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 September 30, 2021

☐	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

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 Share, 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		257,304,768
(Class)		Outstanding at November 5, 2021

VBI VACCINES INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page

PART I - FINANCIAL INFORMATION		5

Item 1.	Condensed Consolidated Financial Statements	5

	Condensed Consolidated Balance Sheets - September 30, 2021 (unaudited) and December 31, 2020	5

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for three and nine months ended September 30, 2021 and 2020 (unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II - OTHER INFORMATION		37

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosure	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

Signatures		41

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 2020 annual report on the Form 10-K filed with the Securities and Exchange Commission on March 2, 2021. 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;
●	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;
●	the impact of the ongoing COVID-19 pandemic on our clinical studies, research programs, manufacturing, sourcing and supply chain, 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 maintain a good relationship with our employees;
●	the suitability and adequacy of our office, manufacturing, and research facilities and our ability to secure term extensions or expansions of leased space;
●	our ability to manufacture, or to have manufactured, any products we develop at a commercially viable scale to the standards and requirements of regulatory agencies;
●	the ability of our vendors and suppliers to manufacture and deliver materials 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 prophylactic hepatitis B vaccine candidate and clinical supplies of our hepatitis B immunotherapeutic candidate, 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 products 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 and funding in the future on reasonable terms, 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 success at managing the risks involved in the foregoing items;
●	our ability to maintain compliance with the NASDAQ Capital Market’s listing standards; 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)

	September 30, 2021			December 31, 2020
	(unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	137,470		$	93,825
Short-term investments		-			25,276
Accounts receivable, net		36			77
Inventory, net		2,265			2,152
Prepaid expenses		3,051			1,569
Other current assets		4,981			9,142
Total current assets		147,803			132,041

NON-CURRENT ASSETS
Other long-term assets		1,094			639
Property and equipment, net		10,381			10,721
Right of use assets		537			1,554
Intangible assets, net		62,150			62,156
Goodwill		2,263			2,261
Total non-current assets		76,425			77,331

TOTAL ASSETS	$	224,228		$	209,372

CURRENT LIABILITIES
Accounts payable	$	3,745		$	3,734
Other current liabilities		28,472			12,415
Current portion of deferred revenues		324			255
Current portion of lease liability		408			944
Total current liabilities		32,949			17,348

NON-CURRENT LIABILITIES
Lease liability, net of current portion		107			619
Long-term debt, net of debt discount		27,939			16,329
Liabilities for severance pay		549			522
Deferred revenues, net of current portion		2,540			2,849
Total non-current liabilities		31,135			20,319

COMMITMENTS AND CONTINGENCIES (NOTE 14)		-			-

STOCKHOLDERS’ EQUITY
Common shares (unlimited authorized; no par value) (September 30, 2021 - issued and outstanding 257,304,768; December 31, 2020 - issued and outstanding 247,039,010)		439,286			403,528
Additional paid-in capital		79,075			75,530
Accumulated other comprehensive income		1,371			1,265
Accumulated deficit		(359,588	)		(308,618	)
Total stockholders’ equity		160,144			171,705

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	224,228		$	209,372

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)

	2021			2020			2021			2020
	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020

Revenues	$	107		$	298		$	550		$	897

Operating expenses:
Cost of revenues		2,466			2,111			7,511			6,747
Research and development		2,972			4,478			14,392			10,035
General and administrative		9,693			5,562			25,807			13,520
Total operating expenses		15,131			12,151			47,710			30,302

Loss from operations		(15,024	)		(11,853	)		(47,160	)		(29,405	)

Interest expense, net of interest income (including related party - see Note 9)		(1,026	)		(742	)		(3,683	)		(2,006	)
Foreign exchange gain (loss)		203			(402	)		(127	)		543
Loss before income taxes		(15,847	)		(12,997	)		(50,970	)		(30,868	)

Income tax expense		-			-			-			-

NET LOSS	$	(15,847	)	$	(12,997	)	$	(50,970	)	$	(30,868	)

Other comprehensive income (loss)		(1,607	)		1,696			106			(1,988	)

COMPREHENSIVE LOSS	$	(17,454	)	$	(11,301	)	$	(50,864	)	$	(32,856	)

Net loss per share of common shares, basic and diluted	$	(0.06	)	$	(0.06	)	$	(0.20	)	$	(0.15	)

Weighted-average number of common shares outstanding, basic and diluted		256,360,356			234,709,403			254,055,707			210,044,126

See accompanying Notes to Condensed Consolidated Financial Statements

VBI Vaccines Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

	Number of Common Shares		Share Capital		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity

BALANCE AS OF DECEMBER 31, 2020		247,039,010	$	403,528	$	75,530		$	1,265		$	(308,618	)	$	171,705

Common shares issued in financing transactions, net of share issuance costs		5,752,068		21,417		-			-			-			21,417
Common shares issued upon exercise of warrants		34,494		52		-			-			-			52
Common shares issued upon of conversion of long-term debt		1,369,863		2,000		-			-			-			2,000
Common shares issued upon cashless exercise of warrants
Common shares issued upon cashless exercise of warrants, shares
Warrant modification in connection with debt amendment
Warrants issued in connection with financing transactions
Conversion feature issued in debt financing transaction
Common shares issued up on exercise of options
Common shares issued up on exercise of options, shares
Stock-based compensation		-		51		2,088			-			-			2,139
Net loss		-		-		-			-			(17,647	)		(17,647	)
Unrealized holding loss on short-term investments		-		-		-			(54	)		-			(54	)
Currency translation adjustments		-		-		-			397			-			397
BALANCE AS OF MARCH 31, 2021		254,195,435	$	427,048	$	77,618		$	1,608		$	(326,265	)	$	180,009

BALANCE AS OF APRIL 1, 2021		254,195,435	$	427,048	$	77,618		$	1,608		$	(326,265	)	$	180,009

Common shares issued in financing transactions, net of share issuance costs		284,100		861		-			-			-			861
Common shares issued upon exercise of warrants		19,346		29		-			-			-			29
Common shares issued upon cashless exercise of warrants		646,257		4,298		(4,298	)		-			-			-
Stock-based compensation		-		32		2,391			-			-

SEC Form 10-Q filed by VBI Vaccines, Inc.