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 June 30, 2023

☐	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		22,872,175
(Class)		Outstanding at August 14, 2023

VBI VACCINES INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

TABLE OF CONTENTS

		Page

PART I - FINANCIAL INFORMATION		5

Item 1.	Condensed Consolidated Financial Statements	5

	Condensed Consolidated Balance Sheets - June 30, 2023 (unaudited) and December 31, 2022	5

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2023 and 2022 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

PART II - OTHER INFORMATION		44

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosure	47

Item 5.	Other Information	47

Item 6.	Exhibits	47

Signatures		49

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 2022 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2023. 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 Canada 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 and successfully execute strategic partnership arrangements;

●	our ability to manufacture, or to have manufactured, our 3-antigen hepatitis B vaccine and our pipeline candidates, at commercially viable scales to the standards and requirements of regulatory agencies;

●	the impact and continuing effects of the COVID-19 endemic 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 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)

	June 30, 2023			December 31, 2022

CURRENT ASSETS
Cash	$	20,840		$	62,629
Accounts receivable, net		79			94
Inventory, net		6,861			6,599
Prepaid expenses		1,667			2,309
Other current assets		2,444			6,059
Total current assets		31,891			77,690

NON-CURRENT ASSETS
Other long-term assets		1,110			1,355
Property and equipment, net		10,104			12,253
Right of use assets		2,703			3,316
Intangible assets, net		40,339			58,345
Goodwill		2,175			2,127
Total non-current assets		56,431			77,396

TOTAL ASSETS	$	88,322		$	155,086

CURRENT LIABILITIES
Accounts payable	$	7,353		$	12,973
Other current liabilities		16,493			22,588
Current portion of deferred revenues		845			409
Current portion of long-term debt, net of debt discount		1,990			-
Current portion of lease liability		993			972
Total current liabilities		27,674			36,942

NON-CURRENT LIABILITIES
Deferred revenues, net of current portion		1,793			2,204
Long-term debt, net of debt discount		47,839			48,888
Lease liability, net of current portion		1,732			2,365
Liabilities for severance pay		546			524
Total non-current liabilities		51,910			53,981

COMMITMENTS AND CONTINGENCIES (NOTE 14)		-			-

STOCKHOLDERS’ EQUITY
Common shares (unlimited authorized; no par value) (June 30, 2023 - issued and outstanding 8,608,539; December 31, 2022 - issued and outstanding 8,608,539)		442,322			442,312
Additional paid-in capital		93,695			90,020
Accumulated other comprehensive income		34,709			21,440
Accumulated deficit		(561,988	)		(489,609	)
Total stockholders’ equity		8,738			64,163

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	88,322		$	155,086

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)

	2023			2022			2023			2022
	Three Months Ended June 30						Six Months Ended June 30
	2023			2022			2023			2022

Revenues, net	$	720		$	346		$	1,205		$	472

Operating expenses:
Cost of revenues		3,483			2,522			7,039			5,276
Research and development		3,292			5,643			6,446			8,005
Sales, general and administrative		10,917			15,084			24,201			26,014
Impairment charges		20,000			-			20,000			-
Total operating expenses		37,692			23,249			57,686			39,295

Loss from operations		(36,972	)		(22,903	)		(56,481	)		(38,823	)

Interest expense, net		(1,708	)		(901	)		(3,137	)		(1,841	)
Foreign exchange loss		(5,948	)		(21,895	)		(12,761	)		(26,289	)
Loss before income taxes		(44,628	)		(45,699	)		(72,379	)		(66,953	)

Income tax expense		-			-			-			-

NET LOSS	$	(44,628	)	$	(45,699	)	$	(72,379	)	$	(66,953	)

Other comprehensive income		6,670			19,236			13,269			24,339

COMPREHENSIVE LOSS	$	(37,958	)	$	(26,463	)	$	(59,110	)	$	(42,614	)

Net loss per share of common shares, basic and diluted	$	(5.18	)	$	(5.31	)	$	(8.41	)	$	(7.78	)

Weighted-average number of common shares outstanding, basic and diluted		8,608,539			8,608,539			8,608,539			8,608,526

See accompanying Notes to Condensed Consolidated Financial Statements

VBI Vaccines Inc. and Subsidiaries