| Stockholders' Equity and Additional Paid-In Capital | 13. STOCKHOLDERS’ EQUITY AND
ADDITIONAL PAID-IN CAPITAL Authorized Unlimited number of common shares without
par value. Common shares issuances 2015 common shares issuances
i. On April 20, 2015, the Company entered into a license agreement (the “CLS License Agreement”) with CLS Therapeutics Limited, a Guernsey company (“CLS”), pursuant to which CLS has granted to the Company, effective as of the completion of the reverse merger with Levon Resources Ltd. on July 9, 2015, (Note 1) an exclusive, worldwide, perpetual and fully paid-up license (including the right to sublicense) to all of CLS’ patents, know-how and related improvements with respect to the Deoxyribonuclease enzyme (“DNASE”), including the exclusive right to research, develop, manufacture, have manufactured, use, sell, offer for sale, import, export, market and distribute products with respect to DNASE for all indications (collectively, the “Licensed Technology”). Pursuant to the CLS License Agreement, SciVac Ltd. agreed to issue to CLS 3,685,075 of its common shares.
ii. On July 8, 2015, Levon issued 567,457 common shares to various advisors for services provided to it in connection with the Levon Merger. The fair value of the shares was recognized as an expense in the amount of $2,127.
iii. The Company received loans from its shareholders and their affiliates in the amount of approximately $2,025 during the year ended December 31, 2015. These loans either were non-interest bearing or had an interest rate of 4.5% per annum. The loans were repayable within one year from date of receipt but were automatically extended for an additional year unless otherwise agreed between the parties. In 2015, the Company calculated the fair value of these loans in the amount of $1,501 using an effective interest rate of approximately 15%. The differences between the principal amount of the loan and their fair value in the amount of $522, was expensed over the term of the loan in 2015, and was recorded as an increase in equity of $393, net of $129 in income taxes.
On July 9, 2015, as part of the Levon Merger, certain related party loans and capital notes plus accrued interest were assigned from SciVac Ltd. to Levon. These loans with a carrying value of $10,611 were deemed to be converted into 1,874,507 common shares.
iv. On July 9, 2015, when the Levon Merger was completed 5,977,262 shares of Levon’s common shares were issued to SciVac Ltd. shareholders with a fair value of $20,872. See Note 1. 2016 common share issuances
i. On May 6, 2016, the Company completed the VBI-SciVac Merger pursuant to which the company issued 13,781,783 shares of the Company’s common shares to VBI DE’s shareholders. See Note 4.
ii. On June 14, 2016, the Company granted 762,500 stock awards pursuant to the 2016 Plan. On June 22, 2016, 25% of these stock awards vested and the Company issued 194,561 shares of the Company’s common shares (out of which 27,746 common shares were withheld for payroll tax withholding purposes). Twenty-five percent of unvested stock awards vest on each anniversary over the next three years. During 2016, an additional 11,998 shares of common shares were vested and issued to employees.
iii. On June 20, 2016, the Company closed an equity private placement. Under the terms of the financing, the Company sold an aggregate of 3,269,688 of its common shares at a price of approximately $4.16 per share for total gross proceeds of approximately $13.6 million. The Company incurred $23 of issuance costs.
Contemporaneously with the December 2016 transaction discussed below, an additional 77,787 common shares were issued pursuant to an anti-dilution provision included in the share purchase agreement.
iv. On September 23, 2016, the Company granted an additional 227,500 stock awards pursuant to the 2016 Plan. Pursuant to Israeli tax requirements, these awards were issued to a Trustee on behalf of SciVac employees, whereby 25% of these stock awards vested on the grant date and the balance vests 25% on each anniversary over the next three years.
v. On December 6, 2016, the Company raised $10.6 million in an equity financing transaction with Perceptive Life Sciences Master Fund Ltd. and Titan-Perc Ltd. Under the terms of the equity financing, the Company sold an aggregate of 3,475,000 of its common shares at a price of $3.05 per share in a private placement to the investors for total gross proceeds of approximately $10.6 million. The securities sold in the private placement have not been registered under the Securities Act of 1933, as amended, and may not be resold absent registration under or exemption from such Act. The Company incurred $77 of issuance costs.
vi. The Company issued 23,814 common shares related to stock options that were exercised during the year.
vii. The Company issued 69,000 common shares of the Company to three consultants for services provided to the Company’s shareholders in connection with their respective consulting agreements. The fair value of the common shares of $219 was recognized as an expense. 2017 common share issuances
i. On March 22, 2017, the Company issued 23,250 stock awards pursuant to the 2016 Plan. Pursuant to Israeli tax requirements, the common shares were issued to a Trustee on behalf of SciVac employees.
ii. On June 22, 2017, 25% of the stock awards granted on June 24, 2016 (see 2016 common share issuances ii above) vested and the Company issued 156,249 shares of the Company’s common shares.
iii. During the first half of 2017, the Company issued 25,000 common shares of the Company to one consultant for services provided to the Company’s shareholders in connection with their respective consulting agreements. The fair value of the common shares of $85 was recognized as an expense.
iv. On October 30, 2017, the Company closed an underwritten public offering and a concurrent registered direct offering of an aggregate of 23,575,410 common shares at a price of $3.05 per share for total gross proceeds of $71,905. In addition, in connection with the registered direct offering, the Company issued four-year warrants to purchase 550,000 common shares to an investor as a finder’s fee, at an exercise price of $3.34 per share. The Company incurred $4,683 of cash share issuance costs.
v. On December 18, 2017, the Company issued 274,000 common shares of the Company to Kevelt as part of the settlement agreement as described in Note 11. The transaction was measured using the fair value of the Company’s common shares at November 8, 2017 at a price of $4.17 for a total of $1,142. 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 at December 31, 2017, there were
1,273,527 options outstanding under the 2006 Plan. 2013 Stock Incentive Plan The 2013 Equity Incentive Plan (the
“2013 Plan”) was approved by and was previously administered by the VBI DE board of directors which designated eligible
participants to be included under the 2013 Plan, and designated the number of options, exercise price and vesting period of the
new options. The 2013 Plan was approved by the VBI DE shareholders on November 8, 2013. No further options will be issued
under the 2013 Plan. As at December 31, 2017, there were 4,613 options outstanding under the 2013 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. No further options will be issued under the 2014 Plan. As at December 31, 2017,
there were 685,755 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 following the VBI-SciVac Merger 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 at December 31, 2017, there were 387,500
options and 424,379 RSUs outstanding under the 2016 Plan. The principal features of the 2016 Plan
are as follows: Eligible Participants Eligible participants include individuals
employed (including services as a director) by the Company or its affiliates, including a service provider, who, by the nature
of his or her position or job is, in the opinion of the Board, in a position to contribute to the success of the Company (“Eligible
Persons”). Reservation of Shares The aggregate number of Common Shares
reserved for issuance to any one participant under the 2016 VBI Equity Incentive Plan, together with all other security-based compensation
arrangements must not exceed 5% of the total number of issued and outstanding Common Shares on a non-diluted basis. The maximum number of Common Shares
(a) issued to insiders within any one year period; and (b) issuable to insiders at any time, under the 2016 VBI Equity Incentive
Plan, when combined with all of the Company’s other security-based compensation arrangements, must not exceed 10% of the
total number of issued and outstanding Common Shares. The aggregate number of common shares
remaining available for issuance for awards under this plan total 3,127,355 at December 31, 2017. The source of common shares issued under
the various stock option plans are new common shares. Options and Stock Appreciation Rights The Company may grant options to Eligible
Persons on such terms and conditions consistent with the 2016 VBI Equity Incentive Plan. The exercise price for an option must
not be less than 100% of the “market price,” as that term is defined in the 2016 Plan, based on a 5- day volume weighted
average trading price per Common Share, on the date of grant of such option. With respect to Tandem Stock Appreciation
Rights attached to an option, which allows the holder, upon vesting of the option and Tandem SAR, to choose to exercise the stock
appreciation right or to exercise the option, the exercise price is the exercise price applicable to the option (as explained above)
to which the Tandem SAR relates, subject to adjustment provisions under the 2016 VBI Equity Incentive Plan. For Stand-Alone SARs,
a SAR that is granted without reference to any related Company options, the base price must not be less than 100% of the market
price on the date of grant of such Stand-Alone SAR. Stock appreciation rights (and in the case of Tandem SARs, the related options)
will be settled by payment in cash or Common Shares or a combination thereof, with an aggregate value equal to the product of (a)
the excess of the market price on the date of exercise over the exercise price or base price under the applicable stock appreciation
right, multiplied by (b) the number of stock appreciation rights exercised or settled. The Company has not issued any SARs under
this plan at December 31, 2017 and 2016. Under the 2016 VBI Equity Incentive
Plan unless otherwise designated by the Board of Directors, 25% of the options will vest on each of the first four anniversaries
of the grant date. The term of options will be for a maximum of 10 years, unless exercised or terminated earlier in accordance
with the terms of the 2016 VBI Equity Incentive Plan or the applicable grant agreement. Upon a participant’s termination
of employment due to death, or in the case of disability: (a) the outstanding options that were granted prior to the year that
includes the participant’s death or disability that have not become vested prior to such date will continue to vest and,
upon vesting, be exercisable during the 36-month period following such date; and (b) the outstanding options that have become vested
prior to the participant’s death or disability will continue to be exercisable during the 36-month period following such
date. In the case of a participant’s
termination of employment or contract for services without cause: (a) the outstanding options that have not become vested prior
to the participant’s termination will continue to vest and, upon vesting, be exercisable during the 120-day period following
such date; and (b) the outstanding options that have become vested prior to the participant’s termination will continue to
be exercisable during the 120-day period following such date. In the case of a participant’s
termination due to resignation (including voluntary withdrawal of services by a non-employee participant): (a) the outstanding
options that have not become vested prior to the date of notice of resignation will be forfeited and cancelled as of such date;
and (b) the outstanding options that have become vested prior to the date of notice of resignation will continue to be exercisable
during the 90-day period following such date. In the case of a participant’s
termination of employment or contract for services for cause, any and all then outstanding unvested options granted to such participant
will be immediately forfeited and cancelled, without any consideration therefor, as of the date such notice of termination is given. Share Units The Board of Directors may grant share
units, which include RSUs and PSUs, to Eligible Persons on such terms and conditions consistent with the 2016 VBI Equity Incentive
Plan. The Board will determine the grant value
and the valuation date for each grant of share units. The number of share units to be covered by each grant will be determined
by dividing the grant value for such grant by the market value of a Common Share as at the valuation date, rounded up to the next
whole number. Share units subject to a grant will
vest as specified in the grant agreement governing such grant, provided that the participant is employed on the relevant vesting
date. RSUs and PSUs will be settled upon, or as soon as reasonably practicable following the vesting thereof, subject to the terms
of the grant agreement. In all events, RSUs and PSUs will be settled on or before the earlier of the 90th day following the vesting
date and the date that is 2 ½ months after the end of the year in which the vesting occurred. Settlement will be made by way
of issuance of one Common Share for each RSU or PSU, a cash payment equal to the market value of the RSUs or PSUs being settled,
or a combination thereof. If the share units would be settled within a blackout period, such settlement will be postponed until
the earlier of the 6th trading day following the end of such blackout period and the otherwise applicable date of settlement as
determined in accordance with the settlement provision set out above. The Company has not issued any PSUs under this plan at December
31, 2017 and 2016. All RSUs issued under the plan at December 31, 2017 and 2016 contain no cash settlement provision. If and when cash dividends are paid
with respect to Common Shares to shareholders of record during the period from the grant date to the date of settlement of the
RSUs or PSUs, a number of dividend equivalent RSUs or PSUs, as applicable, will be credited to the share unit account of such participant. In the event a participant’s employment
is terminated due to resignation, share units that have not vested prior to the date of resignation will not vest and all such
Common Shares will be forfeited immediately. In the case of a participant’s
termination due to death, or in the case of disability, all share units granted prior to the year that includes the participant’s
death or disability, that have not vested prior to the participant’s death or disability will vest at the end of the vesting
period and in the case of PSUs, subject to the achievement of applicable performance conditions and the adjustment of the number
of PSUs that vest to reflect the extent to which such performance conditions were achieved. In the event a participant’s employment
or contract for services is terminated without cause, prior to the end of a vesting period relating to such participant’s
grant, the number of RSUs or PSUs, respectively, as determined by their respective formula set out in the 2016 VBI Equity Incentive
Plan will become vested at the end of the vesting period. In the event a participant’s employment
is terminated for cause, share units that have not vested prior to the date of the termination for cause will not vest and all
such share units will be forfeited immediately. Restricted Stock Restricted stock means Common Shares
that are subject to restrictions on such participant’s free enjoyment of the Common Shares granted, as determined by the
Board of Directors. Notwithstanding the restrictions, the participant will receive dividends paid on the restricted stock, will
receive proceeds of the restricted stock in the event of any change in the Common Shares and will be entitled to vote the restricted
stock during the restriction period. The participant will not have rights
to sell, transfer or assign, or otherwise dispose of the shares of restricted stock or any interest therein while the restrictions
remain in effect. Grants of restricted stock will be forfeited if the applicable restriction does not lapse prior to such date
or occurrence of such event or the satisfaction of such other criteria as is specified in the grant agreement. No restricted stock has been issued through
December 31, 2017. Stock-based compensation expense The table below provides information,
as of December 31, 2017, regarding the 2006 Plan, the 2013 Plan, the 2014 Plan and the 2016 Plan under which our equity securities
are authorized for issuance to officers, directors, employees, consultants, independent contractors and advisors.
Plan Category Number of securities to be issued upon exercise of outstanding awards Weighted average exercise price
2006 Plan 1,273,527 $ 4.11
2013 Plan 4,613 $ 7.31
2014 Plan 685,755 $ 5.36
2016 Plan 811,879 $ 3.90
Total 2,775,774 $ 4.36 Activity related
to stock options is as follows:
Number of Stock Options Weighted Average Exercise Price
Balance outstanding at January 1, 2015 and December 31, 2015 - $ -
Adopted Option Plans 2,104,312 $ 4.50
Granted 108,750 $ 3.61
Exercised (23,814 ) $ 2.50
Forfeited (21,345 ) $ 3.57
Balance outstanding at December 31, 2016 2,167,903 $ 4.45
Granted 303,500 $ 3.72
Exercised (6,377 ) $ 2.50
Forfeited (113,631 ) $ 4.37
Balance outstanding at December 31, 2017 2,351,395 $ 4.44
Exercisable at December 31, 2017 1,740,816 $ 4.47
Outstanding Exercisable
Exercise Price Number Of Options Weighted Average Remaining Contractual Life (Years) Number Of Options Weighted Average Exercise Price
$ 2.50 - $ 3.49 196,420 4.0 196,420 $ 2.65
$ 3.50 - $ 4.49 1,136,759 7.4 766,258 $ 4.09
$ 4.50 - $ 5.49 928,291 6.4 694,587 $ 4.96
$ 5.50+ 89,925 6.5 83,551 $ 8.12
2,351,395 6.7 1,740,816 $ 4.47 The weighted average remaining contractual
life of exercisable options was 5.57 years and 6.05 years at December 31, 2017 and 2016, respectively. Information relating to restricted stock units is as follow:
Number of Stock Awards Weighted Avg Fair Value at Grant Date
Unvested shares outstanding at January 1, 2015 and December 31, 2015 - -
Granted 990,000 $ 3.88
Vested (263,434 ) $ 3.88
Forfeited (87,192 ) $ 3.87
Unvested shares outstanding at December 31, 2016 639,374 $ 3.88
Granted 57,000 $ 4.72
Vested (213,870 ) $ 3.93
Forfeited (58,125 ) $ 3.89
Unvested shares outstanding at December 31, 2017 424,379 $ 3.99 The intrinsic value of outstanding options
at December 31, 2017 was $594 (the intrinsic value of vested options was $452, and the intrinsic value of those
expected to vest was $142). The fair value of the vested RSU’s was $899 for the year ended December 31,
2017. The intrinsic value of exercised options was not significant for the years ended December 31, 2017 and 2016. Stock options are issued with exercise
prices equal to the underlying share’s fair value on the date of grant, subject to a four-year vesting periods as follows: 25%
at the first anniversary of the grant date and 2.083% on the last day of each month for the 36 months thereafter until 100% vested or
monthly over 48 months, with a contractual term of 10 years. In determining the amount of stock-based
compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying
the following weighted average assumptions:
2017 2016
Volatility 87.22 % 80.36 %
Risk free interest rate 2.31 % 1.25 %
Expected term in years 6.3 6.3
Expected dividend yield 0 % 0 %
Weighted average fair value per option $ 3.12 $ 3.09 The volatility was based on an average
of volatility rates of a pool of public pharmaceutical or biotechnology companies that are at a comparable stage of development
and the Company’s recent historic volatility, all calculated taking into account the expected term of the option. The risk-free rate was based on rates
provided by the U.S. Treasury with a term equal to the expected life of the option. The Company does not have sufficient
historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its
equity shares have been publicly traded. As a result, the Company uses the simplified method to determine the expected term of
stock options whereby the expected term equals the average between the vesting period and the contractual life. The fair value of the options is recognized
as an expense on a straight-line basis over the vesting period, forfeitures are accounted for when they occur. The total stock-based compensation expense
recorded in the years ended December 31, was as follows:
2017 2016
Research and development $ 702 $ 637
General and administration 1,648 1,591
Cost of revenue 60 74
Total stock-based compensation expense $ 2,410 $ 2,302 There was no stock-based compensation
expense recorded in the year ended December 31, 2015. There is $3,081 of unrecognized compensation
from all equity awards as at December 31, 2017. This expense will be recognized over a weighted average period of 1.8 years. The number of restricted stock awards
vested during the year ended December 31, 2016 includes 27,746 shares withheld or repurchased by the Company on behalf of employees
to satisfy $105 of tax obligations relating to the vesting of such shares. Warrants The warrants issued on December 6, 2016,
as part of the facility described in Note 10, entitle the Lender to purchase:
● 1,341,282 common shares with an exercise price of $3.355 per share which is equal to the price per share of the common shares paid by investors in the December PIPE;
● an additional 363,771 common shares with an exercise price of $4.13; and,
● the warrants are exercisable at any time on or prior to the fifth anniversary of their issue date. The value of $2,792 attributed to the
warrants issued on December 6, 2016 was based on the Black-Scholes option pricing model determined by applying the following assumptions:
Volatility 85 %
Risk free interest rate 1.35 %
Expected dividend yield - %
Expected term in years 5 The warrants issued on October 30, 2017,
as part of the share underwritten public offering and concurrent registered direct offering described earlier in Note 13, entitle
the holder to purchase 550,000 common shares at an exercise price of $3.34 per share. The warrants are exercisable at
any time on or prior to the fourth anniversary of their issue date. The fair of the warrants issued on October
30, 2017 in the amount of $611 was based on the Black-Scholes option pricing model Activity related to the warrants is
as follows:
Number of Warrants Weighted Average Exercise Price
Balance outstanding at January 1, 2015 and December 31, 2015 - $ -
Issued as part of business combination 363,771 $ 4.13
Issued 1,705,053 $ 3.52
Balance outstanding at December 31, 2016 2,068,824 $ 3.63
Issued 550,000 $ 3.34
Balance outstanding at December 31, 2017 2,618,824 $ 3.57 |
