were reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on November 9, 2015.

 

(b) Functional and presentation currency

 

The functional and presentation currency of the Company is the Canadian dollar (“$”).

 

(c) Significant accounting judgments, estimates and assumptions

 

The preparation of these unaudited condensed consolidated interim financial statements in accordance with IFRS 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 unaudited condensed consolidated interim financial statements and reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from these 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.

 

The key assumptions concerning the future, and other key sources of estimation uncertainty as of the date of the statement of financial position that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next fiscal year arise in connection with the valuation of contingent liabilities and valuation of tax accounts. Significant estimates also take place in connection with the valuation of share-based compensation and share purchase warrants.

 

3.Significant accounting policies

The accompanying unaudited condensed consolidated interim financial statements are prepared in accordance with IFRS and follow the same accounting policies and methods of application as the audited consolidated financial statements of the Company for the seven months ended December 31, 2014. They do not include all of the information and disclosures required by IFRS for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included in these unaudited condensed consolidated interim financial statements. Operating results for the three and nine month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2015. For further information, see the Company’s audited consolidated financial statements including notes thereto for the seven months ended December 31, 2014.

 

5
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

Standards and Interpretations Adopted in Fiscal 2015

 

There were no new accounting standards adopted during the nine months ended September 30, 2015.

 

4.Capital disclosures

The Company’s objectives when managing capital are to:

 

·Maintain its ability to continue as a going concern;

 

·Maintain a flexible capital structure which optimizes the cost of capital at acceptable risk; and

 

·Ensure sufficient cash resources to fund its research and development activities, to pursue partnership and collaboration opportunities and to maintain ongoing operations.

 

The capital structure of the Company consists of cash and cash equivalents, investments and equity comprised of share capital, share purchase warrants, stock options, contributed surplus and deficit. The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issuances, acquiring or disposing of assets, adjusting the amount of cash balances or by undertaking other activities as deemed appropriate under the specific circumstances.

 

In December 2014, Aptose filed a short form base shelf prospectus (the “Base Shelf”) that qualifies for the distribution of up to US$100,000,000 of common shares, warrants, or units comprising any combination of common shares and warrants (“Securities”). The distribution of Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying prospectus supplement, including transactions that are deemed to be “at-the-market” distributions. The Base Shelf provides us with additional flexibility when managing our cash resources as, under certain circumstances, it shortens the time period required to close a financing and is expected to increase the number of potential investors that may be prepared to invest in our company. Funds received from a Prospectus Supplement will be used in line with our Board approved budget and multi-year plan. Our Base Shelf expires in December, 2017. The Base Shelf allowed us to enter into an “At-The-Market” Facility (“ATM”) equity distribution agreement (see Note 6). We intend to use this equity arrangement as an additional option to assist us in achieving our capital objectives. The ATM provides the Company with the opportunity to regularly raise capital on the Nasdaq National Market, at prevailing market prices, at it’s sole discretion providing the ability to better manage cash resources.

 

The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the seven months ended December 31, 2014.

 

(a)Cash and cash equivalents:

 

Cash and cash equivalents consists of cash of $765 thousand (December 31, 2014 - $293 thousand) and funds in both Canadian and US dollars deposited into high interest savings accounts totaling $14.382 million (December 31, 2014 - $14.072 million). The current interest rate earned on these deposits is between 1.2% and 1.25% (December 31, 2014 – 1.2 and 1.25%).

 

(b) Investments:

 

As at September 30, 2015 and December 31, 2014, investments consist of guaranteed investment certificates with Canadian financial institutions having high credit ratings. Investments include six investments (December 31, 2014 – twelve investments) with maturity dates from April 22, 2016 to June 19, 2016 (December 31, 2014 – April 22, 2015 to June 19, 2016), bearing an interest rate from 1.80% to 2.10% (December 31, 2014 – 1.56% to 2.10%) per annum. Investments are recorded at the principle amount plus accrued interest.

 

6
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

5.Financial instruments

 

(a) Financial instruments

 

The Company has classified its financial instruments as follows:

       
   As at  As at
   September 30, 2015  December 31, 2014
       
Financial assets          
Cash and cash equivalents (consisting of deposits in high interest savings accounts), measured at amortized cost  $15,147   $14,365 
Investments, consisting of guaranteed investment certificates, measured at amortized cost including accrued interest   8,205    16,180 
           
Financial liabilities          
Accounts payable, measured at amortized cost   136    256 
           
Accrued liabilities, measured at amortized cost   1,566    1,662 
           
Convertible promissory notes, measured at amortized cost   -    410 

 

At September 30, 2015, there are no significant differences between the carrying values of these amounts and their estimated market values.

 

(b) Financial risk management

 

The Company has exposure to credit risk, liquidity risk and market risk. The Company's Board of Directors has the overall responsibility for the oversight of these risks and reviews the Company's policies on an ongoing basis to ensure that these risks are appropriately managed.

 

(i) Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer, partner or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally 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 for 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 Canadian corporations with debt securities that are traded on active markets and are capable of prompt liquidation.

 

(ii) Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations, the Board considers securing additional funds through equity, debt or partnering transactions. The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows.

 

(iii) Market risk

 

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and equity prices will affect the Company's income or the value of its financial instruments.

 

The Company is subject to interest rate risk on its cash and cash equivalents and investments. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to interest rates on the investments, owing to the relative short-term nature of the investments. The Company does not have any interest bearing liabilities subject to interest rate fluctuations.

 

7
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

Currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. We are exposed to currency risk from employee costs as well as the purchase of goods and services primarily in the United States and the cash balances held in foreign currencies. Fluctuations in the US dollar exchange rate could potentially have a significant impact on the Company’s results. Assuming all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the US dollar would result in an increase or decrease in loss for the year and comprehensive loss of $880 thousand (December 31, 2014- $58 thousand). Balances in foreign currencies at September 30, 2015 are as follows:

       
   US$ balances at  US$ balances at
   September 30, 2015  December 31, 2014
Cash and cash equivalents  $7,196   $66 
Accounts payable and accrued liabilities   (583)   (565)
   $6,613   $(499)

 

The Company does not have any forward exchange contracts to hedge this risk.

 

The Company does not invest in equity instruments of other corporations.

 

6.Share capital

The Company is authorized to issue an unlimited number of common shares.

 

Continuity of common shares and warrants

       
   Common shares  Warrants
   Number  Amount  Number  Amount
   (In thousands)    (In thousands)   
Balance, May 31, 2014   10,388   $212,938    1,630   $1,857 
Warrant exercises   1,231    7,814    (1,231)   (1,166)
Warrant expiry   -    -    (190)   (190)
Option exercises   36    345    -    - 
Promissory note conversion   45    162    -    - 
Balance, December 31, 2014   11,700   $221,259    209   $501 
Warrant exercises (b)   8    33    (8)   (8)
Option exercises   117    1,018    -    - 
Promissory note conversion   42    150    -    - 
Balance, March 31, 2015   11,867   $222,460    201   $493 
Warrant exercises (b)   62    394    (62)   (132)
Option exercises   3    36    -    - 
Balance, June 30, 2015   11,932   $222,890    139   $361 
Warrant exercises (b)   8    50    (8)   (10)
Promissory note conversion   80    288    -    - 
Common shares under ATM (a)   2    10    -    - 
Balance, September 30, 2015   12,022   $223,238    131   $351 

 

 

(a)At The Market Facility (“ATM”)

 

On April 2, 2015, we entered into an ATM equity facility with Cowen and Company, LLC, acting as sole agent. Under the terms of this facility, we may, from time to time, sell shares of our common stock having an aggregate offering value of up to US$20 million through Cowen and Company, LLC on the Nasdaq National Market. We determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. During the nine months ended September 30, 2015 the Company issued 1,504 common shares under the ATM at a price of US$5.20 per share for gross proceeds of approximately Cdn $10 thousand.

 

(b)Exercise of Warrants

 

Warrants exercised during the nine months ended September 30, 2015:      
(in thousands)  Number  Proceeds
August 2011 warrants (i)   13   $68 
June 2013 private placement warrants (ii)   47    141 
December 2013 broker warrants (iii)   18    118 
Total   78   $327 

 

In addition to the cash proceeds received, the original fair value related to these warrants of $150 thousand was transferred from warrants to share capital. This resulted in a total amount of $477 thousand credited to share capital.

 

8
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

Summary of outstanding warrants:      
(in thousands)  September 30, 2015  December 31, 2014
August 2011 warrants (i)   76    89 
June 2013 private placement warrants (ii)   -    47 
December 2013 broker warrants (iii)   55    73 
Number of warrants outstanding, end of period   131    209 

 

(i)August 2011 warrants are exercisable into common shares of Aptose at a price per share of $5.40 and expire in August 2016.

(ii)June 2013 private placement warrants were exercisable into common shares of Aptose at a price per share of $3.00 and expired in June 2015. All June 2013 private placement warrants had been exercised by the end of June 2015.

(iii)December 2013 broker warrants are exercisable into common shares of Aptose at a price per share of $6.60 and expire in December 2015.

 

(b) Continuity of contributed surplus

 

Contributed surplus is comprised of the cumulative grant date fair value of expired share purchase warrants and expired stock options as well as the cumulative amount of previously expensed and unexercised equity settled share-based payment transactions.

       
   Nine months ended  Ten months ended
   September 30, 2015  September 30, 2014
Balance, beginning of period  $21,653   $21,280 
Exercise of convertible promissory notes   54     
Expiry of warrants       103 
Cancellation of stock options
       190 
Expiry of vested stock options   66    72 
Balance, end of period  $21,773   $21,645 

 

(c) Continuity of stock options

       
   Nine months ended  Ten months ended
   September 30, 2015  September 30, 2014
Balance, beginning of period  $4,078   $1,983 
Stock based compensation   2,235    1,907 
Exercise of stock options   (493)   (18)
Cancellation of stock options   -    (103)
Expiry of vested stock options   (66)   (72)
Balance, end of period  $5,754   $3,697 

 

(d) Loss per share

 

Loss per common share is calculated using the weighted average number of common shares outstanding for the three and four month periods ended September 30, 2015 and September 30, 2014 and the nine and ten month periods ending September, 2015 and September 30, 2014 calculated as follows:

             
   Three months
ended
 

Four months

ended

 

Nine months

ended

 

Ten months

ended

   Sept 30,2015  Sept 30,2014  Sept 30, 2015  Sept 30,2014
Issued common shares, beginning of period   11,932    10,388    11,700    3,891 
Effect of April public offering               2,825 
Effect of December public offering               1,204 
Effect of warrant and option exercises   4    1,222    145    833 
Effect of ATM issuances   1             
Effect of promissory note conversions   27        44     
    11,964    11,610    11,889    8,753 

 

9
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

The effect of any potential exercise of our stock options and warrants outstanding during the year has been excluded from the calculation of diluted loss per common share as it would be anti-dilutive.

 

(e) Convertible promissory notes

 

During the nine months ended September 30, 2015, $437.5 thousand promissory notes due in September 2015 incurring interest at a rate of 10% were converted into 122 thousand common shares of the Company.

 

7.Stock options

(a) Stock options transactions for the period:

       
   Nine months ended  Ten months ended
   September 30, 2015  September 30, 2014
   Number of
Options
  Weighted
average
exercise
price
  Number of
Options
  Weighted
average
exercise
price
             
Outstanding, Beginning of period   1,374   $5.95    417   $6.00 
Granted   478    6.92    1,039    5.93 
Exercised   (121)   4.66    (6)   3.72 
Expired   (4)   21.69    (1)   32.17 
Cancelled   -    -    (21)   6.00 
Outstanding, end of period   1,727   $6.28    1,428   $5.88 

 

(b) Stock options outstanding at September 30, 2015:

          
  Options outstanding  Options exercisable



Range of
exercise prices







Number
of Options

 
 
 
Weighted
average
remaining
contractual
life (years)


 
 
 

Weighted
average
exercise
price


 
 
 



Number
of Options




 

Weighted
average
exercise
price
$2.16 - $3.48   121    6.8   $2.78    121   $2.78 
$3.49 - $5.70   643    8.6    5.59    343    5.60 
$5.71 - $9.36   959    8.9    6.96    307    7.35 
$9.37 - $118.80   4    2.5    60.00    4    60.00 
    1,727    8.7   $6.28    775   $6.13 

 

(c) Fair value assumptions

 

The following assumptions were used in the Black-Scholes option-pricing model to determine the fair value of stock options granted during the following periods:

       
   Nine months ended  Ten months ended
   September 30, 2015  September 30, 2014
       
Exercise price      $6.77-7.14    $ 5.16-7.32 
Grant date share price      $6.77-7.14    $ 5.16-7.32 
Risk free interest rate        0.75-1.5%    1.5%
Expected dividend yield             
Expected volatility        103-113%    53-135% 
Expected life of options        5 years    5 years 
Weighted average fair value of options granted in the period
       $5.33   $4.94 

 

10
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

Stock options granted by the Company during the nine months ended September 30, 2015, consist of 128,000 options that vest 50%, 25% and 25% on each of the next three anniversaries and 350,000 options that vest 50% on the first anniversary and 16.67% on each of the next three anniversaries (total four year vesting).

 

Stock options granted by the Company during the ten months ended September 30, 2014 consisted of 897,381 options that vested 50% upon the first anniversary and 25% on each of the next two anniversaries, 70,834 options which vest monthly over thirty six months and 70,834 of options of which 33,334 vested immediately and the remaining 37,500 vests 50% upon the first anniversary and 25% on each of the next two anniversaries.

 

Refer to Note 9 for a breakdown of stock option expense by function.

 

The Company has reserved up to 2,080,050 common shares for issuance relating to outstanding options, rights and other entitlements under the stock based compensation plans of the Company as of September 30, 2015.

 

8.Additional cash flow disclosures

Net change in non-cash operating working capital is summarized as follows:

             
   Three months
ended
 

Four months

ended

 

Nine months

ended

 

Ten months

ended

   Sept. 30, 2015  Sept. 30, 2014  Sept. 30, 2015  Sept. 30, 2014
                     
Prepaid expenses and other assets  $271   $(91)  $267   $(91)
Accounts payable   (14)   (210)   (120)   249 
Accrued liabilities   466    (418)   (96)   (1,258)
   $723   $(719)  $51   $(1,100)

 

9.Other expenses

Components of research and development expenses:

             
   Three months
ended
  Four months
ended
  Nine months
ended
  Ten months
ended
   Sept. 30, 2015  Sept. 30, 2014  Sept. 30, 2015  Sept. 30, 2014
             
APTO-253 development costs  $1,633   $1,272   $3,750   $2,475 
Severance costs               326 
Stock-based compensation
   79    37    145    92 
Deferred share unit costs               17 
Depreciation of equipment   10    2    19    10 
   $1,722   $1,311   $3,914   $2,920 

 

Components of general and administrative expenses:

             
   Three months
ended
  Four months
ended
  Nine months
ended
  Ten months
ended
   Sept. 30,2015  Sept. 30,2014  Sept. 30, 2015  Sept. 30,2014
             
General and administrative excluding salaries  $819   $1,099   $2,997   $2,947 
Salaries   838    836    2,348    2,383 
Severance costs               762 
Stock-based compensation
   572    1,047    2,091    1,814 
Deferred share unit costs               14 
Depreciation of equipment   19    6    45    11 
   $2,248   $2,988   $7,481   $7,931 

 

11
 

APTOSE BIOSCIENCES INC.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

Three and nine months ended September 30, 2015 and four and ten months ended September 30, 2014

(Tabular amounts are in 000s)

 

Components of finance income:

             
   Three months
ended
  Four months
ended
  Nine months
ended
  Ten months
ended
   Sept. 30,2015  Sept. 30,2014  Sept. 30, 2015  Sept. 30,2014
                     
Interest income  $56   $161   $232   $235 
Foreign exchange gain on cash and cash equivalents
   661        1,011     
   $717   $161   $1,243   $235 

 

Components of finance expense:

             
   Three months
ended
 

Four months

ended

 

Nine months

ended

 

Ten months

ended

   Sept. 30, 2015  Sept. 30, 2014  Sept. 30, 2015  Sept. 30, 2014
Interest expense  $8   $37   $43   $190 
Foreign exchange loss       12        35 
   $8   $49   $43   $225 

 

10. Commitments, contingencies and guarantees.

             
(in thousands)  Less than 1 year  1-3 years  3-5 years  Total
Operating leases  $553    890    376   $1,819 

 

The Company has entered into various contracts with service providers with respect to the clinical development of APTO-253. These contracts will result in future payment commitments of up to approximately $3.7 million over the related service period. Of this amount, $419 thousand has been paid and $186 thousand has been accrued at September 30, 2015. The payments are based on services performed and amounts may be higher or lower based on actual services performed.

 

11.Related Party Transactions

In March 2015, the Company entered into an agreement with the Moores Cancer Center at the University of California San Diego (UCSD) to provide pharmacology lab services to the Company. Dr. Stephen Howell is the Acting Chief Medical Officer of Aptose and is also a Professor of Medicine at UCSD and will be overseeing the laboratory work. The research services will be provided from April 1, 2015 to March 31, 2016 for an annual fee of US$154,456 to be paid to UCSD in monthly installments.

 

This transaction is in the normal course of business and will be measured at the amount of consideration established and agreed to by the related parties.

 

 

 

 

12