UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission file number: 001-37769

 

VBI VACCINES INC.

(Exact name of registrant as specified in its charter)

 

British Columbia, Canada		N/A
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

160 Second Street, Floor 3
Cambridge, Massachusetts		02142
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: 617-830-3031

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, no par value per share		VBIV		Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Common Shares, no par value per share		28,682,275
(Class)		Outstanding at May 15, 2024

 

 

 

VBI VACCINES INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

TABLE OF CONTENTS

 

		Page
PART I - FINANCIAL INFORMATION		5
Item 1.	Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets – March 31, 2024 (unaudited) and December 31, 2023	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2024 and 2023 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
PART II - OTHER INFORMATION		47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		50

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

CONTAINED IN THIS REPORT

 

This quarterly report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “will,” “may,” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers, and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from our historical experience and our present expectations, or projections described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2024. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: 

 

●	the timing of, and our ability to, obtain and maintain regulatory approvals for our clinical trials, products, and pipeline candidates;
●	our ability to achieve and sustain commercial success of PreHevbrio in the United States (“U.S.”) and PreHevbri in Europe;
●	the timing and results of our ongoing and planned clinical trials for products and pipeline candidates;
●	the amount of funds we require for our prophylactic and therapeutic pipeline candidates;
●	the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements;
●	our ability to manufacture, or to have manufactured, our 3-antigen hepatitis B vaccine and our pipeline candidates, at a commercially viable scale to the standards and requirements of regulatory agencies;
●	our ability to complete the Brii Transactions on a timely basis;
●	the impact of the COVID-19 endemic and its effects on our clinical studies, research programs, manufacturing, business plan, regulatory review including site inspections, and the global economy;
●	our ability to effectively execute and deliver our plans related to commercialization, marketing, manufacturing capabilities and strategy;
●	our ability to retain and maintain a good relationship with our current employees, and our ability to competitively attract new employees with relevant experience and expertise;
●	the suitability and adequacy of our office, manufacturing, and research facilities and our ability to secure term extensions or expansions of leased space;
●	the ability of our vendors and suppliers to manufacture and deliver materials in a timely manner that meet regulatory agency and our standards and requirements to meet planned timelines and milestones;

 

 

●	any disruption in the operations of our Rehovot, Israel manufacturing facility where we manufacture all of our clinical and commercial supplies of our 3-antigen hepatitis B vaccine and clinical supplies of our hepatitis B immunotherapeutic, VBI-2601;
●	our compliance with all laws, rules, and regulations applicable to our business and products;
●	our ability to continue as a going concern;
●	our history of losses;
●	our ability to generate revenues and achieve profitability;
●	emerging competition and rapidly advancing technology in our industry that may outpace our technology;
●	customer demand for our 3-antigen hepatitis B vaccine and pipeline candidates;
●	the impact of competitive or alternative products, technologies, and pricing;
●	general economic conditions and events and the impact they may have on us and our potential customers;
●	our ability to obtain adequate financing in the future on reasonable terms, if, as, and when we need it;
●	our ability to implement network systems and controls that are effective at preventing cyber-attacks, malware intrusions, malicious viruses, and ransomware threats;
●	our ability to secure and maintain protection over our intellectual property;
●	our ability to maintain our existing licenses with licensors of intellectual property, or obtain new licenses for intellectual property;
●	changes to legal and regulatory processes for biosimilar approval and marketing that could reduce the duration of market exclusivity for our products;
●	our ability to regain and maintain compliance with the NASDAQ Capital Market’s (“Nasdaq”) listing standards;
●	our success at managing the risks involved in the foregoing items; and
●	other factors discussed in this Form 10-Q.

 

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

Unless otherwise stated or the context otherwise requires, the terms “VBI,” “we,” “us,” “our,” and the “Company” refer to VBI Vaccines Inc. and its subsidiaries.

 

Unless indicated otherwise, all references to the U.S. Dollar, Dollar, or $ are to the United States Dollar, the legal currency of the United States of America and all references to € mean Euros, the legal currency of the European Union. We may also refer to NIS, which is the New Israeli Shekel, the legal currency of Israel, and the Canadian Dollar or CAD, which is the legal currency of Canada.

 

Except for share and per share amounts, or as otherwise specified to be in millions, amounts presented are stated in thousands.

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

 

		March 31, 2024				December 31, 2023
		(unaudited)
CURRENT ASSETS
Cash		$	12,595			$	23,685
Accounts receivable, net			227				-
Inventory, net			9,944				8,499
Prepaid expenses			1,601				2,284
Other current assets			1,994				1,763
Total current assets			26,361				36,231
NON-CURRENT ASSETS
Other long-term assets			1,206				1,178
Property and equipment, net			9,088				9,665
Right of use assets			1,947				2,248
Intangible assets, net			35,734				36,499
Goodwill			1,107				1,130
Total non-current assets			49,082				50,720
TOTAL ASSETS		$	75,443			$	86,951
CURRENT LIABILITIES
Accounts payable		$	8,871			$	6,431
Other current liabilities			9,528				10,284
Current portion of deferred revenues			9,619				7,276
Current portion of lease liability			831				976
Current portion of long-term debt, net of debt discount			48,745				50,769
Total current liabilities			77,594				75,736
NON-CURRENT LIABILITIES
Deferred revenues, net of current portion			1,608				1,832
Lease liability, net of current portion			1,136				1,295
Liabilities for severance pay			572				561
Total non-current liabilities			3,316				3,688
COMMITMENTS AND CONTINGENCIES (NOTE 16)			-				-
STOCKHOLDERS’ EQUITY (DEFICIT)
Common shares (unlimited authorized; no par value) (March 31, 2024 issued and outstanding – 25,236,766; December 31, 2023 issued and outstanding – 23,918,983)			455,057				454,214
Additional paid-in capital			108,010				107,431
Accumulated other comprehensive income			31,811				28,327
Accumulated deficit			(600,345	)			(582,445	)
Total stockholders’ equity (deficit)			(5,467	)			7,527
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	75,443			$	86,951

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

 

		2024				2023
		Three Months Ended March 31
		2024				2023
Revenues, net		$	1,214			$	485
Operating expenses:
Cost of revenues			2,724				3,559
Research and development			2,571				3,151
Sales, general and administrative			7,671				13,284
Total operating expenses			12,966				19,994
Loss from operations			(11,752	)			(19,509	)
Interest expense, net of interest income			(1,818	)			(1,429	)
Foreign exchange loss			(4,330	)			(6,813	)
Loss before income taxes			(17,900	)			(27,751	)
Income tax expense			-				-
NET LOSS			(17,900	)		$	(27,751	)
Other comprehensive income			3,484				6,599
COMPREHENSIVE LOSS		$	(14,416	)		$	(21,152	)
Net loss per share of common shares, basic and diluted		$	(0.73	)		$	(3.22	)
Weighted-average number of common shares outstanding, basic and diluted			24,584,798				8,608,539

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share amounts)

 

														Accumulated
		Number of								Additional				Other								Total
		Common				Share				Paid-in				Comprehensive				Accumulated				Stockholders’
		Shares				Capital				Capital				Income (Loss)				Deficit				Equity (Deficit)
BALANCE AS OF DECEMBER 31, 2023			23,918,983			$	454,214			$	107,431			$	28,327			$	(582,445	)		$	7,527
Common shares issued for cash, net of issuance costs			1,317,783				843				-				-				-				843
Stock-based compensation			-				-				579				-				-				579
Net loss			-				-				-				-				(17,900	)			(17,900	)
Currency translation adjustments			-				-				-				3,484				-				3,484
BALANCE AS OF MARCH 31, 2024			25,236,766				455,057				108,010				31,811				(600,345	)			(5,467	)
BALANCE AS OF DECEMBER 31, 2022			8,608,539			$	442,312			$	90,020			$	21,440			$	(489,609	)		$	64,163
Stock-based compensation			-				10				2,001				-				-				2,011
Net loss			-				-				-				-				(27,751	)			(27,751	)
Currency translation adjustments			-				-				-				6,599				-				6,599
BALANCE AS OF MARCH 31, 2023			8,608,539			$	442,322			$	92,021			$	28,039			$	(517,360	)		$	45,022

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

		2024				2023
		For the Three Months Ended March 31
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(17,900	)		$	(27,751	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			493				508
Stock-based compensation			579				2,011
Amortization of debt discount			476				470
Inventory reserve			657				263
Change in operating right of use assets			397				333
Unrealized foreign exchange loss			4,222				6,895
Net change in operating working capital items:
Change in accounts receivable			(238	)			(185	)
Change in inventory			(2,223	)			(599	)
Change in prepaid expenses			677				(118	)
Change in other current assets			(260	)			4,089
Change in other long-term assets			6				28
Change in accounts payable			2,509				(3,204	)
Change in deferred revenues			(232	)			11
Change in other current liabilities			(533	)			(4,073	)
Payments made on operating lease liabilities			(400	)			(334	)
Net cash flows used in operating activities			(11,770	)			(21,656	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(151	)			(534	)
Net cash flows used in investing activities			(151	)			(534	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of commons shares for cash			868				-
Share issuance costs			(25	)			-
Net cash flows provided by financing activities			843				-
Effect of exchange rates on cash			(12	)			(47	)
CHANGE IN CASH FOR THE PERIOD			(11,090	)			(22,237	)
CASH, BEGINNING OF PERIOD			23,685				62,629
CASH, END OF PERIOD		$	12,595			$	40,392
Supplementary information:
Interest paid		$	1,565			$	1,437
Non-cash investing and financing activities:
Promissory note issued by Brii Biosciences Limited assigned to K2 HealthVentures			2,500				-
Capital expenditures included in accounts payable and other current liabilities			45				120
Share issuance costs included in other current liabilities			67				67

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

March 31, 2024 and 2023

(in thousands, except share and per share amounts)

 

1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS

 

Corporate Overview

 

VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.

 

The Company and its wholly owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies, Inc., a Canadian company and the wholly owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd., an Israeli company (“SciVac”); SciVac Hong Kong Limited, a company incorporated pursuant to the Companies Ordinance (Chapter 622 of the Laws of HongKong) and a wholly owned subsidiary (“SciVac HK”); and VBI Vaccines B.V, a Netherlands company and a wholly owned subsidiary (“VBI BV”), are collectively referred to as the “Company”, “we”, “us”, “our”, or “VBI”.

 

The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 160 Second Street, Floor 3, Cambridge, MA 02142. In addition, the Company has manufacturing facilities located in Rehovot, Israel and research facilities located in Ottawa, Ontario, Canada.

 

Principal Operations

 

VBI is a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.

 

Partnership with Brii Bio

 

On July 5, 2023, the Company announced the expansion of its hepatitis B partnership with Brii Biosciences Limited (“Brii Bio”). Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between the Company and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between the Company and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in Asia Pacific (“APAC”), excluding Japan. As part of this collaboration, Brii Bio paid the Company an upfront payment of $15,000 consisting of a $3,000 equity investment in a concurrent registered direct offering, $5,000 as an advance payment for the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023, by and between the Company and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement (the “Letter Agreement”), dated July 5, 2023, by and among the Company, SciVac, and Brii Bio, the Company also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2 HealthVentures LLC (“K2HV”), in all of its respective right, title, and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of the Company’s obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (each as defined herein).

 

 

On February 13, 2024, the Company entered into a series of agreements with Brii Bio, pursuant to which, subject to achievement of certain activities, we would receive up to $33,000 in consideration from Brii Bio, consideration which will be used to correspondingly reduce our obligations due under the Loan and Guaranty Agreement (“Loan Agreement”).

 

Rehovot Purchase Agreement

 

On February 13, 2024, the Company and SciVac entered into a purchase agreement (the “Rehovot Purchase Agreement”) with Brii Bio Israel Ltd (“Brii Israel”), a wholly-owned subsidiary of Brii Bio, prior to the closing, and joined as a party to the agreement prior to the closing as the purchaser, and Brii Biosciences, Inc, a Delaware corporation, pursuant to which, upon achievement of certain activities and closing of the transactions contemplated by the Rehovot Purchase Agreement, subject to the terms and conditions therein, SciVac will sell to Brii Israel certain assets, including SciVac and its affiliates’ interest and rights in certain leases with respect to the vaccine manufacturing facility in Israel, for an aggregate purchase price of $10,000, which is then required to be paid to K2 HealthVentures (“K2HV”) pursuant to the terms of the Fourth Amendment (as defined below).

 

The Rehovot Purchase Agreement contains representations and warranties of SciVac and Brii Israel that are typical for transactions of this type. The Rehovot Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type.

 

The closing of the transactions pursuant to the Rehovot Purchase Agreement are subject to the terms and conditions therein, including closing conditions that are typical for transactions of this type and the Company’s completion of the Essential Activities (as defined below). Closing will not occur prior to June 30, 2024.

 

Brii Purchase Agreement

 

On February 13, 2024, the Company and VBI Cda entered into a Purchase Agreement with Brii Bio (the “Brii Purchase Agreement”), pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for a secured promissory note in the principal amount up to $10,000 (the “Note”) to be issued by Brii Bio, which is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment (as defined below), in exchange for a reduction in the Company’s obligations under the Loan Agreement equal to the initial principal amount of the Note. The Note was issued to Brii Bio on February 13, 2024. The initial principal amount of the Note is $2,500, which shall be increased by an aggregate amount equal to $7,500 upon the Company’s obtaining applicable consents under the license agreement between Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004 and subsequently amended and restated effective September 1, 2021 (the “Amended and Restated Ferring License Agreement”).

 

Brii Side Letter

 

On February 13, 2024, the Company and Brii Bio entered into a side letter (the “Side Letter”) setting forth certain essential and additional priority activities to transfer manufacturing responsibility for clinical supply and commercial supply of VBI-2601 and PreHevbri for the Brii Territories set forth in the Side Letter (the “Essential Activities”) the Company is required to complete as a condition to the entry into the License Agreement (as defined below) and consummation of the transactions pursuant to the Rehovot Purchase Agreement. As of March 31, 2024, the Essential Activities were still in progress and not yet completed. The principal amount of the Note shall increase up to $18,000 upon completion of the Essential Activities and the Company’s obligations under the Loan Agreement shall be reduced by a corresponding amount.

 

Brii License Agreement

 

Upon completion of the Essential Activities pursuant to the Side Letter, VBI Cda and Brii Bio will enter into a license agreement (the “Brii License Agreement”) pursuant to which Brii Bio shall issue a secured promissory note in the amount of $5,000 as consideration for a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to the GBM program (VBI-1901) for development and commercialization in the APAC region (excluding Japan), which such note is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment. The entry by VBI Cda and Brii Bio into the Brii License Agreement is subject to the Company completing the Essential Activities.

 

 

Loan Agreement and Forbearance Agreement with K2HV

 

On each of January 9, 2024, January 23, 2024, and February 6, 2024, as discussed in Note 9, the Loan Parties entered into extensions to the Forbearance Agreement. Additionally, on February 13, 2024, as discussed in Note 9, the Loan Parties entered into the Fourth Amendment.

 

Liquidity and Going Concern

 

The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development and commercialization of its products.

 

The Company has an accumulated deficit of $600,345 and cash of $12,595 as of March 31, 2024. Cash flows used in operating activities were $11,770 for the three months ended March 31, 2024.

 

The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and commercially launch and sell our approved products. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. Based on available cash at March 31, 2024, together with the net proceeds from the April 2024 Offering (defined below), in order to continue to fund our operations, we must raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so. If we are unable to obtain additional financing in the near future, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.

 

ATM Program

 

On August 26, 2022, the Company 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which the Company may offer and sell its common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal (the “Jefferies ATM Program”). During the three months ended March 31, 2024, the Company issued 1,317,783 common shares under the Jefferies ATM Program, for total gross proceeds of $868 at a weighted average price of $0.6589 per share. The Company incurred $25 in sales agent commissions and share issuance costs related to the common shares issued during the three months ended March 31, 2024, resulting in net proceeds of $843. The Company terminated the Jefferies ATM Program on May 9, 2024, effective as of May 10, 2024.

 

On April 16, 2024, upon filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company became subject to General Instruction I.B.6 of Form S-3, pursuant to which in no event will the Company sell its common shares in a registered primary offering using Form S-3 with a value exceeding more than one-third of our public float in any 12 calendar month period so long as our public float remains below $75,000.

 

 

April 2024 Registered Direct Offering

 

On April 9, 2024, the Company entered into a securities purchase agreement (the “April 2024 Purchase Agreement”) with certain institutional investors named therein pursuant to which the Company issued and sold 2,272,728 common shares and accompanying warrants to purchase up to 2,272,728 common shares (the “April 2024 Warrants”) at a combined offering price of $0.88 per common share and accompanying April 2024 Warrant in a registered direct offering (the “April 2024 Offering”). The April 2024 Offering closed on April 11, 2024. The April 2024 Warrants have an exercise price of $0.76 per share, are immediately exercisable on the date of issuance, and expire five years following the date of issuance. Net proceeds to us from the April 2024 Offering, after deducting placement agent fees and estimated offering expenses payable by us, were approximately $1,700. In connection with the April 2024 Offering, the Company also issued to H.C. Wainwright & Co., LLC or its designees, placement agent warrants to purchase up to 136,364 common shares (the “April 2024 Placement Agent Warrants”) as compensation in connection with the April 2024 Offering. The April 2024 Placement Agent Warrants have substantially the same terms and conditions as the April 2024 Warrants, except that the April 2024 Placement Agent Warrants have an exercise price of $1.10 per share, which represents 125% of the offering price per common share and accompanying April 2024 Warrant and expire five years following the commencement of sales pursuant to the April 2024 Offering.

 

Nasdaq Minimum Bid Price Requirement – Extension of Compliance Period

 

As previously reported, on November 1, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023, through October 31, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

 

On April 30, 2024, the Company received a letter from the Nasdaq Stock Market notifying the Company that the Company has been granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in Nasdaq’s deficiency notice to the Company, dated November 1, 2023. The Nasdaq Stock Market’s determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

 

If compliance with the Minimum Bid Price Requirement cannot be demonstrated by October 28, 2024, the Nasdaq Stock Market will provide written notification that the Company’s common shares could be delisted. In such event, Nasdaq rules permit the Company to appeal any delisting determination to a Nasdaq Hearings Panel. Accordingly, there can be no assurance that the Company will be able to regain compliance with the Nasdaq listing rules or maintain its listing on Nasdaq. The Company has not regained compliance as of the date of this Form 10-Q, and if it fails to regain compliance by October 28, 2024, its common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.

 

Financial instruments recognized in the condensed consolidated balance sheet consist of cash, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2023 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), as filed with the SEC on April 16, 2024.

 

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.

 

In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.

 

Significant Accounting Policies

 

The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2023 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2024.

 

3. NEW ACCOUNTING PRONOUNCEMENTS

 

Recently Adopted Accounting Pronouncements, not yet adopted

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires incremental annual and quarterly disclosures about segment measures of profit or loss as well as significant segment expenditures. It also requires public entities with a single reportable segment to provide all segment disclosures required by the amendments and all existing segment disclosures in Topic 280. ASU 2023- 07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. As we have a single reportable segment, we expect the adoption of this standard to result in increased disclosures in the notes to our consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) which enhances the transparency and decision usefulness of income tax disclosures. The amendments under ASU 2023-09 require public business entities to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for fiscal years beginning after December 15, 2024. Public business entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. The Company will apply this ASU for year ended December 31, 2025, and we do not anticipate that this new guidance will have a material impact on the note disclosures going forward.

 

4. INVENTORY, NET

 

Inventory consists of the following:

SCHEDULE OF INVENTORY 

		March 31, 2024				December 31, 2023
Finished goods		$	899			$	1,661
Work-in-process			3,398				2,734
Raw materials			5,647				4,104
Inventory, net		$	9,944			$	8,499

 

5. OTHER CURRENT ASSETS

 

Other current assets consisted of the following:

SCHEDULE OF OTHER CURRENT ASSETS 

		March 31, 2024				December 31, 2023
Government receivables		$	1,508			$	1,268
Other current assets			486				495
Total other current assets		$	1,994			$	1,763

 

 

6. INTANGIBLE ASSETS, NET, AND GOODWILL

SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION  

						March 31, 2024
		Gross								Cumulative				Cumulative
		Carrying				Accumulated				Impairment				Currency				Net Book
		Amount				Amortization				Charge				Translation				Value
IPR&D assets		$	61,500			$	-			$	(22,900	)		$	(2,866	)		$	35,734

 

						December 31, 2023
		Gross								Cumulative				Cumulative
		Carrying				Accumulated				Impairment				Currency				Net Book
		Amount				Amortization				Charge				Translation				Value
IPR&D assets		$	61,500			$	-			$	(22,900	)		$	(2,101	)		$	36,499

 

The change in carrying value for IPR&D assets from December 31, 2023, relates to currency translation adjustments which decreased by $765 for the three months ended March 31, 2024.

SCHEDULE OF GOODWILL 

						March 31, 2024
		Gross				Cumulative				Cumulative
		Carrying				Impairment				Currency				Net Book
		Amount				Charge				Translation				Value
Goodwill		$	8,714			$	(7,292	)		$	(315	)		$	1,107

 

						December 31, 2023
		Gross				Cumulative				Cumulative
		Carrying				Impairment				Currency				Net Book
		Amount				Charge				Translation				Value
Goodwill		$	8,714			$	(7,292	)		$	(292	)		$	1,130

 

The change in carrying value for goodwill from December 31, 2023, relates to currency translation adjustments which decreased by $23 for the three months ended March 31, 2024.

 

7. OTHER CURRENT LIABILITIES

 

Other current liabilities consisted of the following:

SCHEDULE OF OTHER CURRENT LIABILITIES 

		March 31, 2024				December 31, 2023
Accrued research and development expenses (including clinical trial accrued expenses)		$	1,570			$	2,018
Accrued professional fees			1,815				1,674
Payroll and employee-related costs			1,972				1,934
Deferred funding			3,166				3,601
Other current liabilities			1,005				1,057
Total other current liabilities		$	9,528			$	10,284

 

8. LOSS PER SHARE OF COMMON SHARES

 

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 9, Long-Term Debt and Note 10, Stockholders’ Equity (Deficit) and Additional Paid-in Capital.

 

 

The following potentially dilutive securities outstanding at March 31, 2024 and 2023 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING 

		2024				2023
		Three months ended March 31,
		2024				2023
Warrants			14,467,566				118,816
Stock options and restricted stock units			1,639,909				803,894
K2HV conversion feature			205,396				205,396
Total			16,312,871				1,128,106

 

9. LONG-TERM DEBT

 

As of March 31, 2024, and December 31, 2023, the Company’s long-term debt is as follows:

 SCHEDULE OF LONG-TERM DEBT

		March 31, 2024				December 31, 2023
Long-term debt, net of debt discount of $4,454 ($4,930 at December 31, 2023)		$	48,745			$	50,769
Current portion, net of debt discount of $4,454 ($4,930 at December 31, 2023)			(48,745	)			(50,769	)
Long-term debt, net of current portion		$	-			$	-

 

On May 22, 2020, the Company, along with its subsidiary VBI Cda (collectively, the “Borrowers”), entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders, converted $2,000 of the secured term loan into 45,662 common shares at a conversion price of $43.80 per share.

 

On May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the Lenders and received additional loan advances of $12,000.

 

On September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $100,000 from $50,000, which term loans are available in additional tranches subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants, (iii) extend the final maturity date for the term loans to September 14, 2026, which may be extended to September 14, 2027, under certain circumstances, and (iv) to the extent that the maturity date is extended, the term loans will begin amortizing on a monthly basis on September 14, 2026.

 

On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.

 

Pursuant to the Second Amendment, the Lenders have the ability to convert $7,000 into common shares, by which $2,000 of the term loans shall be convertible into 45,662 common shares at a conversion price of $43.80 per share and $5,000 of the term loans shall be convertible into 159,734 common shares at a conversion price of $31.302 per share (“K2HV conversion feature”).

 

 

In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08 per share. If and/or when additional tranches are advanced pursuant to the Second Amendment, the Company will issue additional warrants to purchase up to 72,680 common shares pursuant to the Second Amendment Warrant.

 

The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.

 

The Company is required to make a final payment equal to 6.95% of the aggregate term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Second Amendment (the “Second Amendment Final Payment”). The final payment related to the refinanced $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment of $2,224 remains and is due the earlier of June 1, 2024 or the earlier prepayment of the term loans in accordance with the Second Amendment (the “Original Final Payment”).

 

Upon receipt of additional funds, issuable pursuant to the various tranches, under the Second Amendment, additional common shares will be issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the applicable tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $24.08, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.

 

On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.

 

The secured term loan maturity date is September 14, 2026, until which the Company is required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, included both financial and non-financial covenants, including quarterly minimum Net Revenue (as defined in the Loan Agreement) targets. The Company was not in compliance with the minimum Net Revenue covenant for the measurement periods ended September 30, 2023 and December 31, 2023, and did not qualify for an exception for this covenant, which constituted an Event of Default (as defined in the Loan Agreement). In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, the Company began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023.

 

 

On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement periods ended September 30, 2023, from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. On each of November 28, 2023, December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, and February 6, 2024, the Loan Parties entered into extensions to the Forbearance Agreement pursuant to which the Lenders agreed to extend the Forbearance Period through and including December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, February 6, 2024, and February 20, 2024, respectively, subject to compliance by the Borrowers with the same terms and conditions as set forth in the Forbearance Agreement.

 

The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.

 

On February 13, 2024, the Loan Parties entered into an amendment (the “Fourth Amendment”) to the Loan Agreement, effective upon entry into certain transactions with Brii Bio, pursuant to which the parties have agreed to, among other things, (i) remove a financial covenant requiring us to maintain minimum net revenue of 75% of projections, (ii) the forbearance by K2HV and the other lenders party thereto, prior to the earlier of (A) December 31, 2024, (B) the date the Side Letter (as defined below) ceases to be in full force and effect prior to the completion of the Essential Activities (as defined below) and (C) the date the Essential Activities (as defined below) are complete (the “Forbearance Expiration Date”) from exercising their remedies with respect to the occurrence of Events of Default (as defined in the Loan Agreement) subject to certain exceptions, and (iii) following the Forbearance Expiration Date, add a financial covenant requiring us to maintain a minimum cash amount equal to our obligations under the Loan Agreement at all times.

 

The effectiveness of the Fourth Amendment was conditioned upon entry into the Brii Purchase Agreement, the Rehovot Purchase Agreement and the Side Letter, each of which were entered into by us and the respective parties thereto on February 13, 2024, as described above. As discussed in Note 1, on February 13, 2024 the obligations under the Loan Agreement were reduced by the initial principal amount of the Note of $2,500.

 

The total principal amount of the loan under the Loan Agreement, as amended by the Fourth Amendment, outstanding at March 31, 2024, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $5,699 in connection with the Fourth Amendment, is $53,199. The principal amount of the loan made under the Loan Agreement as amended by the Fourth Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4%. The interest rate as of March 31, 2024 was 12.50%. The effective interest rate on the loan of $47,500, excluding the Original Final Payment and Second Amendment Final Payment, is 20.39%.

 

The total initial debt discount related to the Second Amendment is $7,359. As of March 31, 2024, and December 31, 2023, the unamortized debt discount was $4,454 and $4,930, respectively. The debt discount is being charged to interest expense, net in the condensed consolidated statement of operations and comprehensive loss using the effective interest method over the term of the debt.

 

At March 31, 2024 and December 31, 2023, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be $46,456 and $48,077, respectively.

 

Interest expense, net recorded in the three months ended March 31, 2024 and 2023 was as follows:

 SCHEDULE OF INTEREST EXPENSE

		2024				2023
		Three months ended March 31
		2024				2023
Interest expense		$	1,538			$	1,461
Amortization of debt discount			476				470
Interest income			(196	)			(502	)
Total interest expense, net of interest income		$	1,818			$	1,429

 

 

10. STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL

 

Stock option plans

 

The Company’s stock option plans are approved by and administered by the Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.

 

2006 VBI US Stock Option Plan

 

The 2006 VBI US Stock Option Plan (the “2006 Plan”), was approved by and was previously administered by the VBI US board of directors which designated eligible participants to be included under the 2006 Plan, and designated the number of options, exercise price and vesting period of the new options. The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan (as defined below) following the PLCC Merger and no further options will be issued under the 2006 Plan. As of March 31, 2024, there were 28,038 options outstanding under the 2006 Plan.

 

2014 Equity Incentive Plan

 

On May 1, 2014, the VBI DE board of directors adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the VBI DE’s shareholders on July 14, 2014. The 2014 Plan was superseded by the 2016 Plan (as defined below) and no further options will be issued under the 2014 Plan. As of March 31, 2024, there were 17,195 options outstanding under the 2014 Plan.

 

2016 VBI Equity Incentive Plan

 

The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of 10% of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”), performance share units (“PSUs”), shares of restricted stock, or other such award as may be permitted under the 2016 Plan. As of March 31, 2024, there were 1,594,676 options outstanding and no RSUs unvested under the 2016 Plan.

 

The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled 825,789 at March 31, 2024.

 

Activity related to stock options is as follows:

 SCHEDULE OF STOCK OPTIONS ACTIVITY

		Number of				Weighted
		Stock				Average
		Options				Exercise Price
Balance outstanding at December 31, 2023			1,650,288			$	30.53
Forfeited			(10,379	)			2.30
Balance outstanding at March 31, 2024			1,639,909			$	30.69
Exercisable at March 31, 2024			802,615			$	58.66

 

 

The fair value of the options is recognized as an expense on a straight-line basis over the vesting period and forfeitures are accounted for when they occur. The total stock-based compensation expense recorded in the three months ended March 31, 2024 and 2023 was as follows:

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE

		Three months ended March 31
		2024				2023
Research and development		$	81			$	266
Sales, general and administrative			483				1,718
Cost of revenues			15				27
		$	579			$	2,011

 

11. REVENUES, NET AND DEFERRED REVENUE

 

Revenues, net comprises the following:

 

SCHEDULE OF REVENUE COMPRISED

		2024				2023
		Three months ended March 31
		2024				2023
Product revenues, net		$	979			$	478
R&D service revenues			235				7
Revenues		$	1,214			$	485

 

The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at March 31, 2024:

 

SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS

		Total				Current portion to March 31, 2025				Remaining portion thereafter
Product revenues, net		$	5,494			$	5,494			$	-
License revenues			2,500				2,500				-
R&D service revenues			3,233				1,625				1,608
		$	11,227			$	9,619			$	1,608

 

The following table presents changes in the deferred revenue balance for the three months ended March 31, 2024:

 

SUMMARY OF CHANGES IN DEFERRED REVENUE

Balance at January 1, 2023		$	2,613
			-
			-
			-
Balance at December 31, 2023			9,108
Revenue deferred			2,500
Recognition of deferred revenue			(244	)
Currency translation			(137	)
Balance at March 31, 2024		$	11,227
Short Term		$	9,619
Long Term		$	1,608

 

 

Brii Collaboration Agreements – VBI-2601

 

On December 4, 2018, the Company entered into a Collaboration and License Agreement (the “Brii Collaboration and License Agreement”) with Brii Bio, as amended on April 8, 2021, pursuant to which:

 

	●	the Company and Brii Bio agreed to collaborate on the development of a HBV recombinant protein-based immunotherapeutic in the licensed territory, which consists of China, Hong Kong, Taiwan, and Macau (collectively, the “Licensed Territory”), and to conduct a Phase II collaboration clinical trial for the purpose of comparing VBI-2601, which is a recombinant protein-based immunotherapeutic developed by VBI for use in treating chronic HBV, with a novel composition developed jointly with Brii Bio (either being the “Licensed Product”);
	●	the Company granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as may be required to obtain and maintain marketing approval of the Licensed Product, for the treatment of HBV in the Licensed Territory and to commercialize and the Licensed Product for the diagnosis and treatment of chronic HBV in the Licensed Territory; and
	●	Brii Bio granted the Company an exclusive royalty-free license under Brii Bio’s technology and Brii Bio’s interest in any joint technology developed during the collaboration to develop and commercialize the Licensed Product for the diagnosis and treatment of chronic HBV in the countries of the world other than the Licensed Territory.

 

On December 20, 2021, the Company and Brii Bio further amended the Brii Collaboration and License Agreement (the “Brii Second Amendment Collaboration and License Agreement”) whereby:

 

	●	the Company and Brii Bio agreed to conduct an additional Phase II combination clinical trial of VBI-2601, both with and without IFN-α, and BRII-835 (VIR-2218) (“Combo Clinical Trial”); and
	●	Brii Bio granted the Company a non-exclusive royalty free license under the Brii Bio technology arising from the data generated in the Combo Clinical Trial solely for use in the development, manufacture, or commercialization of the Licensed Product in combination with an siRNA in the countries of the world other than the Licensed Territory.

 

Pursuant to the Brii Collaboration and License Agreement, as amended by the Brii Second Amendment Collaboration and License Agreement, the Company was responsible for the R&D Services and Brii Bio was responsible for costs relating to the clinical trials for the Licensed Territory.

 

The initial consideration of the Brii Collaboration and License Agreement consisted of an $11,000 non-refundable upfront payment. As part of the Brii Collaboration and License Agreement, the Company and Brii Bio entered into a stock purchase agreement. Under the terms of the stock purchase agreement, the Company issued to Brii Bio 76,502 of its common shares valued at $3,626 (based on the Company’s common share price on December 4, 2018). The remaining $7,374, deemed to be the initial transaction price, was allocated to two performance obligations: (i) the VBI-2601 license and (ii) R&D services. The R&D services were allocated $4,737 of the transaction price using an estimated selling price based on an expected cost plus a margin approach and the remaining transaction price of $2,637 was allocated to the VBI-2601 license using the residual method.

 

There was no additional consideration contemplated in the Brii Second Amendment Collaboration and License Agreement.

 

On July 5, 2023, the Company and Brii Bio entered into the A&R Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the A&R Collaboration Agreement, expand the Licensed Territory to the entire world (the “New Licensed Territory”) for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI-2601 (“VBI-2601 Licensed Product”). Pursuant to the A&R Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the VBI-2601 Licensed Products in the New Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in the New Licensed Territory. Except for the rights and licenses expressly granted in the A&R Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property. Additionally, the A&R Collaboration Agreement constituted the entire agreement between the VBI and Brii Bio relating to VBI-2601 and superseded all previous agreements, including the Brii Collaboration and License Agreement and the Brii Second Amendment Collaboration and License Agreement. As a result of the A&R Collaboration Agreement, the unsatisfied performance obligation of $1,925 under the Brii Collaboration and License Agreement prior to the amendment and restatement was immediately recognized as R&D service revenues during the year ended December 31, 2023.

 

 

The initial consideration of the A&R Collaboration Agreement consisted of a $5,000 non-refundable upfront payment. In addition, prior to the purchase agreement, dated February 13, 2024 (see details below and Note 1), by and between the Company and Brii Bio (the “Brii Purchase Agreement”), the Company was also eligible to receive up to an additional $227,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the New Licensed Territory. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts were recognized under the A&R Collaboration Agreement or have been recognized under the A&R Collaboration Agreement. The $5,000 of initial consideration of the A&R Collaboration Agreement was allocated to three performance obligations: (i) the VBI-2601 license for the New Licensed Territory; (ii) R&D services related to VBI-2601; and (iii) the technology transfer of VBI-2601. The initial consideration of $5,000 was allocated as follows: R&D services were allocated $43, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $3,360 was allocated to the VBI-2601 license for the New Licensed Territory.

 

The A&R Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) expiration, invalidation or lapse of the last Company patent claiming such VBI-2601 Licensed Product, (ii) 10 years from the date of first commercial sale of such VBI-2601 Licensed Product in the applicable region, or (iii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such VBI-2601 Licensed Product in such region. Upon expiration (but not an earlier termination) of the A&R Collaboration Agreement in each region of the New Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license, which such license, pursuant to the Brii Purchase Agreement (as defined herein), shall also be irrevocable under the Company’s technology related to the VBI-2601 Licensed Products in such region to make and sell VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.

 

On February 13, 2024, the Company and VBI Cda entered into the Brii Purchase Agreement, pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for the Note to be issued by Brii Bio, which is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment, in exchange for a reduction in the Company’s obligations under the Loan Agreement equal to the initial principal amount of the Note. The Note was issued by Brii Bio on February 13, 2024 for the initial principal amount of $2,500, and is included in deferred revenue as of March 31, 2024, subsequently, the activities required to confirm the $2,500 have been achieved. In addition, pursuant to the Brii Purchase Agreement, subject to achievement of certain activities set forth in the A&R Collaboration Agreement, the Company and Brii Bio agreed to amend the A&R Collaboration Agreement to, among other things, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for research studies and development of VBI-2601 to be “perpetual and irrevocable,” (ii) omit the requirement for Brii Bio to obtain marketing approval and commercialize VBI-2601 in the United States and China, (iii) revise the indemnity requirements such that Brii Bio indemnifies the Company with respect to certain transferred intellectual property after the effective date of the Brii Purchase Agreement and the Company indemnifies Brii Bio prior to such date, (iv) omit the requirement for Brii Bio to make royalty and milestone payments to the Company and (v) omit certain rights of the Company to terminate the A&R Collaboration Agreement and certain other effects of termination of the A&R Collaboration Agreement.

 

 

Brii Collaboration Agreements – PreHevbri

 

On July 5, 2023, the Company and Brii Bio also entered into the Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the Collaboration Agreement, acquired an exclusive license for PreHevbri in APAC, excluding Japan (“PreHevbri Licensed Territory”), for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import PreHevbri (“PreHevbri Licensed Product”). Pursuant to the Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the PreHevbri Licensed Products in the PreHevbri Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in the PreHevbri Licensed Territory. Except for the rights and licenses expressly granted in the Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property.

 

The initial consideration of the Collaboration Agreement consisted of a $2,000 non-refundable upfront payment. In addition, the Company was also eligible to receive up to an additional $195,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the PreHevbri Licensed Territory, prior to the Brii Purchase Agreement. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts were recognized under the Collaboration Agreement or have been recognized under the Collaboration Agreement. The $2,000 of the initial consideration of the Collaboration Agreement was allocated to three performance obligations: (i) the PreHevbri license for the PreHevbri Licensed Territory; (ii) R&D services related to PreHevbri; and (iii) the technology transfer of PreHevbri. The initial consideration of $2,000 was allocated as follows: the R&D services were allocated $88, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $315 was allocated to the PreHevbri license for the PreHevbri Licensed Territory.

 

The Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) 10 years from the date of first commercial sale of such PreHevbri Licensed Product in the applicable region, or (ii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such PreHevbri Licensed Product in such region. Upon expiration (but not an earlier termination) of the Collaboration Agreement in each region of the PreHevbri Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license, which such license, pursuant to the Brii Purchase Agreement, shall also be irrevocable, under the Company’s technology related to the PreHevbri Licensed Products in such region to make and sell PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.

 

Pursuant to the Brii Purchase Agreement, on February 13, 2024, the Company and Brii Bio agreed to amend the Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for the global development activities of the Licensed Product to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval for the Licensed Product in certain territories and (iii) omit the requirement for Brii Bio to make royalty and milestone payments to the Company.

 

The R&D services and technology transfer for the Brii Collaboration Agreements will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred.

 

Upon termination of the Brii Collaboration Agreements prior to the end of the term, there is no obligation for refund and any amounts in deferred revenue related to unsatisfied performance obligations will be immediately recognized.

 

Supply Agreement

 

On July 5, 2023, in connection with the Brii Collaboration Agreements, the Company and Brii Bio entered into the Supply Agreement related to the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures, as negotiated. Pursuant to the Supply Agreement, the Company received an advance payment of $5,000 from Brii Bio. The advance payment of $5,000 will be allocated to the following performance obligations, depending on which performance obligation is requested by Brii Bio, until the advance payment of $5,000 has been fully utilized: (i) units of VBI-2601 and/or PreHevbri; and (ii) manufacturing expenditures. The advance payment of $5,000 is included in deferred revenue as of March 31, 2024.

 

 

The performance obligation of a unit of VBI-2601 and/or PreHevbri will be satisfied at a point in time using the prices set out in the Supply Agreement and revenue will be recognized upon transfer of control of the performance obligation.

 

The manufacturing expenditures will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred.

 

As of March 31, 2024, performance obligations related to the Brii Collaboration Agreements, Brii Purchase Agreement and the Supply Agreements that remain unsatisfied were $10,758.

 

12. COLLABORATION ARRANGEMENTS

 

The Company has entered into, and expects to enter into from time to time in the future, license agreements, funding agreements, collaboration agreements, and similar agreements related to the advancement of its product candidates and research and development efforts. Significant agreements (collectively, the “Collaboration Agreements”) are described in detail in the Company’s 2023 10-K. While specific amounts will fluctuate from quarter to quarter based on clinical trials progress, advancement and completion of research studies and manufacturing projects, and other factors, the Company believes its overall activities regarding Collaboration Agreements are materially consistent with those described in the 2023 10-K, other than described below.

 

Set forth below are the approximate amounts expensed for Collaboration Agreements during the three months ended March 31, 2024 and 2023, respectively. These expensed amounts are included under Research and Development expenses in the accompanying condensed consolidated statements of operations.

SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE

		2024				2023
		Three months ended March 31
		2024				2023
Coalition for Epidemic Preparedness Innovations (“CEPI”)		$	365			$	829
Research and Development Expenses		$	365			$	829

 

CEPI

 

The Company has $3,166 recorded as deferred funding, recorded in other current liabilities on the condensed consolidated balance sheet.

 

13. GOVERNMENT GRANTS

 

Strategic Innovation Fund (“SIF”)

 

On September 16, 2020, we signed the Contribution Agreement (as amended, the “Contribution Agreement”) with Her Majesty the Queen in Right of Canada, as represented by the Minister of Industry (the “Minister”), whereby the Minister agreed to contribute an amount not exceeding the lesser of (i) 75% of VBI Cda’s costs incurred in respect of the Project, subject to certain eligibility limitations as set forth in the Contribution Agreement and (ii) CAD $55,976 from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). We initially agreed to complete such project, to be conducted exclusively in Canada except as permitted otherwise under certain circumstances, in or before the first quarter of 2022 (“Project Completion Date”). On March 28, 2024, we and the Minister signed an amendment to the Contribution Agreement, the main purpose of which was to broaden the scope of the collaboration to accelerate development of VBI’s novel, mRNA-launched eVLP platform technology, and extend the Project Completion Date from December 31, 2023 to March 31, 2027. In consideration of such contribution, we agreed to guarantee the complete performance and fulfillment of VBI Cda’s obligations under the Contribution Agreement. In the event VBI Cda fails to perform or otherwise satisfy any of its obligations related to the Contribution Agreement, we will become a primary obligor under the Contribution Agreement.

 

 

Costs associated with the Contribution Agreement are expensed as incurred in Research and Development expenses and overhead charges are included in Sales, General and Administrative. For the three months ended March 31, 2024 and 2023, the Company recognized $399 and $1,707 respectively, as a reduction in expenses. As of March 31, 2024 and 2023, the Company had $68 and $0 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.

 

14. COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.

 

On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($510,595). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.

 

The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023, and July 13, 2023. The next preliminary hearing is scheduled to be held on June 20, 2024.

 

On December 5, 2022, another tort claim was filed in the District Court of the central district in Israel naming our subsidiary, SciVac, as a defendant. The claim was filed by a minor and his parents against SciVac, the IMoH, and Prof. Arieh Raziel, requesting compensation due to bodily injury of the minor, who was diagnosed as suffering from an Autism Spectrum Disorder. The plaintiffs allege that the minor’s disabilities and the syndrome from which he suffers were caused due to a combination of several factors, including negligent pregnancy monitoring, negligent labor and delivery procedure, and administration of the alleged defective vaccine (Sci-B-Vac vaccine). Preliminary hearings have not yet been scheduled.

 

SciVac intends to defend these claims vigorously.

 

15. LEASES

 

The Company has entered into various non-cancelable lease agreements for its office, lab, and manufacturing facilities, which are classified as operating leases. The office facility lease agreement in the U.S. expires on October 31, 2024 with no option to extend. Our manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027. A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional years and June 30, 2027 with an option to extend the term for five additional years. In September 2022, the Company extended the term of our lease for our research facility in Canada, which comprises office and laboratory space, for three additional years, which now has a term ending on December 31, 2025.

 

 

There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.

 

SCHEDULE OF LEASE COST AND OTHER INFORMATION

		Three months ended March 31
		2024				2023
Operating lease cost		$	452			$	491
Weighted average discount rate			12	%			13	%
Weighted average remaining lease term			2.2 years				2.74 years

 

Operating lease costs are included G&A expenses in the statement of operations and comprehensive loss.

 

The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:

 SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES 

Remaining 2024		$	836
2025			663
2026			584
2027			160
Total			2,243
Effect of discounting			(276	)
Total lease liability			1,967
Current portion			(831	)
Lease liability, net of current portion		$	1,136

 

16. SEGMENT INFORMATION

 

The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.

 

Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:

 SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS

		2024				2023
		Three Months Ended March 31
		2024				2023
United States		$	961			$	322
Israel			20				-
China / Hong Kong			32				7
Europe			201				156
Revenues		$	1,214			$	485

 

There was no revenue attributed to our country of domicile, Canada, for the three months ended March 31, 2024 and 2023.

 

17. SUBSEQUENT EVENTS

 

Jefferies ATM Program

 

Subsequent to March 31, 2024 the Company sold and issued 796,531 common shares under the Jefferies ATM Program for total gross proceeds of $567 at a weighted average price of $0.7119 per share. On May 9, 2024, the Company terminated the Jefferies ATM Program, effective as of May 10, 2024.

 

April 2024 Offering

 

On April 9, 2024 the Company entered into the April 2024 Purchase Agreement, as discussed in Note 1, and issued to the investors named therein an aggregate of 2,272,728 common shares and the April 2024 Warrants at a combined offering price of $0.88 per common share and accompanying April 2024 Warrant in a registered direct offering.

 

Exercised Warrants

 

Subsequent to March 31, 2024, upon exercise of certain outstanding warrants at an exercise price of $0.6057, the Company issued 376,250 common shares for gross proceeds of $228.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”). In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements.

 

Overview

 

We are a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.

 

Product Pipeline

 

Our pipeline is comprised of vaccine and immunotherapeutic programs developed by virus-like particle technologies to target two distinct, but often related, disease areas – infectious disease and oncology. We prioritize the development of programs for disease targets that are challenging, underserved, and where the human immune system, when powered and stimulated appropriately, can be a formidable opponent.

 

VLP vaccines are a type of sub-unit vaccine, in which only the portions of viruses critical for eliciting an immune response are presented to the body. Because of their structural similarity to viruses presented in nature, including their particulate nature and repetitive structure, VLPs can stimulate potent immune responses. VLPs can be customized to present any protein antigen, including multiple antibody and T cell targets, making them, we believe, ideal technologies for the development of both prophylactic and therapeutic vaccines. However, only a few antigenic proteins self-assemble into VLPs, which limit the number of potential targets. Notably, HBV antigens are among those that are able to spontaneously form orderly VLP structures.

 

Our eVLP platform technology expands the list of potentially viable target indications for VLPs by providing a stable core (Gag Protein) and lipid bilayer (the “envelope”). It is a flexible platform that enables the synthetic manufacture of an “enveloped” VLP, or “eVLP”, which looks structurally and morphologically similar to the virus, with no infectious material. We have also developed a technology that leverages the strengths of both eVLP and mRNA technologies to create a proprietary mRNA-launched eVLP platform technology. This novel approach to particulate vaccines adds a genetic code for particle-forming structural protein – the same protein at the core of our eVLPs – to a mRNA vaccine, fundamentally changing the cellular interaction with the vaccine. The addition of this structural protein instructs cells to not only create target antigens but also to create eVLPs in vivo. These particles are released from the cells that generate them to circulate in the body, provoking the immune system to drive B-cell and T-cell responses.

 

Our product pipeline includes an approved vaccine and multiple late- and early-stage investigational programs. The investigational programs are in various stages of clinical development and the scientific information included about these candidates is preliminary and investigative. The investigational programs have not been approved by the United States Food and Drug Administration (“FDA”), European Medicines Agency, United Kingdom Medicines and Healthcare products Regulatory Agency, Health Canada, or any other health authority and no conclusion can or should be drawn regarding the safety or efficacy of these investigational programs.

 

 

In addition to our existing pipeline programs, we may also seek to in-license clinical-stage vaccines or vaccine-related technologies that we believe complement our pipeline, as well as technologies that may supplement our efforts in both immuno-oncology and infectious disease.

 

Key Targeted Disease Areas

 

Hepatitis B Virus (“HBV”)

 

HBV infection can cause liver inflammation, fibrosis, and liver injury, resulting in potentially life-threatening conditions through acute illness and chronic disease, including liver failure, cirrhosis, and cancer. HBV remains a significant public health burden with as many as 2.2 million chronically infected people in the United States (“U.S.”) alone. Worldwide, this number is estimated to be as high as 350 million, with approximately 800,000 deaths resulting from the consequences of HBV infection each year.

 

Despite the highly infectious nature of HBV, due to its often-asymptomatic nature, it is estimated that as many as 67% of chronically infected adults in the U.S. are unaware of their infection status. There is no cure available for HBV infection and while public health initiatives highlight immunization as the most effective strategy for the prevention of HBV infections, the U.S. adult HBV vaccination rates remain persistently low at only about 30% of all adults aged 19 years and older.

 

In April 2022, the Centers for Disease Control and Prevention (“CDC”) Advisory Committee on Immunization Practices (“ACIP”) implemented a change to the adult HBV vaccine recommendations. As incorporated in the CDC’s 2022 Adult Immunization Schedule and as published in the April 1, 2022, CDC Morbidity and Mortality Weekly Report, adults aged 19 to 59 years are now universally recommended to be vaccinated against HBV infection. Additionally, while adults aged 60 years and older with risk factors for HBV infection are still recommended to receive HBV vaccinations, adults aged 60 years and older without known risk factors for HBV may now also receive HBV vaccinations.

 

In addition to our approved vaccine, PreHevbrio [Hepatitis B Vaccine (Recombinant)], there are four other vaccines approved in the U.S. for the prevention of HBV infection in adults: Engerix-B® and Twinrix®, manufactured by GlaxoSmithKline Biologicals S.A. (“GSK”), Recombivax HB®, manufactured by Merck &. Co., and Heplisav-B®, manufactured by Dynavax Technologies Corporation.

 

COVID-19 and Other Coronaviruses

 

Coronaviruses are a large family of enveloped viruses that cause respiratory illness of varying severities. Only seven coronaviruses are known to cause disease in humans, four of which most frequently cause symptoms typically associated with the common cold. Three of the seven coronaviruses, however, have more serious outcomes in people. These more pathogenic coronaviruses are (1) SARS-CoV-2, a novel coronavirus identified as the cause of COVID-19; (2) MERS-CoV, identified in 2012 as the cause of Middle East Respiratory Syndrome (“MERS”); and (3) SARS-CoV, identified in 2002 as the cause of Severe Acute Respiratory Syndrome (“SARS”). While the declaration of a public health emergency associated with COVID-19 expired in the U.S. in May 2023, new strains of the coronavirus continue to evolve and boosters for currently approved vaccines addressing new strains are expected in the foreseeable future.

 

Glioblastoma (“GBM”)

 

GBM is among the most common and aggressive malignant primary brain tumors in humans. In the U.S. alone, about 12,000 new GBM cases are diagnosed each year. The current standard of care for GBM is surgical resection, followed by radiation and chemotherapy. Even with intensive treatment, GBM progresses rapidly and has a high mortality rate, with median overall survival for primary GBM of about 15 months. Median overall survival for recurrent GBM is even lower, at about 8 months.

 

 

Cytomegalovirus (“CMV”)

 

CMV is a common virus that is a member of the herpes family. It infects one in every two people in many developed countries. Most CMV infections are “silent”, meaning the majority of people who are infected exhibit no signs or symptoms. Despite its typically asymptomatic nature in older children and adults, CMV may cause severe infections in newborn children (congenital CMV) and may also cause serious infections in people with weakened immune systems, such as solid organ or bone marrow transplant recipients. Congenital CMV infection can be treated – but not cured – and there are currently no approved vaccines available for the prevention of infection in either the congenital or the transplant setting.

 

Pipeline Programs

 

The table below is an overview of our commercial vaccine and our lead investigational programs as of May 15, 2024:

 

Indication		Program		Technology		Current Status
Approved Vaccine
● Hepatitis B		PreHevbrio1,2,3		VLP		Registration/Commercial
		Hepatitis B Vaccine
		(Recombinant)
Therapeutic Candidates
● Glioblastoma		VBI-1901		eVLP		Ongoing Phase IIb
● Hepatitis B		VBI-2601 (BRII-179)4		VLP		Ongoing Phase II
● Undisclosed		Undisclosed		MLE		Pre-clinical
Prophylactic Candidates
● Coronaviruses (Multivalent)		VBI-2901		eVLP		Ongoing Phase I
● COVID-19 (Beta variant)		VBI-2905		eVLP		Phase Ib Completed
● COVID-19 (Ancestral)		VBI-2902		eVLP		Phase Ia Completed
● Cytomegalovirus		VBI-1501		eVLP		Phase I Completed
● Coronaviruses (Multivalent)		Undisclosed		eVLP		Pre-Clinical
● Undisclosed		Undisclosed		MLE		Pre-Clinical

 

1Approved for use in the U.S. and Canada, under the brand name PreHevbrio, for the prevention of infection caused by all known subtypes of HBV in adults 18 years of age and older.

 

2Approved for use in the European Union (“EU”) / European Economic Area (“EEA”) and the UK, under the brand name PreHevbri, for active immunization against infection caused by all known subtypes of the HBV in adults. It can be expected that hepatitis D will also be prevented by immunization with PreHevbri as hepatitis D (caused by the delta agent) does not occur in the absence of HBV infection.

 

3Approved for use in Israel, under the brand name Sci-B-Vac, for active immunization against hepatitis B virus (HBV infection).

 

4On February 13, 2024, the Company and Variation Biotechnologies Inc., a Canadian federal corporation (“VBI Cda”) entered into the Brii Purchase Agreement with Brii Biosciences Limited (“Brii Bio”), pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Recent Developments–February 2024 Transactions With Brii Bio” below.

 

A summary of our marketed product, lead pipeline programs, and recent developments follows.

 

 

Marketed Product

 

PreHevbrio [Hepatitis B Vaccine (Recombinant)]

 

PreHevbrio [Hepatitis B Vaccine (Recombinant)] was approved by the FDA on November 30, 2021, for the prevention of infection caused by all known subtypes of HBV in adults aged 18 years and older. PreHevbrio contains the S, pre-S2, and pre-S1 HBV surface antigens, and is the only approved 3-antigen HBV vaccine for adults in the U.S. On February 23, 2022, following discussion at the CDC’s ACIP meeting, PreHevbrio joined the list of recommended products for prophylactic adult vaccination against HBV infection. The inclusion of PreHevbrio in the ACIP recommendation was reflected in a CDC publication on April 1, 2022 and was a notable milestone as many insurance plans and institutions require an ACIP recommendation before a vaccine can be reimbursed or is made available to patients. Additionally, PreHevbrio was included in the 2023 annual update of the CDC Adult Immunization Schedule, as detailed in the CDC publication on February 10, 2023. VBI launched PreHevbrio in the U.S. at the end of the first quarter of 2022, and revenue generation began in the second quarter of 2022. In June 2023, PreHevbrio was also awarded part of the CDC 2023 Adult Vaccine contract, for up to $25,350. The CDC vaccine contracts are established for the purchase of vaccines by immunization programs that receive CDC immunization cooperative agreement funds (i.e., state health departments, certain large city immunization projects, and certain current and former U.S. territories).

 

Commercial and regulatory activity for VBI’s 3-antigen HBV vaccine outside of the U.S. include:

 

● EU: On May 2, 2022, we announced that the European Commission (the “EC”) granted Marketing Authorization for PreHevbri [Hepatitis B Vaccine (Recombinant, Adsorbed)]. The European Commission’s centralized marketing authorization is valid in all EU Member States as well as in the EEA countries (Iceland, Liechtenstein, and Norway). On September 8, 2022, we announced a partnership with Valneva SE (“Valneva”) for the marketing and distribution of PreHevbri in select European markets, initially including the UK, Sweden, Norway, Denmark, Finland, Belgium, and the Netherlands. On July 19, 2023, we announced that PreHevbri is now available in the Netherlands and Belgium for active immunization against infection caused by all known subtypes of HBV in adults. PreHevbri became available in Sweden at the end of 2023, and in Denmark and Norway in early 2024.

 

● UK: On June 1, 2022, we announced that the UK Medicines and Healthcare Products Regulatory Agency granted marketing authorization for PreHevbri [Hepatitis B Vaccine (Recombinant, Adsorbed)]. This follows the EC centralized marketing authorization received in May 2022 and was conducted as part of the EC Decision Reliance Procedures. The UK is included in the Valneva marketing and distribution agreement for PreHevbri. On June 15, 2023, VBI announced the launch and availability of PreHevbri in the UK as part of the Valneva partnership. On April 9, 2024, UK Health Security Agency published an update to the hepatitis B chapter of the Green Book including detailed information about PreHevbri, a resource for healthcare providers with the latest information on vaccines in the UK.

 

● Canada: On December 8, 2022, we announced that Health Canada approved PreHevbrio [3-antigen Hepatitis B Vaccine (Recombinant)] for the prevention of infection caused by all known subtypes of HBV in adults aged 18 years and older.

 

● Israel: Approved and commercially available under the brand name Sci-B-Vac® since 2000.

 

● APAC: On July 5, 2023, we announced a license and collaboration agreement with Brii Bio for the development and commercialization of PreHevbri in the Asia Pacific region (“APAC”), excluding Japan.

 

 

Therapeutic Investigational Candidates

 

VBI-1901: Glioblastoma (GBM)

 

Our cancer vaccine immunotherapeutic program, VBI-1901, targets CMV proteins present in tumor cells. CMV is associated with a number of solid tumors including GBM, breast cancer, and pediatric medulloblastoma.

 

In January 2018, we initiated dosing in a two-part, multi-center, open-label Phase I/IIa clinical study of VBI-1901 in 38 patients with recurrent GBM. Phase I (Part A) of the study was a dose-escalation phase that defined the safety, tolerability, and optimal dose level of VBI-1901 adjuvanted with granulocyte-macrophage colony-stimulating factor (GM-CSF) in recurrent GBM patients with any number of prior recurrences. In December 2018, this phase completed enrollment of 18 patients across three dose cohorts, the highest of which (10 µg) was selected as the optimal dose level to test in the Phase IIa portion (Part B) of the study. Phase IIa of the study, which initiated enrollment in July 2019, was a two-arm study that enrolled 20 first-recurrent GBM patients who received 10 µg of VBI-1901 in combination with either GM-CSF or GSK proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 was provided pursuant to a Clinical Collaboration and Support Study Agreement with GSK, which we entered into on September 10, 2019. Enrollment of the 10 patients in the VBI-1901 with GM-CSF arm was completed in March 2020 and enrollment of the 10 patients in the VBI-1901 with AS01 arm was completed in October 2020.

 

Data from the Phase IIa portion of the study was announced throughout 2020, 2021, and 2022, with the latest data presented in November 2022 at the 2022 Society for Neuro-Oncology (SNO) Annual Meeting. The data from the Phase IIa portion of this study demonstrate: (1) improvement in 6-month, 12-month, and 18-month overall survival (“OS”) data compared to historical controls; (2) 12-month OS of 60% (n=6/10) in the VBI-1901 + GM-CSF study arm and 70% (n=7/10) in the VBI-1901 + AS01 study arm, compared to historical controls of ~30%; (3) 18-month OS of 30% (3/10) in the VBI-1901 + GM-CSF study arm and 40% (n=4/10) in the VBI-1901 + AS01 study arm; (4) 2 patients with partial tumor responses, one of whom remained on protocol for over two years and had achieved a 93% tumor reduction relative to baseline at initiation of treatment at the start of the study, and 10 stable disease observations across all study arms; and (5) VBI-1901 continues to be safe and well tolerated at all doses tested, with no safety signals observed.

 

On June 8, 2021, we announced that the FDA granted Fast-Track Designation for VBI-1901 formulated with GM-CSF for the treatment of recurrent GBM patients with first tumor recurrence. The designation was granted based on data from the Phase I/IIa study.

 

On June 22, 2022, we announced that the FDA granted Orphan Drug Designation for VBI-1901 for the treatment of GBM.

 

On October 12, 2022, we announced a collaboration with Agenus Inc. to evaluate VBI-1901 in combination with anti-PD-1 balstilimab in a second Phase II study as part of the INSIGhT adaptive platform trial in patients with primary GBM.

 

On September 7, 2023, we announced that the dosing of the first patient in a Phase IIb study of VBI-1901 in recurrent GBM patients with first tumor recurrence. This study expands the existing study to include a Part C, which is a multi-center, randomized, controlled, open-label study.

 

On April 3, 2024, we announced early tumor response data from the ongoing Phase IIb study during a presentation at World Vaccine Congress 2024. Early data from patients eligible for evaluation at week 12 show two observations of stable disease, indicating no tumor progression, in the VBI-1901 treatment arm (n=2/5, 40% disease control rate [DCR]). By comparison, no tumor responses have been observed in the control arm to-date (n=0/6, 0% DCR), with all patients seeing a 2-8x increase in tumor size by week 6. As of March 22, 2024, 17 patients have been randomized 1:1 to either the active, VBI-1901 treatment arm, or to the control, standard-of-care treatment arm (SoC). 14 leading neuro-oncology centers are actively recruiting patients across the US, with 2 new clinical sites activated in March 2024, and a third expected to be active in the second quarter of 2024. Additional interim data analyses are expected mid-year 2024 and year-end 2024, subject to speed of enrollment.

 

On February 13, 2024, we entered into a series of agreements with Brii Bio. Upon completion of the Essential Activities pursuant to the Side Letter (each as defined below), VBI Cda and Brii Bio will enter into a license agreement (the “Brii VBI-1901 License Agreement”) pursuant to which Brii Bio shall issue a secured promissory note in the amount of $5,000 as consideration for a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to VBI-1901 for development and commercialization in the APAC region (excluding Japan), which such note is then required to be assigned to K2 HealthVentures (“K2HV”) pursuant to the terms of the Fourth Amendment (defined herein). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments – February 2024 Agreements with Brii Bio” below.

 

VBI-2601: HBV Immunotherapeutic Candidate

 

VBI-2601 is a novel, recombinant, protein-based immunotherapeutic candidate in development for the treatment of chronic HBV infection. VBI-2601 is formulated to induce broad immunity against HBV, including T-cell immunity which plays an important role in controlling HBV infection. On July 5, 2023, we announced the A&R Collaboration Agreement (as defined below) with Brii Bio, expanding Brii Bio’s rights to the development and commercialization of VBI-2601 from Greater China rights to global rights.

 

On February 13, 2024, we entered into a series of agreements with Brii Bio, including as related to VBI-2601 (BRII-179). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Recent Developments–February 2024 Transactions with Brii Bio” below.

 

 

Prophylactic Investigational Candidates

 

VBI-2900: Coronavirus Vaccine Program (VBI-2901, VBI-2902, VBI-2905)

 

In response to the SARS-CoV-2 (COVID-19) pandemic, VBI initiated development of a prophylactic coronavirus vaccine program in 2020. Coronaviruses are enveloped viruses by nature which make them a prime target for VBI’s flexible eVLP platform technology. At that time, VBI selected two vaccine candidates with the goal of bringing forward candidates that add meaningful clinical and medical benefit to those already approved: (1) VBI-2901, a multivalent coronavirus vaccine candidate expressing the SARS-CoV-2, SARS, and MERS spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing an optimized “prefusion” form of the SARS-CoV-2 spike protein.

 

In March 2021, a Phase I study of VBI-2902 was initiated and on June 29, 2021, we announced initial positive data from the Phase Ia portion of this study that evaluated one- and two-dose regimens of 5µg of VBI-2902 in 61 healthy adults aged 18-54 years. After two doses, VBI-2902 induced neutralization titers in 100% of participants, with 4.3x higher geometric mean titer (“GMT”) than that of the convalescent serum panel (n=25), and peak antibody binding GMT of 1:4,047. VBI-2902 was also well tolerated with no safety signals observed.

 

In response to the increased circulation of SARS-CoV-2 variants, the Phase Ib portion of the Phase I study was initiated in September 2021 to assess VBI-2905, our eVLP vaccine candidate directed against the SARS-CoV-2 Beta variant. On April 5, 2022, we announced new data from the Phase Ib study (n=53). A single-dose booster of VBI-2905 increased the GMT of neutralizing antibodies directed against the Beta variant 3.8-fold, at day 28, in participants who had previously received two-doses of an mRNA vaccine (ancestral strain) – approximately 2-fold increases were also seen at day 28 in antibody GMTs against both the ancestral and delta variant. New preclinical data announced at the same time showed that against a panel of coronavirus variants in mice, reactivity was seen with VBI-2902 against all variants including the ancestral strain, Delta, Beta, Omicron, Lambda, and RaTG13 (a bat coronavirus that is distant to circulating human strains). In this same panel, VBI-2901 was able to elicit an even stronger response against all variants tested – as the strains became more divergent from the ancestral strain, VBI-2901 elicited a greater difference in GMT from VBI-2902, ranging from 2.5-fold higher against the ancestral strain to 9.0-fold higher against the bat coronavirus. Additionally, a validated pseudoparticle neutralization assay benchmarked against the WHO reference standard demonstrated that VBI-2902 elicited neutralizing antibody responses of 176 IU50/mL in its Phase Ia study – this international standard measure would predict a greater than 90% efficacy, with two internationally approved vaccines estimated to have 90% efficacy at 83 and 140 IU50/mL (Gilbert, PB, 2021). The clinical and preclinical data for all three candidates continue to support the potential of the eVLP platform against coronaviruses.

 

On September 29, 2022, we announced that we initiated the first clinical study of VBI’s multivalent coronavirus candidate, VBI-2901, designed to increase breadth of protection against COVID-19 and related coronaviruses. Interim data was announced on September 27, 2023, demonstrating that VBI-2901 induced broad and durable protective titers against variants of concern. Notably:

 

	●	All participants saw boosting and/or high neutralizing responses against a panel of COVID-19 variants, including Wuhan, Delta, Beta, Omicron BA.5, as well as multiple animal coronaviruses including bat and pangolin variants
	●	Participants with low baseline neutralization titers (geometric mean titer (“GMT”): 148 IU50/mL), who are at the highest risk of infection, saw the greatest vaccine-induced boosting effects across all variants tested at Day 28, after one dose, with increases of: 8.5x against Wuhan, 9.1x against Delta, 14.2x against Beta, and 5.8x against Omicron BA.5
	●	All participants who received one dose had enhanced persistence of neutralizing responses, with only about 25% reduction in GMT against Wuhan after 5 months vs. peak responses
	●	Similar enhanced durability trends were observed against all tested variants
	●	By comparison, a published study [Gilboa et al., 2022] evaluating immune responses after a third dose of a licensed mRNA vaccine in nearly 4,000 healthcare workers in Israel demonstrated an approximate 77% decline in GMT against Wuhan after 5 months vs. peak responses

 

■

In the same study [Gilboa et al., 2022], durability trends against other variants, including Omicron, were seen to wane even more aggressively, with 4-fold to 10-fold lower neutralization titers within 4 months of the third dose

 

 

Durability and breadth of the antibody response to COVID-19 variants were maintained at month 12 after the first dose of VBI-2901 were administered in this Phase I study. Additional data are expected from the Phase I study in 2024. 

 

The VBI-2900 program is supported by a partnership with the Coalition for Epidemic Preparedness Innovations (“CEPI” and the partnership, the “CEPI Funding Agreement”), with contributions of up to $33,018; a partnership with the Strategic Innovation Fund, established by the Government of Canada, with an award of up to CAD $55,976; contribution of up to CAD $1,000 from the Industrial Research Assistance Program (“IRAP”) of the National Research Council of Canada (“NRC”); and a collaboration with the NRC. On December 6, 2022, we and CEPI announced that we expanded the scope of the CEPI Funding Agreement to advance the development of multivalent coronavirus vaccines that could be deployed against COVID-19 as well as a future “Coronavirus X”.

 

VBI-1501: Prophylactic CMV Vaccine Candidate

 

Our prophylactic CMV vaccine candidate uses the eVLP platform to express a modified form of the CMV glycoprotein B antigen and is adjuvanted with alum, an adjuvant used in FDA-approved products.

 

Following the successful completion of the Phase I study in May 2018, and positive discussions with Health Canada, we announced plans for a Phase II clinical study evaluating VBI-1501 on December 20, 2018. We received similarly positive guidance from the FDA in July 2019. The Phase II study is expected to assess the safety and immunogenicity of dosages of VBI-1501 up to 20µg with alum. We are currently evaluating further data and next steps regarding VBI-1501.

 

Third Party License and Assignment Agreements

 

We currently are dependent on licenses from third parties for certain of our key technologies, including the license granted pursuant to an agreement between Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004, as subsequently amended (the “original Ferring License Agreement”) and a license from L’Universite Pierre et Marie Curie, now Sorbonne Université (“UPMC”), Institut National de la Santé et de la Recherche Médicale (“INSERM”) and L’école Normale Supérieure de Lyon.

 

Effective September 1, 2021, the Company amended and restated the original Ferring License Agreement (the “Amended and Restated Ferring License Agreement”), which amends and restates certain of the terms relating to the manufacture and marketing of HBsAg products, which includes, among others, updates to the definition of net sales, and a reduction in the fixed royalty rate on net sales of HBsAg products (“Product”) from seven percent (7%) to three and a half percent (3.5%) in consideration for the grant of the license to utilize genetically engineered CHO cells encoding the hepatitis B antigen and certain information related to the manufacture of hepatitis B vaccines. In connection with the Amended and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac Ltd.’s, an Israeli company (“SciVac”) obligations under the Amended and Restated Ferring License Agreement, or if the Amended and Restated Ferring License Agreement is assigned to a third party, guarantor for SciVac’s obligations that have accrued up until the date of such assignment. Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd., dated February 14, 2012 (the “SciGen Assignment Agreement”), we are required to pay royalties to SciGen Ltd. equal to 5% of net sales (as defined in the original Ferring License Agreement) of Product. Under the original Ferring License Agreement and the SciGen Assignment Agreement, we originally were to pay royalties on a country-by-country basis until the date 10 years after the date of commencement of the first royalty year in respect of such country. In April 2019, we exercised our option to extend the original Ferring License Agreement in respect of all the countries that still make up the territory for an additional 7 years by making a one-time payment to Ferring of $100. Royalties under the Amended and Restated Ferring License Agreement and SciGen Assignment Agreement will continue to be payable for the duration of the extended license periods.

 

 

Under a license agreement with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents that expired in the U.S. in 2023 and expired in other countries in 2021. UPMC is also a co-owner of the patent family covering our VBI-1501 CMV vaccine and we are negotiating an agreement with UPMC to cover this patent family. During the three months ended March 31, 2024, we did not make any milestone payments.

 

Expanded Hepatitis B Partnership with Brii Bio

 

On July 5, 2023, we announced the expansion of our hepatitis B partnership with Brii Bio. Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between us and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement, which amended and restated that certain collaboration and license agreement (the “Brii Collaboration and License Agreement”) between us and Brii Bio, dated December 4, 2018, as amended on April 8, 2021 and December 20, 2021 (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between us and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in APAC, excluding Japan. As part of this collaboration, Brii Bio paid us an upfront payment of $15,000, consisting of a $3,000 equity investment in a concurrent registered direct offering (as discussed herein), $5,000 as an advance payment for the clinical and commercial manufacture and supply of the VBI-2601 licensed product and PreHevbri and any related manufacturing expenditures, pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023 by and between us and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement, dated July 5, 2023, by and among us, SciVac and Brii Bio, we also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2HV, in all of our respective right, title and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of our obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (as defined herein). 

 

February 2024 Agreements with Brii Bio

 

On February 13, 2024, we entered into a series of agreements with Brii Bio, pursuant to which, subject to the achievement of certain activities, we would receive up to $33,000 in consideration from Brii Bio, consideration which will be used to correspondingly reduce our obligations due under the Loan Agreement (as defined herein).

 

Brii Purchase Agreement

 

On February 13, 2024, the Company and VBI Cda entered into a purchase agreement (the “Brii Purchase Agreement”) with Brii Bio, pursuant to which, subject to the achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for a secured promissory note in the principal amount up to $10,000 (the “Note”) to be issued by Brii Bio, which is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment, in exchange for a reduction in the Company’s obligations under the Loan Agreement equal to the initial principal amount of the Note. The initial principal amount of the Note was $2,500, which shall be increased by an aggregate amount equal to $7,500 upon the Company obtaining applicable consents under the Ferring License Agreement.

 

In addition to the foregoing, the Brii Purchase Agreement contains certain amendments to the Brii Collaboration Agreements, which such amendments are further described below.

 

 

Amendments to the Brii Collaboration Agreements

 

As previously disclosed and described above, on December 4, 2018, we and Brii Bio entered into the Brii Collaboration and License Agreement, pursuant to which we and Brii Bio agreed to collaborate on the development of a Hepatitis B recombinant protein-based immunotherapeutic in the licensed territory, which consists of China, Hong Kong, Taiwan, and Macau (collectively, the “VBI-2601 Licensed Territory”). Further, as previously disclosed and as described above, on July 5, 2023, we and Brii Bio entered into the Brii Collaboration Agreements.

 

Pursuant to the Brii Purchase Agreement, on February 13, 2024, the Company and Brii Bio agreed to amend the Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for the global development activities of PreHevbri to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval for PreHevbri in certain territories and (iii) omit the requirement for Brii Bio to make royalty and milestone payments to the Company.

 

Additionally, pursuant to the Brii Purchase Agreement, on February 13, 2024, we and Brii Bio also agreed, subject to achievement of certain activities, to amend the A&R Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the A&R Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for research studies and development of VBI-2601 to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval and commercialize VBI-2601 in the U.S. and China, (iii) revise the indemnity requirements such that Brii Bio indemnifies us with respect to certain transferred intellectual property after the effective date of the Brii Purchase Agreement and we indemnify Brii Bio prior to such date, (iv) omit the requirement for Brii Bio to make royalty and milestone payments to us, and (v) omit certain of our rights to terminate the A&R Collaboration Agreement and certain other effects of termination of the A&R Collaboration Agreement.

 

Side Letter

 

On February 13, 2024, the Company and Brii Bio entered into the Side Letter setting forth certain essential and additional priority activities to transfer manufacturing responsibility for clinical supply and commercial supply of VBI-2601 and PreHevbri for the Brii Territories set forth in the Side Letter (the “Essential Activities”) the Company is required to complete as a condition to the entry into the Brii License Agreement and consummation of the transactions pursuant to the Rehovot Purchase Agreement. As of March 31, 2024, the Essential Activities were still in progress and not yet completed. The principal amount of the Note shall increase up to $18,000 upon completion of the Essential Activities and the Company’s obligations under the Loan Agreement shall be reduced by a corresponding amount.

 

Brii License Agreement

 

Upon completion of the Essential Activities pursuant to the Side Letter, VBI Cda and Brii Bio will enter into the Brii License Agreement pursuant to which Brii Bio shall issue a secured promissory note in the amount of $5,000 as consideration for a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to the GBM program (VBI-1901) for development and commercialization in the APAC region (excluding Japan), which such note is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment.

 

The entry by VBI Cda and Brii Bio into the Brii License Agreement is subject to the Company completing the Essential Activities.

 

Rehovot Purchase Agreement

 

On February 13, 2024, the Company and SciVac entered into a purchase agreement (the “Rehovot Purchase Agreement”) with a wholly-owned subsidiary of Brii Bio, to be formed in Israel (“Brii Israel”) prior to the closing, and joined as a party to the agreement prior to the closing as the purchaser, and Brii Biosciences, Inc, a Delaware corporation, pursuant to which, upon achievement of certain activities and closing of the transactions contemplated by the Rehovot Purchase Agreement, subject to the terms and conditions therein, SciVac will sell to Brii Israel certain assets, including SciVac and its affiliates’ interest and rights in certain leases with respect to the vaccine manufacturing facility in Israel, for an aggregate purchase price of $10,000, which is then required to be paid to K2 HealthVentures (“K2HV”) pursuant to the terms of the Fourth Amendment.

 

 

The Rehovot Purchase Agreement contains representations and warranties of SciVac and Brii Israel that are typical for transactions of this type. The Rehovot Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type.

 

The closing of the transactions pursuant to the Rehovot Purchase Agreement are subject to the terms and conditions therein, including closing conditions that are typical for transactions of this type and the Company’s completion of the Essential Activities (as defined below). Closing will not occur prior to June 30, 2024.

 

Recent Developments

 

Termination of Jefferies ATM Program

 

On August 26, 2022, we entered into an Open Market Sale Agreement (the “Jefferies Sales Agreement”) with Jefferies LLC (“Jefferies”), to act as our sales agent or principal, with respect to the issuance and sale of up to $125,000 of our common shares, from time to time in an at-the-market offering (the “Jefferies ATM Program”). We agreed to pay Jefferies a commission of up to 3.0% of the gross proceeds from the sale of our common shares pursuant to the Jefferies Sales Agreement. On May 9, 2024, we terminated the Jefferies Sales Agreement with Jefferies, effective as of May 10, 2024.

 

April 2024 Offering

 

On April 9, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold 2,272,728 common shares and accompanying warrants to purchase up to 2,272,728 common shares (the “April 2024 Warrants”) at a combined offering price of $0.88 per common share and accompanying April 2024 Warrant in a registered direct offering (the “April 2024 Offering”). The April 2024 Offering closed on April 11, 2024. The April 2024 Warrants have an exercise price of $0.76 per share, are immediately exercisable on the date of issuance, and expire five years following the date of issuance. Net proceeds to us from the April 2024 Offering, after deducting placement agent fees and estimated offering expenses payable by us, were approximately $1,700.

 

In connection with the April 2024 Offering, we also issued to H.C. Wainwright & Co., LLC or its designees, warrants to purchase up to 136,364 common shares (the “April 2024 Placement Agent Warrants”) as compensation in connection with the April 2024 Offering. The April 2024 Placement Agent Warrants have substantially the same terms and conditions as the April 2024 Warrants, except that the April 2024 Placement Agent Warrants have an exercise price of $1.10 per share, which represents 125% of the offering price per common share and accompanying April 2024 Warrant and expire five years following the commencement of sales pursuant to the April 2024 Offering.

 

 

Nasdaq Minimum Bid Price Requirement – Extension of Compliance Period

 

As previously reported, on November 1, 2023, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023, through October 31, 2023, we did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market (“Nasdaq”) pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The letter also indicated that we were provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

 

On April 30, 2024, we received a letter from Nasdaq notifying us that we were granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in the Nasdaq Stock Market’s deficiency notice to us, dated November 1, 2023. The Nasdaq Stock Market’s determination was based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and our written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

 

If compliance with the Minimum Bid Price Requirement cannot be demonstrated by October 28, 2024, the Nasdaq Stock Market will provide written notification that our common shares could be delisted. In such event, Nasdaq rules permit us to appeal any delisting determination to a Nasdaq Hearings Panel. Accordingly, there can be no assurance that we will be able to regain compliance with the Nasdaq listing rules or maintain our listing on Nasdaq. We have not regained compliance as of the date of this Form 10-Q, and if we fail to regain compliance during the additional 180-day grace period, our common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to our ability to raise additional capital.

 

Financial Operations Overview

 

At present, our operations are focused on:

 

●	continuing the commercialization of PreHevbrio in the U.S. and commercialization of PreHevbri in Europe;
●	completing certain activities as part of the partnership with Brii Bio and preparation to transfer the Rehovot, Israel manufacturing facility to Brii Bio pursuant to the Rehovot Purchase Agreement;
●	manufacturing our 3-antigen HBV vaccine at commercial scale to meet demand in the U.S., Europe, and Israel, where it is approved, and to prepare for supply in markets where we or our partner Brii Bio may obtain marketing authorization;
●	manufacturing VBI-2601, our protein-based immunotherapeutic candidate for treatment of chronic HBV, in collaboration with Brii Bio;
●	continuing the Phase IIb clinical study of our GBM vaccine immunotherapeutic candidate, VBI-1901, in the recurrent GBM setting;
●	preparing for a clinical study of VBI-1901 in the primary GBM setting;
●	continuing the Phase I clinical study of our multivalent coronavirus candidate, VBI-2901;
●	continuing our development and scaling-up production processes for our prophylactic coronavirus vaccine candidates using a Contract Development and Manufacturing Organization (“CDMO”) located in Canada;
●	preparation for further development of VBI-1501, our preventative CMV vaccine candidate;

 

 

●	continuing the research and development (“R&D”) of our other pipeline candidates, including the exploration and development of new pipeline candidates;
●	implementing operational, compliance, financial, and management information systems, including through third party partners, to support our commercialization activities;
●	maintaining, expanding, and protecting our intellectual property portfolio; and
●	developing our internal systems and processes for regulatory affairs, legal, and compliance.

 

VBI’s revenue generating activities have been the sale of our 3-antigen HBV vaccine, under the brand name PreHevbrio in the U.S., PreHevbri in the UK and certain countries in Europe, and Sci-B-Vac in Israel. We have also generated revenue from various business development transactions and R&D services generating fees. To date, we have financed our operations primarily with proceeds from sales of our securities, our long-term debt agreements, and contribution agreements and partnerships with CEPI and the Government of Canada.

 

VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and new pipeline candidates. As of March 31, 2024, VBI had an accumulated deficit of approximately $600,345, stockholders’ deficit of approximately $5,467, and cash of $12,595. Cash outflows from operating activities were $11,770 for the three months ended March 31, 2024. Our ability to maintain our status as an operating company and to realize our investment in our In Process Research & Development (“IPR&D”) assets, which consist of our CMV and GBM programs, is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our administrative overhead and our research and development activities, and ultimately to profitably monetize our IPR&D. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing, if required. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.

 

We have incurred operating losses since inception, have not generated significant product sales revenue, and have not achieved profitable operations. We incurred net losses of $17,900 for the three months ended March 31, 2024, and we expect to continue to incur substantial losses in future periods. We anticipate that we will continue to incur substantial operating expenses as we continue our research and development and clinical studies, and as we continue the commercialization of PreHevbrio in the U.S., and PreHevbri in Europe. These include expenses related to the focus of our operations highlighted above.

 

In addition, we have incurred and will continue to incur significant expenses as a public company, which subject us to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of Nasdaq, and the Canadian securities regulators. We have also incurred and will continue to incur regulatory compliance costs and general and administrative costs related to our clinical regulatory operations and commercialization of our marketed product and product candidates.

 

Overall Performance

 

The Company had net losses of $17,900 and $27,751 for the three months ended March 31, 2024 and 2023, respectively. We had an accumulated deficit of $600,345 at March 31, 2024. We had $12,595 of cash and net working capital deficit of $51,233 as of March 31, 2024.

 

 

Revenues, net

 

Revenues, net consist of product sales of PreHevbrio in the U.S., PreHevbri in the UK and certain countries in the EU as part of our partnership with Valneva, sales of Sci-B-Vac in Israel, and R&D services revenue recognized as part of the Brii Collaboration Agreements.

 

In the U.S., beginning in the second quarter of 2022, PreHevbrio was sold to a limited number of wholesalers and specialty distributors and beginning in 2023, PreHevbri was sold to our partner Valneva in the UK and certain countries in the EU (collectively, our “Customers”). We expect to continue to expand our market share in 2024 and beyond. Revenues from product sales are recognized when we have satisfied our performance obligations, which is the transfer of control of our product upon delivery to the Customer. Our standard credit terms are short-term, and we expect to receive payment in less than one year, there is no significant financing component on the related receivables. Taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues.

 

In Israel, Sci-B-Vac is sold through procurement requests from four health funds (“HMOs”) (collectively, the “Sci-B-Vac Customers”).

 

Overall, product revenue, net, reflects our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

 

Cost of Revenues

 

Cost of revenues consist primarily of costs incurred for manufacturing our 3-antigen HBV vaccine which includes cost of materials, consumables, supplies, contractors, and manufacturing salaries.

 

Research and Development Expenses

 

R&D expenses, net of government grants and funding arrangements, consist primarily of costs incurred for the advancement of our lead programs, including: our 3-antigen HBV vaccine; VBI-1901, our GBM vaccine immunotherapeutic candidate; VBI-1501, our CMV vaccine candidate; VBI-2601, our hepatitis B immunotherapeutic candidate; and VBI-2900, our coronavirus vaccine program. These costs include:

 

	●	the cost of acquiring, developing, and manufacturing clinical study materials, and other consumables and lab supplies used in our pre-clinical studies;
	●	expenses incurred under agreements with contractors or CDMOs or Contract Research Organizations to advance the vaccine candidates into and through completion of clinical studies; and
	●	employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense.

 

We expense R&D costs when we incur them.

 

Sales, General, and Administrative (“SG&A”) Expenses

 

SG&A expenses consist principally of commercialization costs, salaries, and related costs for executive and other administrative personnel and consultants, including stock-based compensation, and travel expenses. Other sales, general and administrative expenses include professional fees for legal, patent protection, consulting and accounting services, travel and conference fees, board of directors meeting costs, scientific and commercial advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies, information technology costs and expenses, insurance, and other general expenses. SG&A expenses are expensed when incurred.

 

Interest Expense, Net

 

Interest expense, net of interest income, is associated with our long-term debt as discussed in Note 11 of the Notes to the Consolidated Financial Statements.

 

 

Results of Operations

 

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

 

All dollar amounts stated below are in thousands, unless otherwise indicated.

 

		Three months ended
		March 31
		2024				2023				Change $				Change %
Revenues, net		$	1,214			$	485			$	729				150	%
Expenses:
Cost of revenues			2,724				3,559				(835	)			(23	)%
Research and development			2,571				3,151				(580	)			(18	)%
Sales, general and administrative			7,671				13,284				(5,613	)			(42	)%
Total operating expenses			12,966				19,994				(7,028	)			(35	)%
Loss from operations			(11,752	)			(19,509	)			7,757				(40	)%
Interest expense, net			(1,818	)			(1,429	)			(389	)			27	%
Foreign exchange loss			(4,330	)			(6,813	)			2,483				(36	)%
Loss before income taxes			(17,900	)			(27,751	)			9,851				(35	)%
Income tax expense			-				-				-				0	%
NET LOSS		$	(17,900	)		$	(27,751	)		$	9,851				(35	)%

 

Revenues, net

 

Revenues, net for the three months ended March 31, 2024, were $1,214 as compared to $485 for the three months ended March 31, 2023. Revenues for the three months ended March 31, 2024 increased by $729 or 150% due to mainly an increase in product revenue. Product revenue increased as a result of an increase in PreHevbrio sales in the U.S.

 

Revenues, net Composition

 

		Three months ended March 31
		2024				2023
Product revenue, net		$	979			$	478
R&D service revenue			235				7
Total revenues, net		$	1,214			$	485

 

 

Revenues, net by Geographic Region

 

		Three months ended
		March 31
		2024				2023				$ Change				% Change
Revenue, net in United States		$	961			$	322			$	639				198	%
Revenue, net in Israel			20				-				20				100	%
Revenue, net in China / Hong Kong			32				7				25				357	%
Revenue, net in Europe			201				156				45				29	%
		$	1,214			$	485			$	729				150	%

 

Cost of Revenues

 

Cost of revenues for the three months ended March 31, 2024 was $2,724 as compared to $3,559 for the three months ended March 31, 2023. The decrease in the cost of revenues of $835 or 23% is due to lower direct labor costs as a result of the previously disclosed organizational changes commencing in April 2023, and decreased inventory-related costs incurred in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, offset by increased product sales.

 

Research and Development Expenses

 

R&D expenses for the three months ended March 31, 2024 were $2,571 as compared to $3,151 for the three months ended March 31, 2023. R&D expenses were offset by $664 for the three months ended March 31, 2024 and $2,402 for the three months ended March 31, 2023 due to government grants and funding arrangements. The decrease in R&D expenses of $580 or 18%, is mainly a result of a decrease in R&D expenses related to the development of our vaccine candidates VBI-2901 and VBI-1901. During the three months ended March 31, 2023, the clinical trial for VBI-2901 was ongoing and had achieved full patient enrollment. During the three months ended March 31, 2024, the clinical trial for VBI-1901 is ongoing, however, patient enrollment is still continuing, while VBI-2901 is nearing completion.

 

Sales, General, and Administrative Expenses

 

SG&A expenses, net of government grants and funding arrangements, for the three months ended March 31, 2024 were $7,671 as compared to $13,284 for the three months ended March 31, 2023. SG&A expenses were offset by $102 for the three months ended March 31, 2024 and $183 for the three months ended March 31, 2023 due to government grants and funding arrangements. The SG&A expense decrease of $5,613 or 42%, is mainly a result of the previously disclosed organizational changes commencing in April 2023, which reduced our internal headcount, commercial field teams, and our activity-based commercial expenses related to PreHevbrio in the U.S.

 

Loss from Operations

 

The net loss from operations for the three months ended March 31, 2024 was $11,752 as compared to $19,509 for the three months ended March 31, 2023. The $7,757 decrease in the net loss from operations resulted from the reduction in other expenses and other items discussed above.

 

Interest Expense, Net

 

Interest expense, net for the three months ended March 31, 2024 was $1,818 as compared to $1,429 for the three months ended March 31, 2023. The increase in interest expense, net of $389 or 27% is due to increased interest payments on our long-term debt due to higher interest rates.

 

Foreign Exchange Loss

 

The foreign exchange loss for the three months ended March 31, 2024 was $4,330 compared to $6,813 for the three months ended March 31, 2023. The decrease in the foreign exchange loss is a result of the changes in the foreign currency exchange rates (NIS and CAD) in which the foreign currency transactions were denominated for each of those periods, including the foreign exchange impact of intercompany loans that are translated at period end.

 

 

Net Loss

 

Net loss for the three months ended March 31, 2024 was $17,900 compared to $27,751 for the three months ended March 31, 2023 and was a result of the items discussed above.

 

Liquidity and Capital Resources

 

		March 31, 2024				December 31, 2023				$ Change				% Change
Cash		$	12,595			$	23,685			$	(11,090	)			(47	)%
Current Assets			26,361				36,231				(9,870	)			(27	)%
Current Liabilities			77,594				75,736				1,858				2	%
Working Capital Deficit			(51,233	)			(39,505	)			(11,728	)			30	%
Accumulated Deficit			(600,345	)			(582,445	)			(17,900	)			3	%

 

As of March 31, 2024, we had cash of $12,595 as compared to $23,685 as of December 31, 2023. As of March 31, 2024, we had working capital deficit of $51,233 as compared to working capital deficit of $39,505 at December 31, 2023. Working capital is calculated by subtracting current liabilities from current assets.

 

Net Cash Used in Operating Activities

 

The Company incurred net losses of $17,900 and $27,751 in the three months ended March 31, 2024 and 2023, respectively. The Company used $11,770 and $21,656 in cash for operating activities during the three months ended March 31, 2024 and 2023, respectively. The decrease in cash outflows is largely a result of the decrease in net loss and the change in operating working capital, most notably in inventory, other current assets, accounts payable, and other current liabilities.

 

Net Cash Used in Investing Activities

 

Net cash flows used by investing activities was $151 for the three months ended March 31, 2024 compared to cash used in investing activities of $534 for the three months ended March 31, 2023. The cash outflow in both periods is a result of routine property and equipment purchases.

 

Net Cash Provided by Financing Activities

 

Net cash flows provided by financing activities was $843 for the three months ended March 31, 2024 compared to cash flows provided by financing activities of $0 during the three months ended March 31, 2023. The cash flows provided for the three months ended March 31, 2024 relates to net proceeds from the sale and issuance of our common shares under our Jefferies ATM Program.

 

Sources of Liquidity

 

April 2024 Offering

 

On April 9, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold 2,272,728 common shares and accompanying April 2024 Warrants at a combined offering price of $0.88 per common share and accompanying April 2024 Warrants in the April 2024 Offering. The April 2024 Offering closed on April 11, 2024. The April 2024 Warrants have an exercise price of $0.76 per share, are immediately exercisable on the date of issuance, and expire five years following the date of issuance. Net proceeds to us from the April 2024 Offering, after deducting placement agent fees and estimated offering expenses payable by us were approximately $1,700.

 

 

In connection with the April 2024 Offering, we also issued to H.C. Wainwright & Co., LLC (“HCW”) or its designees the April 2024 Placement Agent Warrants as compensation in connection with the April 2024 Offering. The April 2024 Placement Agent Warrants have substantially the same terms and conditions as the April 2024 Warrants, except that the April 2024 Placement Agent Warrants have an exercise price of $1.10 per share, which represents 125% of the offering price per common share and accompanying April 2024 Warrant and expire five years following the commencement of sales pursuant to the April 2024 Offering.

 

Jefferies Open Market Sale Agreement

 

On August 26, 2022, we 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies, pursuant to which we may offer and sell our common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal. During the first quarter of 2024, we issued 1,317,783 common shares under the Jefferies ATM Program, for total gross proceeds of $868 at a weighted average price of $0.6589 per share. The Company incurred $25 in sales agent commissions and share issuance costs related to the common shares issued in the quarter ended March 31, 2024, resulting in net proceeds of $843. On May 9, 2024, we terminated the Jefferies ATM Program, effective as of May 10, 2024.

 

On April 16, 2024, upon filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company became subject to General Instruction I.B.6 of Form S-3, pursuant to which in no event will the Company sell its common shares in a registered primary offering using Form S-3 with a value exceeding more than one-third of our public float in any 12 calendar month period so long as our public float remains below $75,000.

 

K2 HealthVentures LLC Long Term Debt

 

On May 22, 2020, the Company, along with its subsidiary VBI Cda, (collectively, the “Borrowers”) entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders converted $2,000 of the secured term loan into 45,662 common shares at a conversion price of $43.80 per share.

 

On May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the Lenders and received additional loan advances of $12,000.

 

On September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $100,000 from $50,000, which term loans are available in additional tranches subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants, (iii) extend the final maturity date for the term loans to September 14, 2026, which may be extended to September 14, 2027, under certain circumstances, and (iv) to the extent that the maturity date is extended, the term loans will begin amortizing on a monthly basis on September 14, 2026.

 

On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.

 

 

Pursuant to the Second Amendment, the Lenders have the ability to convert $7,000 into common shares, by which $2,000 of the term loans shall be convertible into 45,662 common shares at a conversion price of $43.80 per share and $5,000 of the term loans shall be convertible into 159,734 common shares at a conversion price of $31.302 per share (“K2HV conversion feature”).

 

In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08. If and/or when additional tranches are advanced pursuant to the Second Amendment, the Company will issue additional warrants to purchase up to 72,680 common shares pursuant to the Second Amendment Warrant. If the full remaining $50,000 available in the K2HV tranches is advanced pursuant to the Second Amendment, up to an additional 72,680 common shares will be issuable pursuant to the Second Amendment Warrant.

 

The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.

 

The Company is required to make a final payment equal to 6.95% of the aggregate term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Second Amendment (the “Second Amendment Final Payment”). The final payment related to the refinanced $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment of $2,224 remains and is due the earlier of June 1, 2024 or the earlier prepayment of the term loans in accordance with the Second Amendment (the “Original Final Payment”).

 

Upon receipt of additional funds, issuable pursuant to the various tranches, under the Second Amendment, additional common shares will be issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the applicable tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $24.08, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.

 

On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.

 

The secured term loan maturity date is September 14, 2026, until which the Company is required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, included both financial and non-financial covenants, including quarterly minimum Net Revenue (as defined in the Loan Agreement) targets. The Company was not in compliance with the minimum Net Revenue covenant for the measurement periods ended September 30, 2023 and December 31, 2023, and did not qualify for an exception for this covenant, which constituted an Event of Default (as defined in the Loan Agreement). In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, the Company began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023.

 

 

On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement periods ended September 30, 2023, from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. On each of November 28, 2023, December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, and February 6, 2024, the Loan Parties entered into extensions to the Forbearance Agreement pursuant to which the Lenders agreed to extend the Forbearance Period through and including December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, February 6, 2024, and February 20, 2024, respectively, subject to compliance by the Borrowers with the same terms and conditions as set forth in the Forbearance Agreement.

 

The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.

 

On February 13, 2024, the Loan Parties entered into an amendment (the “Fourth Amendment”) to the Loan Agreement, effective upon entry into certain transactions with Brii Bio, pursuant to which the parties have agreed to, among other things, (i) remove a financial covenant requiring us to maintain minimum net revenue of 75% of projections, (ii) the forbearance by K2HV and the other lenders party thereto, prior to the earlier of (A) December 31, 2024, (B) the date the Side Letter (as defined below) ceases to be in full force and effect prior to the completion of the Essential Activities (as defined below) and (C) the date the Essential Activities (as defined below) are complete (the “Forbearance Expiration Date”) from exercising their remedies with respect to the occurrence of Events of Default (as defined in the Loan Agreement) subject to certain exceptions, and (iii) following the Forbearance Expiration Date, add a financial covenant requiring us to maintain a minimum cash amount equal to our obligations under the Loan Agreement at all times.

 

The effectiveness of the Fourth Amendment was conditioned upon entry into the Brii Purchase Agreement, the Rehovot Purchase Agreement and the Side Letter (each as defined herein), each of which were entered into by us and the respective parties thereto on February 13, 2024, as described above. As discussed above, on February 13, 2024 the obligations under the Loan Agreement were reduced by the initial principal amount of the Note of $2,500.

 

The total principal amount of the loan under the Loan Agreement as amended by the Fourth Amendment, outstanding at March 31, 2024, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $5,699 in connection with the Fourth Amendment, is $53,199. The principal amount of the loan made under the Loan Agreement as amended by the Fourth Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4%. The interest rate as of March 31, 2024 was 12.50%. The effective interest rate on the loan of $47,500, excluding the Original Final Payment and Second Amendment Final Payment, is 20.39%.

 

CEPI Partnership

 

On March 9, 2021, we and CEPI announced the CEPI Funding Agreement, to develop eVLP vaccine candidates against SARS-COV-2 variants, including the Beta variant, also known as the B.1.351 variant and as 501Y.V2, first identified in South Africa. CEPI agreed to provide up to $33,018 to support the advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion form of the spike protein from the Beta variant strain, through Phase I clinical development. On December 6, 2022, we and CEPI entered into the CEPI Amendment to expand the scope of the CEPI Funding Agreement. The CEPI Amendment, among others, (i) expands the definition of “Project Vaccine” to include additional multivalent vaccine constructs within the VBI-2900 program, (ii) removes certain pricing restrictions previously allocated to high-income countries in the CEPI Funding Agreement, (iii) updates the proposed volume commitment percentage contributions by us to CEPI for a Project Vaccine, and (iv) adds certain commercial benefits and related adjustments for CEPI following the pandemic period, including royalties paid to CEPI, in the event that CEPI provides funding for Phase III clinical studies of the Project Vaccine. Since inception of the CEPI Funding Agreement we received $19,327, of which there is a balance remaining of $3,601 in other current liabilities on the consolidated balance sheet.

 

 

Plan of Operations and Future Funding Requirements

 

The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2023, contains an explanatory paragraph regarding our ability to continue as a going concern. VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out our planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and the advancement of our pipeline candidates. As of March 31, 2024, VBI had an accumulated deficit of $600,345, stockholders’ deficit of $5,467 and cash of $12,595. Cash outflows from operating activities were $11,770 for the three months ended March 31, 2024.

 

Our ability to maintain our status as an operating company and to realize our investment in our IPR&D assets is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our commercialization activities, our administrative overhead and our research and development activities. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, government or non-government grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing. Based on available cash at March 31, 2024, together with the net proceeds from the financing activities subsequent to March 31, 2024, in order to continue to fund our operations, we must raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so. If we are unable to obtain additional financing in the near future or complete the transactions contemplated by the various agreements with Brii Bio consummated in February 2024 on a timely basis, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty. Our long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of our products, to bring about their successful commercial release, to generate revenue, and, ultimately, to attain profitable operations, or, alternatively, to advance our products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.

 

We will require additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and, subject to such approvals, commercially launch and sell our products, and will need to secure additional financing in the future to support our operations and to realize our investment in our IPR&D assets. We base this belief on assumptions that are subject to change, and we may be required to use our available cash and cash equivalent resources sooner than we currently expect. Our actual future capital requirements will depend on many factors, including the progress and results of our ongoing clinical trials, the duration and cost of discovery and preclinical development, laboratory testing and clinical trials for our pipeline candidates, the timing and outcome of regulatory review of our products, product sales, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the number and development requirements of other pipeline candidates that we pursue, and the costs of commercialization activities, including product marketing, sales, and distribution.

 

We expect to finance our future cash needs through public or private equity offerings, debt financings, government grants or non-government funding, or business development transactions. Pursuant to the Contribution Agreement, we will receive up to CAD $55,976 as a government grant to support the development of the Company’s coronavirus vaccine program, though Phase II clinical studies, and pursuant to the CEPI Funding Agreement, as amended by the CEPI Amendment, we will receive up to $33,018 in funding to support the development of the Company’s coronavirus vaccine program. We may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate. We may also decide to raise additional funds even before we need them if the conditions for raising capital are favorable. Additional equity, debt, government grants or non-government funding, or business development transactions may not be available on acceptable terms, if at all. If adequate funds are not available or we are unable to complete the Brii Transactions on a timely basis, we may be required to delay, reduce the scope of or eliminate our R&D programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain pipeline candidates that we might otherwise seek to develop or commercialize independently.

 

 

The common warrants sold in July 2023 in the underwritten public offering and the registered direct offering contain reset provisions applicable to the exercise price to be triggered upon issuance of equity or equity-linked securities at an effective common share purchase price of less than the exercise price in effect. Such obligations may make any additional financing difficult to obtain or unavailable to the Company.

 

To the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business, and other factors beyond our control. The continuing wars between Russia and Ukraine and between Israel and Hamas, and inflation, among others, have caused an unstable economic environment globally. Disruptions in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Current economic conditions have been, and continue to be, volatile. Continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business.

 

The Company’s long-term success and ability to continue as a going concern are dependent upon obtaining sufficient capital to fund the research and development of its pipeline candidates, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or, alternatively, to advance its products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.

 

To date, the Company has been able to obtain financing as and when it was needed; however, there is no assurance that financing will be available in the future, or if it is, that it will be available at acceptable terms.

 

As of March 31, 2024, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

 

Known Trends, Events, and Uncertainties

 

As with other companies that are in the process of developing and commercializing novel pharmaceutical and biologic products, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In addition, the emergence and effects of public health crises, such as endemics and epidemics and the consequences of the ongoing war between Russia and Ukraine and between Israel and Hamas, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than as discussed in this report, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

 

Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

 

 

Critical Accounting Policies and Estimates

 

There have been no changes to our critical accounting policies during the three months ended March 31, 2024. Critical accounting policies and the significant accounting estimates made in accordance with such policies are regularly discussed with the Audit Committee of the Company’s board of directors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” included in Item 7 of our 2023 10-K, as well as in our consolidated financial statements and the footnotes thereto, included in the 2023 10-K.

 

Recent Accounting Pronouncements

 

See Note 3 of Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer and Head of Corporate Development (our principal financial and accounting officer), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer and Head of Corporate Development have concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer and Head of Corporate Development, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended March 31, 2024, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.

 

On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($510,595). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.

 

The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023, and July 13, 2023. The next preliminary hearing is scheduled to be held on June 20, 2024.

 

On December 5, 2022, another tort claim was filed in the District Court of the central district in Israel naming our subsidiary, SciVac, as a defendant. The claim was filed by a minor and his parents against SciVac, the IMoH, and Prof. Arieh Raziel, requesting compensation due to bodily injury of the minor, who was diagnosed as suffering from an Autism Spectrum Disorder. The plaintiffs allege that the minor’s disabilities and the syndrome from which he suffers were caused due to a combination of several factors, including negligent pregnancy monitoring, negligent labor and delivery procedure, and administration of the alleged defective vaccine (Sci-B-Vac vaccine). Preliminary hearings have not yet been scheduled. 

 

SciVac intends to defend these claims vigorously.

 

 

Item 1A. Risk Factors

 

The following description of risk factors includes any material changes to risk factors associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of the 2023 10-K. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, and stock price.

 

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

 

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common shares.

 

On November 1, 2023, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). On April 30, 2024, we received a letter from Nasdaq notifying us that we had been granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in Nasdaq’s deficiency notice to us, dated November 1, 2023. Nasdaq’s determination was based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and our written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

 

In order to regain compliance with Nasdaq’s minimum bid price requirement, our common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days (with such compliance period extendable at the discretion of Nasdaq) during the additional 180-day grace period, which will end on October 28, 2024. As of the date of this filing, we have not regained compliance with the Minimum Bid Price Requirement, and there can be no assurance that the market price of our common shares will remain at least $1.00 for a minimum of ten consecutive business days in order for us to regain compliance with the Minimum Bid Price Requirement prior to October 28, 2024.

 

If we fail to regain compliance with the Minimum Bid Price Requirement by October 28, 2024, our common shares will be subject to delisting by Nasdaq. We would then be permitted to appeal any delisting determination to a Nasdaq Hearings Panel. Our common shares would remain listed on Nasdaq pending the panel’s decision after the hearing. If we do not appeal the delisting determination, or do not succeed in such an appeal, then our common shares would be delisted from Nasdaq and we may list our common shares on an over-the-counter exchange. Any delisting could seriously decrease or eliminate the value of an investment in our common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital, even if our shares continued to trade in the over-the-counter market.

 

To resolve our noncompliance with the Minimum Bid Price Requirement, we may consider available options including a reverse share split, which may not result in a permanent increase in the market price of our shares, which is dependent on many factors, including general economic, market and industry conditions and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission. It is not uncommon for the market price of a company’s shares to decline in the period following a reverse share split. For example, we did not satisfy the Minimum Bid Price Requirement for the period between May 18, 2022 to June 30, 2022, and we effected the Reverse Stock Split in April 2023 with the primary intent of increasing the price of our common shares immediately following the Reverse Stock Split to regain compliance with the Minimum Bid Price Requirement, and we regained such compliance in April 2023. It cannot be assured that any future reverse stock split will result in any sustained proportionate increase in the market price of our common shares, which is dependent upon many factors, including the business and financial performance of the company, general market conditions, and prospects for future success, which are unrelated to the number of shares of our common shares outstanding. It is not uncommon for the market price of a company’s common shares to decline in the period following a reverse stock split.

 

Although we expect to take actions intended to restore our compliance with the Minimum Bid Price Requirement, we can provide no assurance that any action taken by us would be successful, or that we would successfully maintain compliance with the Minimum Bid Price Requirement or any of Nasdaq’s other listing requirements or that any such action would stabilize the market price or improve the liquidity of our common shares. Should a delisting occur, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our shares, and our ability to raise future capital through the sale of our shares could be severely limited.

 

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

a) Sales of Unregistered Securities

 

There have been no unregistered sales of securities during the period covered by this Form 10-Q that have not been previously reported in a Current Report on Form 8-K. We have not made any purchases of our own securities during the time period covered by this Form 10-Q.

 

c) Issuer Purchases of Equity Securities

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 

Item 6. Exhibits

 

See the Exhibit Index following the signature page to this Form 10-Q for a list of exhibits filed or furnished with this Form 10-Q, which Exhibit Index is incorporated herein by reference.

 

EXHIBIT INDEX

 

Exhibit No.		Description
4.1		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on April 11, 2024).
4.2		Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on April 11, 2024).
10.1		Extension to Forbearance Agreement, dated January 9, 2024, by and among VBI Vaccines Inc., Variation Biotechnologies Inc. and K2 HealthVentures LLC (incorporated by reference to Exhibit 10.65 to the Company’s Annual Report on Form 10-K (SEC File No. 001-37769), filed with the SEC on April 16, 2024).
10.2		Extension to Forbearance Agreement, dated January 23, 2024, by and among VBI Vaccines Inc., Variation Biotechnologies Inc. and K2 HealthVentures LLC (incorporated by reference to Exhibit 10.66 to the Company’s Annual Report on Form 10-K (SEC File No. 001-37769), filed with the SEC on April 16, 2024).
10.3		Extension to Forbearance Agreement, dated February 6, 2024, by and among VBI Vaccines Inc., Variation Biotechnologies Inc. and K2 HealthVentures LLC (incorporated by reference to Exhibit 10.67 to the Company’s Annual Report on Form 10-K (SEC File No. 001-37769), filed with the SEC on April 16, 2024).
10.4+		Amendment to Consulting Agreement with F. Diaz-Mitoma Professional Corporation, effective January 1, 2024 (incorporated by reference to Exhibit 10.68 to the Company’s Annual Report on Form 10-K (SEC File No. 001-37769), filed with the SEC on April 16, 2024).
10.5*		Fourth Amendment to Loan and Guaranty Agreement, dated February 13, 2024, by and among VBI Vaccines Inc., as borrower, Variation Biotechnologies Inc., as borrower representative, each of the guarantors signatory thereto, and K2 HealthVentures LLC, as lender and as administrative agent.
10.6(2)(3)*		Purchase Agreement, dated February 13, 2024, among VBI Vaccines Inc, Variation Biotechnologies Inc., and Brii Biosciences Limited.
10.7(3)*		Purchase Agreement, dated February 13, 2024, among VBI Vaccines Inc, SciVac Ltd, and Brii Biosciences, Inc..
10.8(2)(3)*		Side Letter, dated February 13, 2024, among VBI Vaccines Inc, and Brii Biosciences Limited.
10.9*		Amendment to the Contribution Agreement, signed March 28, 2024, by and among VBI Vaccines, Inc., Variation Biotechnologies, Inc. and Her Majesty The Queen in Right of Canada as represented by the Minister of Industry.
10.10(2)		Form of Securities Purchase Agreement, dated April 9, 2024, by and among the Company and the investors named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on April 11, 2024).
31.1*		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2*		Certification of Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1**		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2**		Certification of Principal Financial and Accounting Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
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.
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

* Filed herewith.

 

** Furnished herewith.

 

+ Indicates a management contract or compensatory plan.

 

(1)	Certain material has been omitted from this document pursuant to a request for confidential treatment. The omitted material has been filed separately with the SEC.
(2)	Certain of the schedules (and similar attachments) to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K under the Securities Act because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the Exhibit or the disclosure document. The registrant hereby agrees to furnish a copy of all omitted schedules (or similar attachments) to the SEC upon its request.
(3)	Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K under the Securities Act, because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished to the SEC upon its request.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: May 15, 2024	VBI VACCINES INC.
	By:	/s/ Jeffrey Baxter
		Jeffrey Baxter
		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Nell Beattie
		Nell Beattie
		Chief Financial Officer and Head of Corporate Development
		(Principal Financial and Accounting Officer)