| Stockholders' Equity and Additional Paid-In Capital | 11. STOCKHOLDERS’ EQUITY AND ADDITIONAL
PAID-IN CAPITAL Authorized Unlimited number of common shares without par
value. Common shares issuances 2017 common share issuances
i. On January 17, 2017 the Company issued 6,377 common shares related to stock options that were exercised during the year.
ii. 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.
iii. 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.
iv. 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.
v. 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.
vi. On December 18, 2017, the Company issued 274,000 common shares of the Company to Kevelt as part of a settlement agreement related to a Development and Manufacturing Agreement. 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. 2018 common share issuances
i. During the first half of 2018 the Company issued 39,828 common shares related to stock options that were exercised during the year.
ii. On March 7, 2018, the Company issued 135,000 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.
iii. On June 18, 2018, 25% of the stock awards granted on June 24, 2016 vested and the Company issued 129,782 shares of the Company’s common shares.
iv. On December 4, 2018, the Company issued 2,295,082 common shares of the Company to Brii Bio as part of a License Agreement (see Note 1). The transaction was measured using the fair value of the Company’s common shares at December 4, 2018 at a price of $1.58 for a total net proceeds of $3,626.
v. On December 17, 2018, the Company closed an underwritten public offering of 30,665,304 common shares at a price of $1.40 per share for total gross proceeds of $42,932. The Company incurred $3,152 of share issuance costs of which $3,006 were paid in cash during the year ended December 31, 2018 and $146 are included in other current liabilities as at December 31, 2018. 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, 2018, there were 1,140,053
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, 2018, there were 3,460 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, 2018, there were 613,577
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 at December 31, 2018, there were 1,722,586 options outstanding
and 268,570 RSUs unvested 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 5,213,166 at December 31, 2018. 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 the 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, 2018 and 2017. 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, 2018 and 2017. All RSUs issued under the plan at December 31, 2018 and 2017 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, 2018. Stock-based compensation expense The table below provides information, as of
December 31, 2018, 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 1,140,053 $ 4.09
2013 Plan 3,460 $ 7.31
2014 Plan 613,577 $ 5.23
2016 Plan 1,991,156 $ 3.82
Total 3,748,246 $ 4.14 Activity related to stock
options is as follows:
Number of Stock Options Weighted Average Exercise Price
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
Granted 1,515,000 $ 3.82
Exercised (39,828 ) $ 2.50
Forfeited (346,891 ) $ 4.47
Balance outstanding at December 31, 2018 3,479,676 $ 4.14
Exercisable at December 31, 2018 2,292,112 $ 4.34
Outstanding Exercisable
Exercise Price Number Of Options Weighted Average Remaining Contractual Life (Years) Number Of Options Weighted Average Exercise Price
$ 0.00 - $ 3.49 508,493 7.47 212,651 $ 2.87
$ 3.50 - $ 4.49 2,211,920 7.60 1,380,852 $ 4.15
$ 4.50 - $ 5.50 691,299 5.37 630,645 $ 4.91
$ 5.50+ 67,964 5.51 67,964 $ 8.13
3,479,676 7.10 2,292,112 $ 4.34 The weighted average remaining contractual
life of exercisable options was 6.12 years and 5.57 years at December 31, 2018 and 2017, 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, 2016 and 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
Granted 150,000 $ 4.26
Vested (237,669 ) $ 4.01
Forfeited (68,140 ) $ 3.89
Unvested shares outstanding at December 31, 2018 268,570 $ 4.13 The intrinsic value of outstanding options
at December 31, 2018 was $0 (the intrinsic value of vested options was $0 and the intrinsic value of those expected to vest was
$0). The fair value of the vested RSU’s was $954 for the year ended December 31, 2018. The intrinsic value of exercised options
was not significant for the years ended December 31, 2018 and 2017. 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:
2018 2017
Volatility 114.68 % 87.22 %
Risk free interest rate 2.57 % 2.31 %
Expected term in years 5.84 6.3
Expected dividend yield 0.00 % 0.00 %
Weighted average fair value per option $ 3.21 $ 3.12 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 United States 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:
2018 2017
Research and development $ 696 $ 702
General and administration 2,556 1,648
Cost of revenue 60 60
Total stock-based compensation expense $ 3,312 $ 2,410 There is $3,935 of unrecognized compensation
from all equity awards as at December 31, 2018. This expense will be recognized over a weighted average period of 1.96 years. The number of restricted stock awards vested
during the year ended December 31, 2018 includes 9,281 shares withheld or repurchased by the Company on behalf of employees to
satisfy $35 of tax obligations relating to the vesting of such shares. Warrants The Company amended a portion of the warrants
issued on December 6, 2016, as described in Note 9. The warrants issued on October 30, 2017, as
a finder’s fee in connection with the registered direct offering described earlier in Note 11, 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 value 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 December 31, 2016 2,068,824 $ 3.63
Issued 550,000 $ 3.34
Balance outstanding at December 31, 2017 and 2018 2,618,824 $ 3.57 |
