ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in Part I, Item 1A in this Annual Report on Form 10-K. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.

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

OVERVIEW

Aptose is a clinical stage precision oncology company advancing highly differentiated kinase inhibitors to treat unmet medical needs in life-threatening cancers. Based on insights into the genetic profiles of certain cancers and patient populations, Aptose is building a pipeline of novel and targeted oncology therapies directed at dysregulated processes and signaling pathways in cancer cells, and this strategy is intended to optimize efficacy through simultaneous targeting of key drivers of disease in cancer cells, while preserving quality of life in patients by minimizing the side effects associated with conventional therapies. Our product pipeline includes cancer drug candidates that exert potent activity as stand-alone agents and that enhance the activities of other anticancer agents without causing overlapping toxicities. Indeed, we believe our targeted products can emerge as first-in-class or best-in-class agents that deliver single agent benefit and may serve as part of a combination therapeutic strategy for specific populations of cancer patients. We currently have two candidates in clinical development: HM43239 and luxeptinib (CG-806), both being evaluated for safety, tolerability, pharmacokinetics and signals of efficacy in Phase 1 clinical trials. Each molecule is described below.

HM43239 is an orally administered, highly potent myeloid kinome inhibitor that selectively targets a constellation of kinases operative in myeloid malignancies and known to be involved in tumor proliferation, resistance to therapy, and differentiation. This small molecule anticancer agent is currently being evaluated in an international Phase 1/2 clinical trial in patients with relapsed or refractory AML, including the emerging populations resistant to FLT3 inhibitors.

Luxeptinib (CG-806) is an orally administered, highly potent dual lymphoid and myeloid kinome inhibitor that selectively targets defined clusters of kinases that are operative in hematologic malignancies. This mutationally agnostic small molecule anticancer agent is currently being evaluated in a Phase 1a/b study for the treatment of patients having B-cell malignancies including classic CLL, SLL and certain NHL that are resistant/refractory/intolerant to other therapies, and in a Phase 1a/b study for the treatment of patients with R/R AML and HR MDS.

Impact of COVID 19 on our Research Programs:

We are advancing first-in-class targeted agents to treat life-threatening cancers that, in most cases, are not elective for patients and require immediate treatment. However, COVID-19 has caused global economic and social disruptions that could adversely affect our ongoing or planned research and development and clinical trial activities including enrollment of patients in our ongoing clinical trials, collection and analysis of patient data and eventually, the reporting of top-line results from our trials.

Our team proactively addressed these new challenges swiftly and appropriately, implementing safeguards and procedures to ensure both the safety of our employees and stakeholders, and accommodate the potential challenges due to COVID-19. Aptose was early in directing its employees to work-from-home and provided the tools to minimize productivity disruptions. Our clinical operations team reached out to active and future clinical sites to determine their needs and challenges and assist where possible, including virtual monitoring of patients, which reduces patients’ visits.We also have contacted our drug manufacturers to identify any potential supply chain disruptions and are adjusting accordingly. Since the early part of the COVID-19 pandemic in the first quarter of 2020, we began to carefully monitor the potential impact of COVID-19, and on a regular basis, we communicated with investigators at our clinical sites to gain an evolving understanding of competing COVID-19 related activities and clinical trial related activities. While it is difficult to estimate the duration and impact of COVID-19 on clinical sites, as of the date of this report, we have not experienced and do not foresee material delays to the enrollment of patients or timelines for the HM43239 and luxeptinib clinical trials.

PROGRAM UPDATES

HM43239

Indication and Clinical Trials:

HM43239 is an oral, highly potent, genotype-agnostic small molecule inhibitor of kinases operative in myeloid malignancies and known to be involved in tumor proliferation, resistance to therapy and differentiation. Preclinical in vitro and in vivo studies suggest that HM43239 may be an effective monotherapy and combination therapy in patients with hematologic malignancies including AML. An international Phase 1/2 clinical trial in patients with relapsed or refractory AML is ongoing. The dose escalation portion of this study to date has observed evidence of robust clinical activity, including multiple complete responses in R/R AML patients with various disease genotypes, and no toxicity trends that should prevent further dose escalation.

The FDA has granted orphan drug designation to HM43239 for the treatment of patients with AML in October 2018. Orphan drug designation is granted by the FDA to encourage companies to develop therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States. Orphan drug status provides research and development tax credits, an opportunity to obtain grant funding, exemption from FDA application fees and other benefits. The orphan drug designation also provides us with seven additional years of marketing exclusivity in this indication.

Manufacturing:

Following the HM43239 licensing agreement between Aptose and Hanmi on November 4, 2021, Aptose received from Hanmi an existing inventory of drug product expected to support continuation of the current Phase 1/2 study. The Company and Hanmi have also entered into a separate supply agreement in 2022 for additional production of new drug substance (API) and drug product to support further clinical development.

Program Updates at Recent Scientific Forums:

At the 63rd American Society of Hematology (ASH) Annual Meeting on December 11, 2021, we presented new clinical data from HM43239 in patients with relapsed or refractory AML at an oral presentation titled “First in Human FLT3 and SYK Inhibitor HM43239 Shows Single Agent Activity in Patients with Relapsed or Refractory FLT3 Mutated and Wild-Type Acute Myeloid Leukemia (AML)”. In the ongoing international Phase 1/2 study, thirty-four relapsed/refractory patients who had received at least one prior line of therapy were enrolled at multiple centers between March 2019 and August 2021, and treated at doses escalating from 20 mg to 160 mg. HM43239 delivered multiple complete responses (CR) and demonstrated clinically meaningful benefit in all responders, by either bridging successfully to hematopoietic stem cell transplant (HSCT) or leading to a durable response, as well as a favorable safety profile across all treated patients. Among FLT3 mutant patients treated with 80 mg, 3 of 8 (37.5%) achieved a durable composite CR (CRc, CR + CRi). At the 80 mg dose, a composite CRc rate of 25% was observed in both FLT3 mutant (including a prior gilteritinib failure patient) and FLT3 wild-type AML (including >1 year duration of response in a relapsed TP53m AML patient unfit for HSCT). At the 80 mg dose, 4 of 5 (80%) responders advanced to HSCT. At the 120 mg dose, a prior gilteritinib failure patient achieved PR after one cycle. HM43239 showed a favorable safety profile with only mild AEs and no DLTs up to 160 mg per day, and no drug discontinuations from drug related toxicity. HM43239 plasma inhibitory assay (PIA) activity was dose-dependent with up to 90% phospho-FLT3 inhibition at dose levels ≥ 80 mg.

Luxeptinib (CG-806)

Indication and Clinical Trials:

Luxeptinib is being developed with the intent to deliver the agent as an oral therapeutic for the treatment of R/R AML and for the treatment of a spectrum of B cell malignancies (including but not limited to CLL, SLL and NHL).

On March 25, 2019, we announced that the FDA granted Aptose IND allowance to initiate its Phase 1a/b clinical trial for luxeptinib. The clinical trial is a multicenter, open label, dose-escalation study with additional optional expansion cohorts to assess the safety, tolerability, pharmacokinetics and pharmacodynamic effects, and preliminary efficacy of luxeptinib in patients with CLL, SLL or NHL. In this study, luxeptinib is administered in gelatin capsules twice daily (BID) during a 28-day cycle.

As of the date of this report, we have initiated multiple clinical sites for the Phase 1a/b trial in patients with CLL/SLL or NHL which include specialty regional cancer care centers as well as large hospitals and key academic institutions. As of the date of this report, we have completed the first, second, third, fourth and fifth dose levels (150 mg, 300 mg, 450 mg, 600 mg, and 750 mg BID, respectively). Under an FDA-approved accelerated titration protocol, only one patient was required at each of the first two dose levels, followed by three patients at each dose level thereafter. Intra-patient dose escalation is allowed if the higher dose is safe in three or more patients, and additional patients may be enrolled at dose levels previously declared safe. To date, we have reported that among enrolled patients with an array of B-cell malignancies, we have observed inhibition of phospho-BTK and “on-target” lymphocytosis in patients with classic CLL and modest tumor reductions in patients with different tumor types, indicating target engagement and pharmacologic activity of luxeptinib.

We are also advancing luxeptinib into myeloid malignancies, with an initial focus on AML and MDS, in a separate Phase 1a/b trial. Our strategy was to identify a starting dose of luxeptinib that we believe could be therapeutically active in critically ill patients with R/R AML. In our ongoing Phase 1a/b study in patients with CLL and other B-cell malignancies, 450 mg BID luxeptinib delivered plasma levels potently inhibited phospho-FLT3 in a plasma inhibitory activity (PIA) reporter cell assay, suggesting that the 450 mg BID dose may be active in patients with AML. On June 29, 2020, we announced that we had received allowance from the FDA to proceed with a study in R/R AML with a starting dose of 450 mg BID, and subsequently on October 19, 2020, we announced that we had initiated dosing of the first patient with AML. As of the date of this report we have initiated multiple clinical sites for the Phase 1a/b trial, and we have completed the first, second, and third dose levels (450 mg, 600 mg, and 750 mg BID, respectively).. To date, we have reported that among enrolled patients, we have observed blast reductions in patients carrying the FLT3-ITD mutation, and a durable MRD-negative CR in a patient carrying the FLT3-ITD mutation.

In parallel with the ongoing dose escalation of the current formulation of luxeptinib in patients with B-cell malignancies and AML, Aptose has made significant progress in the development of a “next generation” formulation that could reduce total API administered, reduce pill burden, improve absorption, and increase exposure. Aptose began testing this new formulation of luxeptinib in the ongoing studies in patients with hematologic malignancies in the first half of fiscal 2022.

Manufacturing:

During fiscal years 2017 and 2018, we created a scalable chemical synthetic route for the manufacture of luxeptinib drug substance and have scaled the manufacture of API to multi-kg levels, we completed the manufacture of a multi-kg batch of API under GMP conditions as our API supply for our first-in-human clinical trials, and we manufactured under GMP conditions two dosage strengths of capsules to serve as our clinical supply in those human studies. During fiscal 2019 and 2020, we completed successful manufacture of multiple batches of API and drug product, and planned numerous GMP production campaigns to supply the ongoing trial and planned trials into the future. To date we have been able to manufacture API and capsules to support clinical supplies under GMP conditions. In fiscal 2021 we are continued our manufacturing campaigns and scale-up and tech transfer activities to support additional manufacturing capacity for the ongoing and planned clinical trials of luxeptinib. Additional research and development funds were utilized to support the development of a “next generation” formulation of luxeptinib.

Program Updates at Recent Scientific Forums:

We have completed several non-clinical studies that demonstrate the highly differentiated profile of luxeptinib. Key studies that have been presented at scientific forums are as follows:

LIQUIDITY AND CAPITAL RESOURCES

We are an early stage development company and we currently do not earn any revenues from our drug candidates. The continuation of our research and development activities and the commercialization of the targeted therapeutic products are dependent upon our ability to successfully finance and complete our research and development programs through a combination of equity financing and payments from strategic partners. We have no current sources of significant payments from strategic partners.

Sources of liquidity:

The following table presents our cash and cash equivalents, investments and working capital as at December 31, 2021 and 2020.

(in thousands) Balances at December 31, 2021 Balances at December 31, 2020

Working capital is a non gaap measure and represents primarily cash, cash equivalents, investments, prepaid expenses and other current assets less current liabilities.

We believe that our cash, cash equivalents and investments on hand at December 31, 2021 will be sufficient to finance our operations for at least 12 months from the issuance date of these financial statements. Our cash needs for the next twelve months include estimates of the number of patients and rate of enrollment of our clinical trials, the amount of drug product that we will require to support our clinical trials, and our general corporate overhead costs to support our operations, and our reliance on our manufacturers. We have based these estimates on assumptions and plans which may change and which could impact the magnitude and/or timing of operating expenses and our cash runway.

We expect that we will need to raise additional capital or incur indebtedness to continue to fund our operations in the future. In December 2019, we filed a short form base shelf prospectus (the “Base Shelf”) that allows us to distribute, upon the filing of prospectus supplements, up to $200,000,000 of Common Shares, warrants, or units comprising any combination of Common Shares and warrants. The Base Shelf was declared effective by the SEC on January 9, 2020 and expires on January 9, 2023.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.

On May 5, 2020, the Company entered an “at-the-market” equity distribution agreement with Piper Sandler & Co. (“Piper Sandler”) and Canaccord Genuity LLC (“Canaccord Genuity”) acting as co-agents (the “2020 ATM Facility”). Under the terms of the 2020 ATM Facility, the Company may, from time to time, sell Common Shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on the Nasdaq Capital Market. During the year ended December 31, 2021, the Company issued 15,315 shares under the 2020 ATM Facility at an average price of $2.446 for gross proceeds of $37 thousand ($36 thousand net of share issue costs). Costs associated with the proceeds consisted of a 3% cash commission.

On July 20, 2020 and August 10, 2020, the Company completed a confidentially marketed public offering (“CMPO”), with Piper Sandler as the representative of the underwriters, through the issuance of, in the aggregate, 11,854,472 Common Shares for gross proceeds of $62.2 million (approximately $58.2 million net of share issue costs).

During the year ended December 31, 2019, the Company completed two CMPOs, with RBC Capital Markets, LLC (“RBC Capital Markets”) and Canaccord Genuity, as representatives of the underwriters, and Piper Jaffray & Co (now Piper Sandler) as the representative of the underwriters, respectively, through the issuance of, in the aggregate, 30,043,750 Common Shares for aggregate gross proceeds of $95.45 million (approximately $88.18 million net of share issue costs). The Company also raised capital pursuant to two separate share purchase agreements with Aspire Capital Fund, LLC (“Aspire Capital”) through the issuance of an aggregate of 7,302,433 Common Shares for aggregate gross proceeds of $14.4 million.

Our ability to raise additional funds could be affected by adverse market conditions, the status of our product pipeline, possible delays in enrollment in our trial related to COVID-19, and various other factors and we may be unable to raise capital when needed, or on terms favorable to us. If the necessary funds are not available, we may need to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying the time to market for any of our product candidates.

Cash flows:

The following table presents a summary of our cash flows for the years ended December 31, 2021 and 2020:

For the Years Ended,

Net cash provided by (used in):

Effect of exchange rates changes on cash and cash equivalents 7 7

Net (decrease)/increase in cash and cash equivalents $ (78,279 ) $ 37,551

Cash used in operating activities:

Our cash used from operating activities for the years ended December 31, 2021 and 2020 was approximately $43.3 million and $33.9 million, respectively. Our uses of cash for operating activities for both years consisted primarily 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, drug manufacturing costs, laboratory supplies and materials, and professional fees. In the year ended December 31, 2021, our use of cash from operating activities also included $5.0 million in license fees to Hanmi for global development rights of compound HM43239. Net cash used in operating activities was higher in the year ended December 31, 2021 as compared with the year ended December 31, 2020 resulting mostly from a higher net loss in the current year. See “Results of Operations”.

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

Cash flow from investing activities:

Our cash used by investing activities for the year ended December 31, 2021 was $35.2 million, and consisted of net purchases of investments of approximately $35.0 million and purchases of property and equipment of approximately $212 thousand.

Our cash provided by investing activities for the year ended December 31, 2020 was $12.6 million, and consisted of maturities of investments of approximately $12.7 million and purchases of property and equipment of approximately $79 thousand.

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

Cash flow from financing activities:

Our cash flow from financing activities for the year ended December 31, 2021 was approximately $226 thousand, and consisted mostly of proceeds from the exercise of stock options of $190 thousand and proceeds from shares issued from the 2020 ATM Facility of approximately $36 thousand as described above. Our cash flow from financing activities for the year ended December 31, 2020 was approximately $58.8 million, consisted mostly of the CMPO we completed in July and August 2020 as described above and of proceeds from the exercise of stock options of $573 thousand.

At-The-Market Facilities

On May 5, 2020, the Company entered into an equity distribution agreement with Piper Sandler and Canaccord Genuity acting as co-agents in connection with the 2020 ATM Facility. Under the terms of the 2020 ATM Facility, the Company may, from time to time, sell Common Shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on the Nasdaq Capital Market. During the year ended December 31, 2021, the Company issued 15,315 shares under the 2020 ATM Facility at an average price of $2.446 for gross proceeds of approximately $37 thousand ($36 thousand net of share issue costs). Costs associated with the proceeds consisted of a 3% cash commission.

Contractual Obligations and Off-Balance Sheet Financing

As at December 31, 2021, we have not entered into any off-balance sheet arrangements.

The Company enters into research, development and license agreements in the ordinary course of business where the Company receives research services and rights to proprietary technologies. Milestone and royalty payments that may become due under various agreements are dependent on, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which is uncertain.

On November 4, 2021, the Company entered into an exclusive license agreement with Hanmi for global rights to its compound named HM43239. Under the Company’s license agreement with Hanmi, the Company has maximum obligations for clinical development and global regulatory milestones totaling $64.5 million for the first potential clinical indication of HM43239, $34 million for the second indication, and $29 million for the third Indication. The Company has maximum obligations for tiered global sales based milestones totaling $280 million. The Company also has an obligation for tiered royalty payments on global sales of commercialized product. The timing of any milestone or royalty payments that may become due is not yet determinable.

Under the license agreement with CG with regards to the Rights (other than the China Rights), the Company has obligations for development milestones of $16 million related to the initiation of Phase 2 and pivotal clinical trials, and regulatory milestones totaling $44 million. The Company also has an obligation to pay royalty payments on sales of commercialized product. The timing of any milestone or royalty payments that may become due is not yet determinable.

Under the license agreement with CG with regards to the China Rights, we entered into a license agreement with CG to gain an exclusive license to CG-806 in China (including the People’s Republic of China, Hong Kong and Macau). The Company has future obligations of development milestones of $6 million related to approval of an IND and to the initiation of Phase 2 and pivotal clinical trials, and regulatory milestones totaling $20 million. The Company also has an obligation to pay sales milestones and royalty payments on sales of commercialized product. The timing of any milestone or royalty payments that may become due is not yet determinable.

RESULTS OF OPERATIONS

A summary of the results of operations for the years ended December 31, 2021 and 2020 is presented below:

Year ended December 31,

(in thousands except per Common Share data) 2021 2020

Revenues $ — $ —

Unrealized gain/(loss) on securities available-for-sale - (18 )

Basic and diluted loss per Common Share $ (0.73 ) $ (0.67 )

Net loss of $65.4 million for the year ended December 31, 2021 increased by approximately $10.1 million as compared with $55.2 million for the year ended December 31, 2020, primarily as of a result of $12.5 million in license fees paid to Hanmi for development rights of HM43239, a combined increase in program costs and related personnel expenses of approximately $4.2 million on our luxeptinib development program, and higher cash-based general and administrative expenses of approximately $1.5 million, and lower finance income of approximately $0.4 million, offset by a decrease of $8.6 million in stock-based compensation expense.

Research and Development Expenses

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

● License fees.

We have ongoing Phase 1 clinical trials for our product candidates HM43239 and Luxeptinib. HM43239 was licensed into Aptose in Q4, 2021 and we have assumed sponsorship, and the related costs, of the HM43239 study effective January 1, 2022. In Q4, 2021, we discontinued the APTO-253 program and are exploring strategic alternatives for this compound.

We expect our research and development expenses to be higher for the foreseeable future as we continue to advance HM43239 and luxeptinib into larger clinical trials.

The research and development (“R&D”) expenses for the years ended December 31, 2021 and 2020 were as follows:

Year ended December 31,

Depreciation of equipment 12 17

R&D expenses increased by $16.7 million to $46.0 million for the year ended December 31, 2021 as compared with $29.3 million for the comparative period in 2020. Changes to the components of our R&D expenses presented in the table above are primarily as a result of the following activities:

General and Administrative Expenses

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

We expect that our general and administrative expenses will increase for the foreseeable future as we incur additional costs associated with being a publicly traded company and to support our expanding pipeline of activities. We also expect our intellectual property related legal expenses to increase as our intellectual property portfolio expands.

The general and administrative expenses for the years ended December 31, 2021 and 2020 are as follows:

Year ended December 31,

General and administrative, excluding items below: $ 10,164 $ 8,627

Depreciation of equipment 138 135

General and administrative expenses for the year ended December 31, 2021 were approximately $19.5 million as compared with $26.5 million for the comparative period in 2020, a decrease of approximately $7.0 million. The decrease was primarily as a result of the following:

COVID-19 did not have a significant impact on our results of operations for the years ended December 31, 2021 and 2020. We have not experienced and do not foresee material delays to the enrollment of patients or timelines for the HM43239 Phase 1/2 trial or the luxeptinib Phase 1a/b trials due to the variety of clinical sites that we have actively recruited for these trials. As of the date of this report, we have not experienced material delays in the manufacturing of HM43239 or luxeptinib related to COVID-19. Should our manufacturers be required to shut down their facilities due to COVID-19 for an extended period of time, our trials may be negatively impacted.

CRITICAL ACCOUNTING POLICIES

Critical Accounting Policies and Estimates

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

Significant accounting judgments and estimates

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

Other important accounting policies and estimates made by management are the estimates related to prepaid and accrued R&D activities, the valuation of contingent liabilities, the valuation of tax accounts, and the assumptions used in determining the valuation of share-based compensation.

Research and Development Activities:

R&D costs are expensed as incurred. R&D costs consist primarily of salaries and benefits, stock-based compensation, manufacturing, contract services, clinical trials, and research related overhead. Non-refundable advance payments for goods and services that will be used in future research are recorded in prepaid and other assets and are expensed when the services are performed.

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

Although Management does not expect our estimates to be materially different from amounts actually incurred, if the estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in the Company reporting amounts that are too high or too low in any particular period. As of December 31, 2021, the Company has recorded approximately $632 thousand in prepaid expenses and approximately $3.5 million in accrued liabilities related to its research and development activities. If the estimates are too high or too low by a factor of 10% this would mean that prepaid expenses would be over or understated by approximately $63 thousand, and accrued liabilities would be over or understated by approximately $350 thousand. On a combined basis, this could mean an increase or decrease in research and development expenses by approximately $413 thousand. To date, there have been no material differences between the estimates of such expenses and the amounts actually incurred.

Valuation of contingent liabilities:

The Company utilizes considerable judgment in the measurement and recognition of provisions and the Company’s exposure to contingent liabilities. Judgment is required to assess and determine the likelihood that any potential or pending litigation or any and all potential claims against the Company may be successful. The Company must estimate if an obligation is probable, as well as quantify the possible economic cost of any claim or contingent liability. Such judgments and assumptions are inherently uncertain. The increase or decrease of one of these assumptions could materially increase or decrease the fair value of the liability and the associated expense.

Valuation of tax accounts:

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Currently, the Company has deductible temporary differences which would create a deferred tax asset. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. To date, the Company has determined that none of its deferred tax assets should be recognized. The Company’s deferred tax assets are mainly comprised of its net operating losses from prior years and prior year research and development expenses not yet deducted for income tax purposes. These tax pools relate to entities that have a history of losses, have varying expiry dates, and may not be used to offset taxable income. As well, there are no taxable temporary differences or any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets. The generation of future taxable income could result in the recognition of some portion or all of the remaining benefits, which could result in an improvement in the Company’s results of operations through the recovery of future income taxes.

Valuation of share based compensation:

Management measures the costs for share based payments using market-based option valuation techniques. Assumptions are made and judgment is used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the share price, expected dividend yield, and expected life of the options. The Company uses historical data to estimate the expected dividend yield and expected volatility of its Common Shares in determining the fair value of stock options. The expected life of the options represents the estimated length of time the options are expected to remain outstanding. Such judgments and assumptions are inherently uncertain. The increase or decrease of one of these assumptions could materially increase or decrease the fair value of share based payments and share purchase warrants issued and the associated expense.

The weighted average assumptions that were used in the Black Scholes option pricing model to determine the fair value of stock options granted during the periods ended December 31, 2021 and 2020, respectively, are presented in Note 12 to the consolidated financial statements.

Updated share information

As at March 22, 2022, we had 92,229,189 Common Shares issued and outstanding. In addition, there were 18,674,755 Common Shares issuable upon the exercise of outstanding stock options.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this item are included in the Exhibits to this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of our fiscal year ended December 31, 2021, an evaluation of the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) was carried out by our management, with the participation of our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that as of the end of that fiscal year, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officers, to allow timely decisions regarding required disclosure.

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive and financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2021, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on those criteria. We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the Securities Act. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the 1934 Act) during our fiscal quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III.

Certain information required by Part III of this Annual Report on Form 10-K is omitted from this report because we are incorporating by reference to the definitive Proxy Statement for our 2022 Annual Meeting of Shareholders, referred to as the Proxy Statement, which will be filed with the SEC within 120 days of the 2021 fiscal year-end.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated herein by reference to the information from the Proxy Statement under the sections entitled “Election of Directors,” “Nomination of Directors,” and “Corporate Governance – Board Committees” and except for the information required with respect to our executive officers, which has been included under the heading “Executive Officers” in Item 1, Part I of this Form 10-K, and is incorporated herein by reference, and except for information on our code of ethics:

We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at http://www.aptose.com under the Corporate Governance section of our Investor Relations page. We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals that is required to be disclosed pursuant to SEC rules and regulations, the name of such person who is granted the waiver and the date of the waiver.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the information from the Proxy Statement under the sections entitled “Executive Compensation,” and “Director Compensation.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to the information from the Proxy Statement under the sections entitled “Share Ownership of Certain Beneficial Owners, Management and Directors” and “Equity Compensation Plan Information.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AN DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to the information from the Proxy Statement under the sections entitled “Corporate Governance - Independence of the Board” and “Interest of Related Persons in Transactions.”

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated herein by reference to the information from the Proxy Statement under the section entitled “Audit, Audit-Related, Tax and Other Fees” and “Pre-Approval Policies and Procedures.”

PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report.

1. Financial Statements. We have filed the following documents as part of this Annual Report:

Page

Balance Sheets F-5

Statements of Operations and Comprehensive Loss F-6

Statements of Shareholders’ Equity F-7

Statements of Cash Flows F-8

Notes to Financial Statements F-9

2. Financial Statement Schedules.

All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.

(b) Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this report:

Exhibit Number Description of Document

4.1* Description of Securities

Exhibit Number Description of Document

21.1* List of Subsidiaries

23.1* Consent of Independent Registered Public Accounting Firm (KPMG)

24.1* Powers of Attorney (included on signature page)

101.INS** Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

Exhibit Number Description of Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

+ Indicates management contract or compensatory plan.

* Filed herewith.

ITEM 16. FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on the 22ndday of March, 2022.

Aptose Biosciences Inc. /s/ William G. Rice

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dr. William G. Rice and Dr. Jotin Marango , and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title

/s/ Denis R. Burger, Ph.D. Director, Lead Independent

/s/ Carol G. Ashe Director

/s/ Caroline Loewy Director

/s/ Erich M. Platzer, M.D., Ph.D. Director

/s/ Mark D.Vincent, M.D. Director

/s/ Warren Whitehead Director

Consolidated Financial Statements

APTOSE BIOSCIENCES INC.

Years ended December 31, 2021 and 2020

F-1

KPMG LLP

100 New Park Place, Suite 1400

Vaughan, ON L4K 0J3

Tel 905-265 5900

Fax 905-265 6390

www.kpmg.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Aptose Biosciences Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Aptose Biosciences Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.

F-2

Aptose Biosciences Inc.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Research and Development Prepaid and Accrued Costs

As discussed in Notes 2(i), 4 and 9 to the consolidated financial statements, the Company records expenses for research and development activities based on Management’s estimates of services received and efforts expended pursuant to contracts with vendors that conduct research and development on the Company’s behalf. The financial terms vary from contract to contract and may result in uneven payment flows as compared with services performed or products delivered. As a result, the Company is required to estimate research and development expenses incurred during the period, which impacts the amount of accrued expenses and prepaid balances related to such costs as of each balance sheet date. Management estimates the amount of work completed through discussions with internal personnel and the contract research and contract manufacturing organizations as to the progress or stage of completion of the services. The Company’s estimates are based on a number of factors, including the Company’s knowledge of the status of each of the research and development project milestones, and contract terms together with related executed change orders. Management makes significant judgments and estimates in determining the accrued balance at the end of each reporting period.

We identified the evaluation of research and development prepaid and accrued costs as a critical audit matter. Higher degree of auditor judgment was required in evaluating the results of our audit procedures because of the subjectivity and estimation uncertainty associated with this estimate.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the critical audit matter. This included controls over the development of the estimated amount of prepaid and accrued costs incurred by the contract research and contract manufacturing organizations. For a selection of research and development projects, we assessed the Company’s estimates of a selection of the research and development activities completed to date by:

F-3

Aptose Biosciences Inc.

We have served as the Company’s auditor since 1994.

/s/KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

Vaughan, Canada

March 22, 2022

F-4

APTOSE BIOSCIENCES INC.

Consolidated Statements of Financial Position

(Expressed in thousands of US dollars)

Assets

Current assets:

Non-current assets:

Right-of-use assets, operating leases 465 925

Liabilities and Shareholders’ Equity

Current liabilities:

Current portion of lease liability, operating leases 459 539

Non-current liabilities:

Lease liability, operating leases 115 535

Shareholders’ equity:

Share capital:

Accumulated other comprehensive loss (4,316 ) (4,316 )

Total liabilities and shareholders’ equity $ 82,525 $ 126,262

See accompanying notes to consolidated financial statements.

Subsequent events (note 16)

F-5

APTOSE BIOSCIENCES INC.

Consolidated Statements of Loss and Comprehensive Loss

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

Revenue $ - $ -

Expenses:

Other income :

Foreign exchange gain/(loss) (1 ) 8

Other comprehensive loss:

Unrealized loss on securities available-for-sale - (18 )

Basic and diluted loss per common share $ (0.73 ) $ (0.67 )

Basic and diluted loss per common share 89,086 81,837

See accompanying notes to consolidated financial statements.

F-6

APTOSE BIOSCIENCES INC.

Consolidated Statements of Changes in Shareholders’ Equity

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

Common Shares

Common shares issued under the May 2020 ATM 15 36 - - - 36

Common shares issued upon exercise of stock options 82 327 (137 ) - - 190

Common shares issued pursuant to the public offering 11,854 58,234 - - - 58,234

Common shares issued upon exercise of stock options 235 998 (425 ) - - 573

Other comprehensive loss - - - (18 ) - (18 )

See accompanying notes to consolidated financial statements.

F-7

APTOSE BIOSCIENCES INC.

Consolidated Statements of Cash Flows

(Expressed in thousands of US dollars)

Cash flows from operating activities:

Items not involving cash:

Shares issued to Hanmi Pharmaceutical as license fees 7,500 -

Depreciation and amortization 150 152

Amortization of right-of-use assets 472 462

Interest on lease liabilities 43 69

Unrealized foreign exchange gain/(loss) (7 ) (8 )

Accrued interest on investments (18 ) 33

Change in operating working capital:

Operating lease payments (555 ) (537 )

Other assets (4 ) 12

Cash used in operating activities (43,304 ) (33,891 )

Cash flows from financing activities:

Issuance of common shares under 2020 ATM 36 -

Issuance of common shares under July/August 2020 Public Offering - 58,402

Offering costs paid - (168 )

Issuance of common shares pursuant to exercise of stock options 190 573

Cash provided by financing activities 226 58,807

Cash flows from (used in) investing activities:

Maturity (acquisition) of investments, net (34,996 ) 12,707

Purchase of property and equipment (212 ) (79 )

Cash provided by (used in) investing activities (35,208 ) 12,628

Effect of exchange rate fluctuations on cash and cash equivalents held 7 7

Increase/(decrease) in cash and cash equivalents (78,279 ) 37,551

Cash and cash equivalents, beginning of year 117,393 79,842

Cash and cash equivalents, end of year $ 39,114 $ 117,393

See accompanying notes to consolidated financial statements.

F-8

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

1. Reporting entity:

Aptose Biosciences Inc. (“Aptose” or the “Company”) is a clinical‐stage precision oncology company developing differentiated kinase inhibitors addressing unmet medical needs in oncology. The Company’s executive offices are located in San Diego, California and its head office is located in Toronto, Canada.

Aptose has two clinical-stage programs and a third program in discovery-stage and partnered with another company. Luxeptinib (previously named CG-806), Aptose’s dual lymphoid and myeloid kinome inhibitor, is currently evaluating the safety, tolerability, PK, and preliminary efficacy of luxeptinib in a Phase 1a/b, multicenter, dose-escalation trial with expansions to assess in patients with chronic lymphocytic leukemia (CLL/SLL) or non-Hodgkin lymphomas (NHL), and, in parallel, a separate Phase 1a/b multicenter, dose escalation trial in patients with relapse or refractory acute myeloid leukemia (AML) and high-risk Myelodysplastic Syndrome (MDS) . In November 2021, Aptose licensed in HM43239 from Hanmi Pharmaceutical Co. HM43239 is an oral potent myeloid kinome inhibitor, targeting a constellation of kinases operative in myeloid malignancies and known to be involved in tumor proliferation, resistance to therapy, and differentiation. Specifically, HM43239 is a potent inhibitor of FLT3, SYK, cKIT-MUT, JAK, and other kinases. HM43239 is currently being evaluated in an international Phase 1/2 dose-escalation clinical trial designed to assess the safety, tolerability, pharmacokinetics and pharmacodynamic responses of HM43239 as a single agent in patients with relapsed or refractory AML. Aptose assumed sponsorship of this trial effective January 1, 2022. In December 2021 Aptose announced that it was discontinuing further development of APTO-253, a small molecule MYC inhibitor, previously positioned in a Phase 1a/b clinical trial for the treatment of patients with R/R blood cancers, including AML and high risk MDS.

We are advancing first-in-class targeted agents to treat life-threatening cancers that, in most cases, are not elective for patients and require immediate treatment. However, COVID-19 has caused global economic and social disruptions that could adversely affect our ongoing and planned research and development of our clinical-stage programs including but not limited to drug manufacturing campaigns, clinical trial activities including enrollment of patients in our ongoing and planned clinical trials, collection and analysis of patient data and eventually, the reporting of results from our trials.

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, drug manufacturing costs, laboratory supplies and materials, and professional fees.

We do not expect to generate positive cash flow from operations for the foreseeable future due to the early stage of our clinical trials. It is expected that negative cash flow will continue until such time, if ever, that we receive regulatory approval to commercialize any of our products under development and/or royalty or milestone revenue from any such products exceeds expenses.

Our ability to raise additional funds could be affected by adverse market conditions, the status of our product pipeline, possible delays in enrollment in our trial related to COVID-19, and various other factors and we may be unable to raise capital when needed, or on terms favorable to us. If necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying the time to market for any of our product candidates.

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

2. Significant accounting policies

(a) Basis of consolidation:

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

(b) Basis of presentation:

These consolidated 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 annual reports filed on Form 10-K. The functional and presentation currency of the Company is the US dollar.

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

The impacts of such estimates are pervasive throughout the consolidated 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) Leases

The Company’s operating leases of tangible property with terms greater than twelve months are recognized as right of use assets, which represents the lessee’s right to use, or control the use of, a specified asset for the lease term, and a corresponding lease liability, which represents the lessee’s obligation to make lease payments under a lease, measured on a discounted basis. Landlord inducements in the form of free rent periods are netted against lease payments to the landlord in measuring right-of-use assets and lease liabilities.

(e) Cash and cash equivalents:

Cash and cash equivalents are short-term highly liquid investments with original maturities of 90 days or less as at the date of purchase. Cash equivalents are accounted for an amortized cost basis, which approximates its fair value due to their short-term maturities.

(f) Investments:

Investments consist of term deposits with original maturities greater than 90 days and are classified by management as securities available-for-sale. These available-for-sale securities are recorded at estimated fair values. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income (AOCI) in shareholder’s equity. Realized gains and losses and declines in value that are judged to be other than temporary are included in interest income.

(g) 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 Canadian corporations and treasury bills, which are capable of prompt liquidation.

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

(h) Property and equipment:

Property and equipment is measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The Company records depreciation at rates that charge operations with the cost of the assets over their estimated useful lives on a straight‐line basis as follows:

Office furniture 5 years

Laboratory equipment 5 years

Computer hardware 3 years

Computer software 3 years

Leasehold improvements Life of lease

The residual value, useful life and methods of depreciation of the assets are reviewed at each reporting period and adjusted prospectively if appropriate.

(i) Research and development:

Research and development (R&D) costs are expensed as incurred. R&D costs consist primarily of salaries and benefits, stock-based compensation, manufacturing, contract services, clinical trials and research related overhead. Non-refundable advance payments for goods and services that will be used in future research are recorded in prepaid and other assets and are expensed when the services are performed.

(j) Fair value:

The Company measures its financial assets and liabilities at fair value. The carrying amounts for the Company’s financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities approximate their fair value due to their short maturities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

(k) Stock-based compensation:

The Company has a stock‐based compensation plan (the “Plan”) available to officers, directors, employees and consultants with grants under the Plan approved by the Company’s Board of Directors. Under the Plan, the exercise price of each option equals the closing trading price of the Company’s stock on the day prior to the grant if the grant is made during the trading day or the closing trading price on the day of grant if the grant is issued after markets have closed. Vesting is provided for at the discretion of the Board of Directors and the expiration of options is to be no greater than 10 years from the date of grant.

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

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

Stock options awarded to non‐employees are measured at grant-date fair value of the equity instruments issued in accordance with FASB issued accounting standards update No2018-07, Topic 718.

The Company has a stock incentive plan pursuant to which the Board may grant equity settled stock‐based awards comprised of restricted stock units or dividend equivalents to employees, officers, consultants, independent contractors, advisors and non‐employee directors of the Company. Compensation cost for restricted share units is measured at fair value at the date of grant, which is the market price of the underlying security, and is expensed over the award’s vesting period on a straight-line basis using an estimate of the number of awards that will eventually vest.

(l) Segment reporting:

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or CODM. The Company’s Chief Executive Officer serves as its CODM. The Company views its operations and manages its business as one segment, which is the discovery and development of personalized therapies addressing unmet medical needs in oncology. The Company operates primarily in the US.

(m) Loss per share:

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the year. Diluted loss per share is computed similarly to basic loss per share except that the weighted average share outstanding is increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the year. The inclusion of the Company’s stock options and warrants in the computation of diluted loss per share has an anti‐dilutive effect on the loss per share and, therefore, they have been excluded from the calculation of diluted loss per share.

(n) Income taxes:

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which these temporary differences are expected to be recovered or settled. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. Reserves are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filing is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. Potential interest and penalties associated with such uncertain tax positions are recorded as components of income tax expense. As at December 31, 2021 and December 31, 2020, the Company has not recorded any reserves for potential payments as the Company has a history of losses and does not have any revenue from operations.

3. Cash and cash equivalents:

Cash and cash equivalents consists of cash of $294 thousand ( December 31,2020 ‐ $329 thousand), deposits in high interest savings accounts, money market funds and accounts with original maturities less than 90 days totaling $38.820 million ( December 31,2020 ‐ $117.064 million).

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

4. Prepaid expenses:

December 31, December 31,

Prepaid research and development expenses $ 632 $ 622

5. Property and equipment:

December 31, 2021 Cost Accumulated depreciation Net book value

December 31, 2020 Cost Accumulated depreciation Net book value

Laboratory equipment $ 185 $ 177 $ 8

6. Right-of-use assets, operating leases:

Right-of-use assets, beginning of year $ 1,848 $ 1,837

Additions to right-of-use assets 12 11

Right-of-use assets, end of year 1,860 1,848

Accumulated amortization (1,395 ) (923 )

Right-of use assets, NBV $ 465 $ 925

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

7. Investments:

Investments consisted of the following as of December 31, 2021 and December 31, 2020:

Cost Unrealized gain Market value

Guaranteed Investment Certificate $ 20,016 - 20,016

Cost Unrealized gain Market value

United States Treasury Bills $ 5,000 - 5,000

8. 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 the Company’s financial instruments for the periods presented:

Assets

High interest savings accounts 5,045 - 5,045 -

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

Assets

Money Market accounts $ 668 $ - $ 668 $ -

United States Treasury Bill 5,000 - 5,000 -

Government of Canada Treasury Bill 23,999 - 23,999 -

9. Accrued liabilities:

Accrued liabilities as of December 31, 2021 and December 31, 2020 consisted of the following:

December 31, December 31,

Accrued personnel related costs $ 2,152 $ 1,917

Accrued research and development expenses 3,520 1,932

10. Lease liability

Aptose leases office space and lab space in San Diego, California. The lease for the office space expires on March 31, 2023 and can be extended for an additional 5 year period. The lease for our lab space expired on February 28, 2022 and has been renewed for a twelve month period. We lease office space in Toronto, Ontario, Canada and the lease for this location expires on June 30, 2023 with an option to renew for another 5-year period. 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,

Thereafter -

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

To calculate the lease liability, the lease payments in the table above were discounted over the remaining term of the leases using the Company’s incremental borrowing rate as at January 1, 2019 for existing leases at the time of adopting the Topic 842, and for new leases after the date adoption, as at the date of the execution date of the new lease. The following table presents the weighted average remaining term of the leases and the weighted average discount rate:

December 31, December 31,

Weighted-average remaining term – operating leases (years) 1.2 2.1

Weighted-average discount rate – operating leases 5.37 % 5.40 %

Lease liability, current portion $ 459 $ 539

Lease liability, long term portion 115 535

Lease liability, total $ 574 $ 1,074

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

Operating lease cost $ 515 $ 530

Operating cash flows from operating leases $ 555 $ 537

11. Share capital:

The Company has authorized share capital of an unlimited number of common voting shares.

(a) Equity issuances:

(ii) 2020 At‐The‐Market (“ATM”) Facility

On May 5, 2020, the Company entered into an equity distribution agreement with Piper Sandler and Canaccord Genuity acting as co-agents in connection with the 2020 ATM Facility. Under the terms of the 2020 ATM Facility, the Company may, from time to time, sell Common Shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on the Nasdaq Capital Market. During the year ended December 31, 2021, the Company issued 15,315 shares under this ATM Facility at an average price of $2.446 for gross proceeds of $37 thousand ($36 thousand net of share issue costs). Costs associated with the proceeds consisted of a 3% cash commission.

(iii) July/August 2020 Confidentially Marketed Public Offering (CMPO)

On July 20, 2020 and August 10, 2020, the Company completed a confidentially marketed public offering through the issuance of 11,854,472 common shares at a price of $5.25 per share for gross proceeds of $62.236 million (approximately $58.234 million net of share issue costs). Costs associated with the proceeds consisted of a 6% cash commissions and share issue costs, which consisted of agent commission, legal and professional fees and listing fees.

(b) Loss per share:

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

(in thousands) Year ended December 31, 2021 Year ended December 31, 2020

Weighted-average common shares – basic and diluted 89,086 81,837

Net loss per share – basic and diluted $ (0.73 ) $ (0.67 )

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

The effect of any potential exercise of the Company’s stock options outstanding during the year ended December 31, 2021 and December 31, 2020 has been excluded from the calculation of diluted loss per common share as it would be anti‐dilutive.

12. Stock‐based compensation:

(a) Stock option plan and employee stock purchase plan

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

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

The Corporation currently maintains its existing Share Option Plan and 2015 Stock Incentive Plan (2015 SIP). Effective June 1, 2021 no further grants will be made under the Share Option Plan or 2015 SIP, though existing grants under the Share Option Plan will remain in effect in accordance with their terms.

The aggregate number of our common shares, no par value, that may be issued under all awards under the New Incentive Plan is (i) 6,343,242, plus (ii) any of our common shares subject to any outstanding award under our prior plans that, after June 1, 2021, are not purchased or are forfeited or reacquired by us, or otherwise not delivered to the participant due to termination, cancellation or cash settlement of such award subject to the share counting provisions of the New Incentive Plan.

Under both the Share Option Plan and the New Incentive Plan, the exercise price of each option equals the closing trading price of the Company’s stock on the day prior to the grant if the grant is made during the trading day or the closing trading price on the day of grant if the grant is issued after markets have closed. Vesting is provided for at the discretion of the Board of Directors and the expiration of options is to be no greater than 10 years from the date of grant.

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

The ESPP, which will be administered by the Board of Directors, allows eligible employees of the Company with an opportunity to purchase Common Shares through accumulated payroll deductions up to a maximum 15% of eligible compensation. The ESPP will be implemented by consecutive offering periods with a new offering period commencing on the first trading day on or after February 1 and August 1 each year, or on such other date as the Board of Directors will determine, and continuing thereafter until terminated in accordance with the Plan. Unless the Board of Directors provides otherwise, the purchase price will be equal to eighty‐five percent (85%) of the fair market value of a Common Share on the offering date or the exercise date, whichever is lower.

The maximum number of Common Shares which will be made available for sale under the ESPP will be 1,700,000 Common Shares.

The Company has not established a first offering period; there are no options outstanding under the ESPP as of December 31, 2021.

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APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

Stock option transactions for the year ended December 31, 2021 and December 31, 2020, are summarized as follows:

Option numbers are in (000’s)

Weighted average

Aggregate intrinsic value represents the excess of the value of the closing stock price on the previous trading day of the respective balance sheet dates over the exercise price of the stock options. Total intrinsic value of options exercised was $222 thousand for 2021 (2020 – $850 thousand).

As of December 31, 2021, there was $6.0 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over an estimated weighted-average period of 1.68 years.

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

Risk-free interest rate 0.59 % 1.27 %

Expected dividend yield - -

Expected volatility 81.8 % 85.9 %

Expected life of options (years) 5 5

Grant date fair value $ 2.47 $ 4.59

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

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

Number of options Number of options

Cliff vesting after one year anniversary - 300

Earlier of Performance criteria or 4 years 800 -

Total stock options granted in the year 4,659 6,362

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APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

During the year ended December 31, 2021, the option agreements of one officer were modified as part of a separation and release agreement. Vested options of 1,679,169, with exercise prices ranging from $1.03 to $7.44, were allowed to continue to be exercisable for an additional 12 month period, and also 504,833 options that would have expired unvested, were allowed to continue to vest for a 12 month period. As there was no service requirement, during the year ended December 31, 2021, the company recorded $945 thousand and $663 thousand additional compensation related to these modifications for the vested and unvested options, respectively.

During the year ended December 31, 2021, the Company issued 800,000 performance stock option (PSO) to two officers of the Company. One officer received 400,000 PSOs, of which 200,000 PSOs will vest in tranches connected with financing events, and the remaining 200,000 PSOs will vest in connection with licensing and partnering events. The other officer received 400,000 PSOs, of which 200,000 PSOs will vest in tranches connected to dose escalation trials and the remaining 200,000 PSOs will vest in connection with expansion trials. If such performance triggers are not attained, such PSOs will vest on the fourth anniversary of the grant. On November 11, 2021, the performance criteria connected with the financing events were met, and 200,000 PSOs were vested.

(b) Restricted share units

The Company has a stock incentive plan (SIP) pursuant to which the Board may grant stock-based awards comprised of restricted stock units or dividend equivalents to employees, officers, consultants, independent contractors, advisors and non-employee directors of the Company. Each restricted unit is automatically redeemed for one common share of the Company upon vesting. The following table presents the activity under the SIP plan for the year ended December 31, 2021 and 2020 the units outstanding.

Outstanding, beginning of period - $ - 40 $ 2.00

Outstanding, end of period - $ - - $ -

On March 10, 2020, the Company granted 645,000 restricted share units (RSUs) with a vesting term of three months. On May 5, 2020, the vesting term on the RSUs was extended from three months to four months. On July 10, 2020, all of these restricted share units were vested and were redeemed for 645,000 common shares.

On June 3, 2019, the Company granted 80,000 restricted share units (RSUs), 40,000 of which have a vesting term of three months and the balance have a vesting term of one year. On May 5, 2020, the vesting term on the balance was extended from one year to one year and one month. On July 2, 2020, the remaining of these restricted share units were vested and were redeemed for 40,000 common shares.

The grant date fair value of the RSUs was determined as the closing value of the common shares of the Company on the Nasdaq Stock Market on the date prior to the date of grant.

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APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

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

13. Collaborative agreements:

On November 4, 2021, the Effective Date, the Company entered into an exclusive license agreement with Hanmi Pharmaceutical Co. Ltd. (Hanmi) for global rights to its compound named HM43239. In consideration of the license and other rights granted, Aptose made an upfront payment to Hanmi in the amount of $12.5 million, including $5.0 million in cash and $7.5 million in Aptose common shares (the “Aptose Shares”). The number of Aptose Shares issued was determined using the average market closing price of the Aptose Shares on the NASDAQ stock market over the five (5) trading day period ending on the Effective Date. Accordingly, Aptose has issued 3,235,548 shares to Hanmi.

Under the Company’s license agreement with Hanmi, the Company has maximum obligations for clinical development and global regulatory milestones totaling $64.5 million for the first potential clinical indication of HM43239, $34 million for the second indication, and $29 million for the third Indication. The company has maximum obligations for tiered global sales based milestones totaling $280 million. The Company also has an obligation for tiered royalty payments on global sales of commercialized product. The timing of any milestone or royalty payments that may become due is not yet determinable.

Under the Company’s license agreement with CrystalGenomics for rights to CG-806, in all territories outside of the Republic of Korea and China, the Company has obligations for development milestones of $16 million related to the initiation of Phase 2 and pivotal clinical trials, and regulatory milestones totaling $44 million. The Company also has an obligation to pay royalty payments on sales of commercialized product. The timing of any milestone or royalty payments that may become due is not yet determinable.

On June 13, 2018, the Company entered into a license agreement with CrystalGenomics to gain an exclusive license to CG-806 in China. The Company has potential future obligations of development milestones of $6 million related to approval of an Investigational New Drug (“IND”) and to the initiation of Phase 2 and pivotal clinical trials, and regulatory milestones totaling $20 million. The Company also has an obligation to pay sales milestones and royalty payments on sales of commercialized product. The timing or likelihood of any milestone or royalty payments that may become due is not yet determinable.

On March 7, 2018, we entered into an exclusive global license agreement with Ohm Oncology (OHM), for the development, manufacture and commercialization of APL-581, as well as related molecules from our dual bromodomain and extra-terminal domain motif (BET) protein and kinase inhibitor program. Under the agreement, we will retain reacquisition rights to certain molecules, while OHM/LALS will have the rights to develop and sublicense all other molecules. We have received two nominal upfront cash payments and are eligible to receive up to $125 million of additional payments based on the achievement of certain development, regulatory and sales milestones, as well as significant royalties on future sales generated from the program, if any.

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APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

14. Income taxes:

(a) Income taxes

For the years ended December 31, 2021 and 2020, the total comprehensive loss is as follows:

Loss attributed to US foreign operations $ (52,447 ) $ (39,757 )

Loss attributed to Canadian operations (12,907 ) (15,481 )

Income (loss) before income taxes $ (65,354 ) $ (55,238 )

(b) Tax rate reconciliation

Major items causing the Company’s income tax rate to differ from the statutory rate of approximately 26.5% ( December 31,2020 – 26.5%) are as follows:

Statutory Canadian corporate tax rate 26.5 % 26.5 %

Computed expected tax recovery $ (17,319 ) $ (14,638 )

Non-deductible permanent differences 3,707 4,959

Foreign tax rate differential (683 ) (428 )

Prior year true-up adjustments (951 ) (230 )

$ - $ -

The tax effects of temporary differences that give rise to significant portions of the unrecognized deferred tax assets are presented below:

Net operating losses carried forward $ 49,286 $ 37,362

Research and development expenditures 5,032 5,032

Property, equipment, and other intangible assets 7,261 3,760

Research and development tax credits 4,202 3,597

Right-of-use assets 40 40

Net deferred tax asset $ - $ -

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APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

The valuation allowance at December 31, 2021 was primarily related to net operating loss carryforwards that, in the judgment of management, are not more-likely than-not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely than-not that all or some portion of the deferred assets will not be realized. This ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those deductible temporary difference become deductible. Based on the history of losses and projections for future taxable income, management believes that it is not more-likely than-not that the Company will realize the benefits of these deductible temporary differences (e.g. deferred tax assets).

The Company has Canadian undeducted research and development expenditures, totaling $19.0 million that can be carried forward indefinitely. The Company also has Canadian non‐refundable federal and provincial investment tax credits of approximately $3.3 million which are available to reduce future federal taxes payable and begin to expire in 2022, as well as non‐refundable US research and development tax credits of approximately $1.8 million which are available to reduce future US taxes payable and begin to expire in 2038.

In addition, the Company has Canadian non-capital loss carryforwards of $177.9 million. To the extent that the non-capital loss carryforwards are not used, they begin to expire in 2026. The Company also has US non-capital loss carryforward of $0.9 million, To the extent that the non-capital loss carryforwards are not used, they begin to expire in 2034.

The Company files income tax returns with Canada and its provinces and territories. Generally, we are subject to routine examinations by the Canada Revenue Agency ("CRA"). Income tax returns filed with various provincial jurisdictions are generally open to examination for periods of four to five years subsequent to the filing of the respective return.

The Company also files income tax returns for our U.S. operations and subsidiary with the U.S. federal and state tax jurisdictions. Generally, we are subject to routine examination by taxing authorities in the U.S. jurisdictions. There are presently no examination of our U.S. federal and U.S. state returns. We believe that our tax positions comply with the applicable tax law.

15. Selected quarterly financial data (unaudited):

Selected financial data (unaudited) for the periods presented was as follows:

Revenue $ - $ - $ - $ -

Basic and diluted loss per common share (0.18 ) (0.15 ) (0.13 ) (0.27 )

Revenue $ - $ - $ - $ -

Basic and diluted loss per common share (0.15 ) (0.21 ) (0.15 ) (0.17 )

F-

APTOSE BIOSCIENCES INC.

Notes to Consolidated Financial Statements

Year ended December 31, 2021 and 2020

(Tabular amounts in thousands of United States dollars, except as otherwise noted)

16. Subsequent events

Subsequent to the year end, the Company issued 3,870,000 stock options to directors, officers, employees and consultants with an average exercise price of $1.34. The stock options vest 50% after one year and 16.67% on each of the next three anniversaries, except for 425,000 options which vest 50% after one year and 25% on each of the next two anniversaries.

F-23

APTOF US Equity

APTOF · 10-K · period ended 2021-12-31

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AN DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

APTOF US Equity☆

APTOF · 10-K · period ended 2021-12-31

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AN DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

APTOF US Equity