VBI Vaccines (VBIVQ) 10-Q 2022 Q3 Quarterly report

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, 2022

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	258,257,494
(Class)	Outstanding at November 10, 2022

VBI VACCINES INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION		5
Item 1.	Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets - September 30, 2022 (unaudited) and December 31, 2021	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (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	38
Item 4.	Controls and Procedures	38
PART II - OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosure	42
Item 5.	Other Information	42
Item 6.	Exhibits	42
Signatures		44

2

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 2021 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2022. 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 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;

● the impact of the COVID-19 pandemic and the continuing effects of the COVID-19 pandemic 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;

3

● 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 success at managing the risks involved in the foregoing items;

● our ability to regain and 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.

4

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, 2022			December 31, 2021
CURRENT ASSETS
Cash	$	83,550		$	121,694
Accounts receivable, net		132			8
Inventory, net		5,796			2,576
Prepaid expenses		2,730			2,373
Other current assets		4,008			3,633
Total current assets		96,216			130,284
NON-CURRENT ASSETS
Other long-term assets		1,349			1,259
Property and equipment, net		11,149			11,037
Right of use assets		3,465			3,344
Intangible assets, net		57,727			62,091
Goodwill		2,104			2,261
Total non-current assets		75,794			79,992
TOTAL ASSETS	$	172,010		$	210,276
CURRENT LIABILITIES
Accounts payable	$	11,666		$	4,280
Other current liabilities		21,504			26,941
Current portion of deferred revenues		597			526
Current portion of lease liability		914			839
Total current liabilities		34,681			32,586
NON-CURRENT LIABILITIES
Deferred revenues, net of current portion		2,004			2,277
Long-term debt, net of debt discount		48,418			28,441
Lease liability, net of current portion		2,571			2,516
Liabilities for severance pay		519			574
Total non-current liabilities		53,512			33,808
COMMITMENTS AND CONTINGENCIES (NOTE 14)		-
STOCKHOLDERS’ EQUITY
Common shares (unlimited authorized; no par value) (September 30, 2022 - issued and outstanding 258,257,494; December 31, 2021 - issued and outstanding 258,250,273)		442,300			442,235
Additional paid-in capital		87,705			81,583
Accumulated other comprehensive income (loss)		22,280			(1,565	)
Accumulated deficit		(468,468	)		(378,371	)
Total stockholders’ equity		83,817			143,882
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	172,010		$	210,276

See accompanying Notes to Condensed Consolidated Financial Statements

5

VBI Vaccines Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30						Nine Months Ended September 30
	2022			2021			2022			2021
Revenues, net	$	317			107		$	789		$	550
Operating expenses:
Cost of revenues		2,672			2,466			7,948			7,511
Research and development		4,983			2,972			12,988			14,392
General and administrative		14,220			9,693			40,234			25,807
Total operating expenses		21,875			15,131			61,170			47,710
Loss from operations		(21,558	)		(15,024	)		(60,381	)		(47,160	)
Interest expense, net of interest income		(958	)		(1,026	)		(2,799	)		(3,683	)
Foreign exchange (loss) gain		(2,693	)		203			(28,982	)		(127	)
Loss before income taxes		(25,209	)		(15,847	)		(92,162	)		(50,970	)
Income tax expense		-			-			-			-
NET LOSS	$	(25,209	)		(15,847	)		(92,162	)		(50,970	)
Other comprehensive (loss) income		(494	)		(1,607	)		23,845			106
COMPREHENSIVE LOSS	$	(25,703	)		(17,454	)		(68,317	)		(50,864	)
Net loss per share of common shares, basic and diluted	$	(0.10	)		(0.06	)		(0.36	)		(0.20	)
Weighted-average number of common shares outstanding, basic and diluted		258,257,494			256,360,356			258,257,229			254,055,707

See accompanying Notes to Condensed Consolidated Financial Statements

6

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, 2021		258,250,273	$	442,235	$	81,583		$	(1,565	)	$	(378,371	)	$	143,882
Adjustments for prior periods from adoption of ASU 2020-06		-		-		(2,746	)		-			2,065			(681	)
Common shares issued upon exercise of options		7,221		12		-			-			-			12
Stock-based compensation		-		25		2,477			-			-			2,502
Net loss		-		-		-			-			(21,254	)		(21,254	)
Currency translation adjustments		-		-		-			5,103			-			5,103
BALANCE AS OF MARCH 31, 2022		258,257,494	$	442,272	$	81,314		$	3,538		$	(397,560	)	$	129,564
BALANCE AS OF APRIL 1, 2022		258,257,494	$	442,272	$	81,314		$	3,538		$	(397,560	)	$	129,564
Stock-based compensation		-		14		2,443			-			-			2,457
Net loss		-		-		-			-			(45,699	)		(45,699	)
Currency translation adjustments		-		-		-			19,236			-			19,236
BALANCE AS OF JUNE 30, 2022		258,257,494	$	442,286	$	83,757		$	22,774		$	(443,259	)	$	105,558
BALANCE AS OF JULY 1, 2022		258,257,494	$	442,286	$	83,757		$	22,774		$	(443,259	)	$	105,558
Warrant issued in connection with debt amendment		-		-		1,550			-			-			1,550
Stock-based compensation		-		14		2,398			-			-			2,412
Net loss		-		-		-			-			(25,209	)		(25,209	)
Currency translation adjustments		-		-		-			(494	)		-			(494	)
BALANCE AS OF SEPTEMBER 30, 2022		258,257,494	$	442,300	$	87,705		$	22,280		$	(468,468	)	$	83,817
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
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			-			-			2,423
Warrant modification in connection with debt amendment		-		-		867			-			-			867
Net loss		-		-		-			-			(17,476	)		(17,476	)
Unrealized holding gain on short-term investments		-		-		-			54			-			54
Currency translation adjustments		-		-		-			1,316			-			1,316
BALANCE AS OF JUNE 30, 2021		255,145,138	$	432,268	$	76,578		$	2,978		$	(343,741	)	$	168,083
BALANCE AS OF JULY 1, 2021		255,145,138	$	432,268	$	76,578		$	2,978		$	(343,741	)	$	168,083
Common shares issued in financing transactions, net of share issuance costs		2,156,597		6,982		-			-			-			6,982
Common shares issued upon exercise of warrants		3,033		4		-			-			-			4
Stock-based compensation		-		32		2,497			-			-			2,529
Net loss		-		-		-			-			(15,847	)		(15,847	)
Currency translation adjustments		-		-		-			(1,607	)		-			(1,607	)
BALANCE AS OF SEPTEMBER 30, 2021		257,304,768	$	439,286	$	79,075		$	1,371		$	(359,588	)	$	160,144

See accompanying Notes to Condensed Consolidated Financial Statements

7

VBI Vaccines Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	2022			2021
	For the Nine Months Ended September 30
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(92,162	)	$	(50,970	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,541			1,366
Stock-based compensation		7,371			7,091
Amortization of debt discount		1,237			2,499
Loss on extinguishment of long-term debt		172			-
Inventory reserve		1,401			1,056
Unrealized foreign exchange loss		28,410			-
Net change in operating working capital items:
Change in accounts receivable		(127	)		40
Change in inventory		(5,174	)		(1,178	)
Change in prepaid expenses		(407	)		(1,477	)
Change in other current assets		(667	)		4,182
Change in other long-term assets		(174	)		(448	)
Change in operating right of use assets		1,010			768
Change in accounts payable		7,606			10
Change in deferred revenues		30			(244	)
Change in other current liabilities		(3,715	)		16,710
Payments made on operating lease liabilities		(1,001	)		(797	)
Net cash flows used in operating activities		(54,649	)		(21,392	)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of short-term investments		-			25,151
Purchase of property and equipment		(2,892	)		(1,385	)
Net cash flows (used in) provided by in investing activities		(2,892	)		23,766
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares for cash		-			30,275
Share issuance costs		-			(937	)
Proceeds from debt financing		20,000			12,000
Debt issuance costs		(563	)		(22	)
Proceeds from issuance of common shares for cash, upon exercise of warrants		-			85
Proceeds from issuance of common shares for cash, upon exercise of options		12			-
Net cash flows provided by financing activities		19,449			41,401
Effect of exchange rates on cash		(52	)		(130	)
CHANGE IN CASH FOR THE PERIOD		(38,144	)		43,645
CASH, BEGINNING OF PERIOD		121,694			93,825
CASH, END OF PERIOD		83,550		$	137,470
Supplementary information:
Interest paid	$	2,067		$	1,428
Non-cash investing and financing activities:
Adjustments for prior periods from adoption of ASU 2020-06		681			-
Warrant modification in connection with debt amendment		-			867
Warrant issued in connection with debt amendment		1,550			-
Common shares issued in connection with cashless warrant exercise		-			4,298
Common shares issued upon conversion of debt		-			2,000
Capital expenditures included in accounts payable and other current liabilities		283			73
Share issuance costs included in other current liabilities		67			78

See accompanying Notes to Condensed Consolidated Financial Statements

8

VBI Vaccines Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(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”); and SciVac Ltd. an Israeli company (“SciVac”); SciVac Hong Kong Limited (“SciVac HK”) and VBI Vaccines B.V a Netherlands company (“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 Vaccines Inc. (“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, 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.

The COVID-19 pandemic has materially negatively affected the global economy, and the ongoing effects of the COVID-19 pandemic, including but not limited to, supply chain issues, global shortages of supplies, materials and products, volatile market conditions and rising global inflation, continue to do so. As a result of the COVID-19 pandemic, the Company’s business and results of operations were adversely affected and, as the ongoing effects of the COVID-19 pandemic continue to impact the global economy, may continue to adversely affect our business and results of operations. The extent to which the effects of the COVID-19 pandemic will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted. We do not yet know the full extent of potential delays or impacts on our business, our clinical studies, our research programs, the recoverability of our assets, and our manufacturing; however, the effects of the COVID-19 pandemic may continue to disrupt or delay our business operations, including with respect to efforts relating to potential business development transactions, and it could continue to disrupt the marketplace which could have an adverse effect on our operations.

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 had an accumulated deficit of $468,468 as of September 30, 2022 and cash outflows from operating activities of $54,649 for the nine months ended September 30, 2022.

The Company will require significant additional funds to conduct clinical and non-clinical trials, commercially launch our products, and achieve regulatory approvals. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, structured asset financings, 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. 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 should the Company be unable to continue as a going concern.

9

On July 1, 2022, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“NASDAQ”) indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between May 18, 2022 through September 30, 2022, 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 December 28, 2022 (the “Compliance Period”), in which to regain compliance pursuant to NASDAQ Listing Rule 5810(c)(3)(A).

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 during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for NASDAQ, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. We have not regained compliance as of the date of this Form 10-Q, and if we fail to regain compliance during the Compliance Period or any subsequent grace period granted by NASDAQ, our common shares will be subject to delisting by NASDAQ, which 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.

On August 26, 2022, the Company 1) filed a registration statement for 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 “ATM Program”). The ATM Program replaces Open Market Sale Agreements previously entered into with Jefferies on July 31, 2020, and September 3, 2021, pursuant to each of which we could offer and sell our common shares having an aggregate price of up to $125,000 from time to time, through “at the market” (“ATM”) equity offering programs. Both ATM programs were terminated, effective as of August 26, 2022. Prior to termination, $27,022 of our common shares remained available for sale pursuant to the first ATM program, and $125,000 of our common shares remained available for sale pursuant to the second ATM program. Neither ATM program was utilized in 2022.

In September 2022, the Company refinanced its existing term loan facility with K2 HealthVentures LLC (“K2”) to increase the amount of term loans available to $100,000 among other items. See Note 9 for more details. The refinanced long-term debt has a maturity date of September 14, 2026.

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 United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2021 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, 2021 (the “2021 10-K”), as filed with the SEC on March 7, 2022.

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.

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Significant Accounting Policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2021 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2022, other than the polices discussed below.

3. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts on an entity’s own equity. Specifically, the new standard has removed the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It has also removed certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation for convertible instruments.

On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. Our conversion option that was previously bifurcated and recorded as a debt discount and additional paid-in capital has now been combined as a single instrument classified as a liability. The Company eliminated the beneficial conversion feature from additional paid-in capital; eliminated the interest accretion on the beneficial conversion feature through December 31, 2021 from the opening balance of accumulated deficit; and eliminated the corresponding debt discount. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

Accordingly, the cumulative effect of the changes made on our January 1, 2022 condensed consolidated balance sheet for the adoption of the ASU was as follows:

SCHEDULE OF CUMULATIVE EFFECT OF CHANGES ON CONSOLIDATED BALANCE SHEETS 

	Balance as at December 31, 2021			Adjustments from adoption of ASU 2020-06			Balance as at January 1, 2022
Liabilities
Long-term debt, net of debt discount	$	28,441		$	681		$	29,122
Stockholders’ equity
Additional paid-in capital	$	81,583		$	(2,746	)	$	78,837
Accumulated deficit	$	(378,371	)	$	2,065		$	(376,306	)

Recently Issued Accounting Standards, not yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This ASU will be implemented through a modified retrospective method of transition. The Company is currently evaluating the potential impact of ASU 2016-13 on its condensed consolidated financial statements.

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4. INVENTORY, NET

Inventory consists of the following:

SCHEDULE OF INVENTORY 

	September 30, 2022		December 31, 2021
Finished goods	$	774	$	-
Work-in-process		1,074		645
Raw materials		3,948		1,931
Total	$	5,796	$	2,576

5. OTHER CURRENT ASSETS

Other current assets consisted of the following:

SCHEDULE OF OTHER CURRENT ASSETS 

	September 30, 2022		December 31, 2021
Government receivables	$	2,350	$	1,438
Other current assets		1,658		2,195
Total	$	4,008	$	3,633

6. INTANGIBLE ASSETS, NET, AND GOODWILL

The Company’s intangible assets determined to have indefinite useful lives including In-Process Research and Development (“IPR&D”) and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. Such circumstances could include but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator.

The Company has established August 31st as the date for its annual impairment test of IPR&D and goodwill. The costs of rights to IPR&D projects acquired in an asset acquisition are expensed in the consolidated statements of operations unless the project has an alternative future use. These costs include initial payments incurred prior to regulatory approval in connection with research and development agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products.

The IPR&D assets, which consist of the CMV and GBM programs, were acquired in a business combination, capitalized as an intangible asset and are tested for impairment at least annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. The impairment test compares the carrying amount of the IPR&D asset to its fair value. If the carrying amount exceeds the fair value of the asset, such excess is recorded as an impairment loss. There was no IPR&D impairment as a result of the Company’s annual testing on August 31, 2022. The fair value of the IPR&D assets included in the impairment test was determined using the income approach method and is considered Level 3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value of IPR&D assets including: 1) the amount and timing of costs to develop the IPR&D into viable products; 2) the amount and timing of future cash inflows; 3) the discount rate; and 4) the probability of technical and regulatory success. The discount rate used was 12% and the cumulative probability of technical and regulatory success to achieve approval to market the products ranged from approximately 10% to 17%.

The fair value of our CMV asset was in excess of its carrying value by approximately 25% as of August 31, 2022. In the event we continue to experience challenging market conditions, insufficient internal resources due to competing programs, and changes in the competitive and technological landscape for CMV vaccines, this may give rise to a triggering event that may require the Company to record impairment charges on our IPR&D assets in the future.

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

			September 30, 2022
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation			Net Book Value
Patents	$	669	$	(669	)	$	-		$	3		$	3
IPR&D assets		61,500		-			(300	)		(3,476	)		57,724
	$	62,169	$	(669	)	$	(300	)	$	(3,473	)	$	57,727

			December 31, 2021
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(660	)	$	-		$	47	$	56
IPR&D assets		61,500		-			(300	)		835		62,035
	$	62,169	$	(660	)	$	(300	)	$	882	$	62,091

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The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives.

The change in carrying value for IPR&D assets from December 31, 2021 relates to currency translation adjustments which decreased by $4,311 for the nine months ended September 30, 2022.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary, after step zero), if the carrying value of a reporting unit exceeded its fair value an impairment would be recorded. We would perform our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. There was no goodwill impairment determined as a result of the Company’s annual testing on August 31, 2022. The fair value of the Company, which consists of a single reporting unit, included in the impairment test was determined using the closing market stock price of VBI as of August 31, 2022.

SCHEDULE OF GOODWILL 

			September 30, 2022
	Gross Carrying Amount		Cumulative Impairment Charge			Cumulative Currency Translation			Net Book Value
Goodwill	$	8,714	$	(6,292	)	$	(318	)	$	2,104

			December 31, 2021
	Gross Carrying Amount		Cumulative Impairment Charge			Cumulative Currency Translation			Net Book Value
Goodwill	$	8,714	$	(6,292	)	$	(161	)	$	2,261

The change in carrying value for goodwill from December 31, 2021 relates to currency translation adjustments which increased by $157 for the nine months period ended September 30, 2022.

7. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

SCHEDULE OF OTHER CURRENT LIABILITIES 

	September 30, 2022		December 31, 2021
Accrued research and development expenses (including clinical trial accrued expenses)	$	7,224	$	8,196
Accrued professional fees		2,970		2,294
Payroll and employee-related costs		2,392		4,805
Deferred funding		7,479		10,183
Other current liabilities		1,439		1,463
Total	$	21,504	$	26,941

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 10, Stockholders’ Equity and Additional Paid-in Capital.

The following potentially dilutive securities outstanding at September 30, 2022 and 2021 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  

	September 30, 2022		September 30, 2021
Warrants		3,564,882		1,384,469
Stock options and restricted stock units		23,102,475		18,409,572
K2 conversion feature		6,161,889		1,369,863
Total		32,829,246		21,163,904

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9. LONG-TERM DEBT 

As of September 30, 2022, and December 31, 2021, the long-term debt is as follows:

SCHEDULE OF LONG-TERM DEBT  

	September 30, 2022		December 31, 2021
Long-term debt, net of debt discount of $7,281 ($3,783 at December 31, 2021)	$	48,418	$	28,441
Less: current portion		-		-
Long-term debt, net of current portion	$	48,418	$	28,441

On May 22, 2020, the Company (along with its subsidiary VBI Cda) entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2 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 $1.46 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 1,369,863 common shares at a conversion price of $1.46 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 up to four tranches the subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants to the Second Amendment, (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 second tranche of term loans of up to $15,000 will be available from April 1, 2023, through June 30, 2023, subject to the achievement of certain clinical milestones and compliance with a liquidity requirement which requires the Company to have sufficient cash on hand to funds its operations for at least nine months (the “Liquidity Requirement”). The third tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain of the milestones for the second tranche of term loans were achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The fourth 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 1,369,863 shares of common stock at a conversion price of $1.46 per share and $5,000 of the term loans shall be convertible into 4,792,026 shares of common stock at a conversion price of $1.0434 per share (“K2 conversion feature”).

In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 625,000 common shares (the “Original K2 Warrant”) at an exercise price of $1.12 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2 Warrant to purchase an additional 312,500 common shares for a total of 937,500 common shares (the “First Amendment Warrant”) with the same exercise price of $1.12 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 2,180,413 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $0.8026. If the full remaining $50,000 available in the K2 tranches is advanced pursuant to the Second Amendment, up to an additional 2,180,413 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.

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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 second, third and fourth 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 second tranche, third tranche and fourth tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $0.8026, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.

The Company accounted for the Second Amendment as a debt extinguishment and resulted in an extinguishment loss of $172, which is included in interest expense, net of interest income in the condensed consolidated statement of operations and comprehensive loss. The term loans under the Loan Agreement as amended by the First Amendment were derecognized and the term loan under the Loan Agreement as amended by the Second Amendment was recorded at fair value of $48,340, which resulted in a total debt discount of $7,359. Fees paid to the Lender, including the fair value of the Second Amendment Warrant of $1,550 and the facility fee of $563, were included in the calculation of extinguishment loss. Fees paid to third parties were de minimums and expensed as incurred in general and administrative in the condensed consolidated statement of operations and comprehensive loss.

The total principal amount of the loan under the Loan Agreement as amended by the Second Amendment, outstanding at September 30, 2022, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $3,475 in connection with the Second Amendment, is $55,699. The principal amount of the loan made under the Loan Agreement as amended by the Second Amendment accrues interest at an annual rate equal to the greater of (a) 8.00% or (b) prime rate plus 4.00%. The interest rate as of September 30, 2022 was 10.25%. The Company is required to pay only interest until September 14, 2026. The effective interest rate on the loan of $50,000, excluding the Original Final Payment and Second Amendment Final Payment, is 13.63%.  

Upon the occurrence of an Event of Default, and during the continuance of an Event of Default, the applicable rate of interest, described above, will be increased by 5.00% per annum. The secured term loan maturity date is September 14, 2026, or if the milestone for the Restatement Third Tranche Term Loan (as defined in the Second Amendment) has been achieved, September 14, 2027, and the Loan Agreement as amended by the Second Amendment includes both financial and non-financial covenants. The Company was in compliance with these covenants as of September 30, 2022.

The obligations under the Loan Agreement as amended by the Second Amendment, are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries other than intellectual property. 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.

The total debt discount related to the Second Amendment is $7,359. As of September 30, 2022, and December 31, 2021, the unamortized debt discount was $7,281 and $3,783 respectively. The debt discount is being charged to interest expense, net of interest income in the condensed consolidated statement of operations and comprehensive loss using the effective interest method over the term of the debt.

At September 30, 2022 and December 31, 2021, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be $47,080 and $30,406, respectively.

Interest expense, net of interest income recorded in the three and nine months ended September 30, 2022 and 2021 was as follows:

SCHEDULE OF INTEREST EXPENSE  

	2022			2021			2022			2021
	Three months ended September 30						Nine months ended September 30
	2022			2021			2022			2021
Interest expense	$	856		$	618		$	2,132		$	1,488
Amortization of debt discount		416			487			1,237			2,499
Extinguishment loss		172			-			172			-
Interest income		(486	)		(79	)		(742	)		(304	)
Total	$	958		$	1,026		$	2,799		$	3,683

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The following table summarizes the future principal payments due under long-term debt:

SCHEDULE OF FUTURE PRINCIPAL OF LONG-TERM DEBT  

	Principal payments on Loan Agreement and final payment
Remaining 2022	$	-
2023		-
2024		2,224
2025		-
2026		53,475
Total	$	55,699

10. STOCKHOLDERS’ EQUITY 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 September 30, 2022, there were 842,803 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 September 30, 2022, there were 521,242 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 September 30, 2022, there were 21,727,860 options outstanding and 10,570 RSUs unvested under the 2016 Plan.

The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled 1,268,789 at September 30, 2022.

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Activity related to stock options is as follows:

SCHEDULE OF STOCK OPTIONS ACTIVITY  

	Number of Stock Options			Weighted Average Exercise Price
Balance outstanding at December 31, 2021		18,534,379		$	2.63
Granted		5,140,000			1.51
Exercised		(7,221	)		1.65
Forfeited		(575,253	)		2.28
Balance outstanding at September 30, 2022		23,091,905		$	2.38
Exercisable at September 30, 2022		14,536,140		$	2.52

Information relating to RSUs is as follow:

SCHEDULE OF RESTRICTED STOCK UNITS  

	Number of Stock Awards			Weighted Average Fair Value at Grant Date
Unvested shares outstanding at December 31, 2021		39,329		$	1.47
Forfeited		(695	)		1.46
Vested		(28,064	)		1.48
Unvested shares outstanding at September 30, 2022		10,570		$	1.46

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:

SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK-SCHOLES OPTION PRICING ASSUMPTIONS  

	2022			2021
Volatility		93.23	%		96.99	%
Risk free interest rate		1.75	%		0.57	%
Expected term in years		5.83			5.84
Expected dividend yield		0.00	%		0.00	%
Weighted average fair value per option	$	1.13		$	2.41

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 and nine months ended September 30, 2022 and 2021 was as follows:

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE  

	Three months ended September 30				Nine months ended September 30
	2022		2021		2022		2021
Research and development	$	514	$	476	$	1,534	$	1,368
General and administrative		1,868		2,029		5,751		5,656
Cost of revenues		30		24		86		67
Total stock-based compensation expense	$	2,412	$	2,529	$	7,371	$	7,091

11. REVENUES, NET AND DEFERRED REVENUE

Revenues, net comprises the following:

SCHEDULE OF REVENUE COMPRISED  

	Three months ended September 30				Nine months ended September 30
	2022		2021		2022		2021
Product revenues, net	$	258	$	24	$	680	$	262
R&D service revenues		59		83		109		288
Total revenues, net	$	317	$	107	$	789	$	550

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The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2022:

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

	Total		Current portion to September 30, 2023		Remaining portion thereafter
Product revenues, net	$	469	$	-	$	469
R&D service revenues		2,132		597		1,535
Total revenues, net	$	2,601	$	597	$	2,004

The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2022:

SUMMARY OF CHANGES IN DEFERRED REVENUE  

Balance at January 1, 2021	$	3,104
Currency translation		-
Balance at December 31, 2021		2,803
Recognition of deferred revenue		(57)
Currency translation		(145)
Balance at September 30, 2022	$	2,601
Short Term	$	597
Long Term	$	2,004

Collaboration and License Agreement – Brii Bio

On December 4, 2018, the Company entered into a Collaboration and License Agreement (the “License Agreement”) with Brii Biosciences Limited (“Brii Bio”), amended on April 8, 2021, whereby:

● 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 Ib/IIa collaboration clinical trial for the purpose of comparing VBI-2601 (BRII-179), 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 for the Licensed Product, for the treatment of HBV in the Licensed Territory and to commercialize and promote 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 License Agreement (the “Second Amendment License Agreement”) subject to the following additional terms and conditions:

● the Company and Brii Bio agreed to conduct an additional Phase II combination clinical trial of VBI-2601 (BRII-179), 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 License Agreement, as amended, the Company is responsible for the R&D Services and Brii Bio is responsible for costs relating to the clinical trials for the Licensed Territory.

The Company and Brii Bio will jointly own all right, title and interest in the joint know-how development and the patents claiming joint inventions made pursuant to the Second Amendment License Agreement.

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The initial consideration of the License Agreement consisted of an $11,000 non-refundable upfront payment. As part of the 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 2,295,082 shares of its common stock valued at $3,626 (based on the Company’s common stock 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 (BRII-179) 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 (BRII-179) license using the residual method.

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

In addition, the Company is also eligible to receive an additional $117,500 in potential regulatory and sales milestone payments, along with royalties on commercial sales in the 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 have been recognized to date.

The R&D Services 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 September 30, 2022, R&D services related to Brii Bio that remain unsatisfied are $1,932, out of the $2,601 total deferred revenue.

Upon termination of the Collaboration and License Agreement 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.

12. COLLABORATION ARRANGEMENTS

GlaxoSmithKline Biologicals S.A. (“GSK”)

On September 10, 2019, the Company entered into a Clinical Collaboration Agreement (“Collaboration Agreement”) pursuant to which we will investigate the use of GSK’s proprietary AS01_B adjuvant system in our ongoing study of VBI-1901. As a result of the Collaboration Agreement, a second study arm was added to Part B of the ongoing Phase Ib/IIa clinical study to accommodate the AS01_B adjuvant.

This relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic 606. Costs associated with the second study arm will be expensed as incurred in Research and Development expenses; three and nine months ended September 30, 2022 are $0 and $139, respectively. Costs for the three and nine months ended September 30, 2021 are $48 and $374, respectively.

National Research Council of Canada (“NRC”)

On March 31, 2020, the Company announced a collaboration with the NRC, Canada’s largest federal research and development organization, to develop a coronavirus vaccine candidate, targeting COVID-19, SARS, and MERS. The NRC and the Company are collaborating to evaluate and select promising coronavirus vaccine candidates. The collaboration combines the Company’s viral vaccine expertise, eVLP technology platform, and modified coronavirus antigens with the NRC’s proprietary SARS-CoV-2 antigens and assay development capabilities to select the most immunogenic vaccine candidate for further development.

On December 21, 2020, the Company signed an amendment to the collaboration agreement with the NRC to broaden the scope of collaboration to include certain pre-clinical evaluations, bioprocess optimization, technology transfer, and the performance of additional scale up work.

On July 8, 2021, the Company signed a second amendment to the collaboration agreement with the NRC to broaden the scope of the collaboration to include developing a vaccine against the Beta variant of SARS-CoV-2.

On August 27, 2021, the Company signed a third amendment to the collaboration agreement with the NRC further broaden the scope to include certain stable cell line work for our vaccine candidate against the Beta variant of SARS-CoV-2.

On November 15, 2021, we signed a fourth amendment to the collaboration agreement with the NRC to further broaden the scope to include additional animal studies and PRNT analysis for our vaccine candidate against the Beta variant of SARS-CoV-2.

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On February 8, 2022, we signed a fifth amendment to the collaboration agreement with the NRC to further broaden the scope to include additional assays of new variants against SARS-CoV-2.

On April 28, 2022, we signed a sixth amendment to the collaboration agreement with the NRC to further broaden the scope to include generation and testing of stable pools of cells expressing SARS-CoV-2 spike protein.

The expiry date of the collaboration agreement, as amended, is December 31, 2022. 

This relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic 606. Costs associated with the collaboration will be expensed as incurred in Research and Development expenses; costs for the three and nine months ended September 30, 2022 are $118 and $702, respectively. Costs for the three and nine months ended September 30, 2021 are $712 and $942, respectively.

Coalition for Epidemic Preparedness Innovations (“CEPI”)

On March 9, 2021, the Company 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.

Under the terms of the CEPI Funding Agreement, among other things, the Company and CEPI agreed on the importance of global equitable access to any vaccines produced pursuant to the CEPI Funding Agreement. Any such vaccines, if approved, are expected to be procured and allocated through global mechanisms as part of the Access to COVID-19 Tools (ACT) Accelerator, an international initiative launched by the WHO, Gavi the Vaccine Alliance, CEPI, and other global non-governmental organizations and governmental leaders in 2021.

This relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic 606.

Costs associated with the collaboration are expensed as incurred in Research and Development and General and Administrative expenses; costs for the three and nine months ended September 30, 2022 are $692 and $3,098 respectively. Costs for the three and nine months ended September 30, 2021 are $2,711 and $4,918, respectively. Such expenses, including administrative expenses, for the three and nine months ended September 30, 2022 and three and nine months ended September 30, 2021 were reduced by the same amount. Since inception of the CEPI Funding Agreement in 2021, the Company received $19,327 from CEPI and the Company had $7,479 recorded as deferred funding, recorded in other current liabilities on the condensed consolidated balance sheet.

Brii Biosciences Limited

On December 4, 2018, we entered into the Collaboration and License Agreement with Brii Bio, which was amended on April 8, 2021, as described in Note 11.

As described in Note 11, the Company and Brii Bio entered into the Second Amendment License Agreement on December 20, 2021. The Combo Clinical Trial collaboration is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic 606. Costs associated with the Combo Clinical Trial collaboration will be expensed as incurred in Research and Development expenses; costs for the three and nine months ended September 30, 2022, were $56 and $191 respectively.

13. GOVERNMENT GRANTS

Grants recognized in research and development expenses in the condensed consolidated statement of operations and comprehensive loss are as follows:

Industrial Research Assistance Program (“IRAP”)

On July 3, 2020, the Company and the NRC as represented by its IRAP signed a contribution agreement whereby the NRC agreed to contribute up to CAD $1,000 for the transfer and scale-up of the technical production process for our prophylactic coronavirus vaccine program.

For the three and nine months ended September 30, 2022 the Company recognized $0 and $0, respectively, as a reduction in expenses. As of September 30, 2022, the Company had $41 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.

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For the three and nine months ended September 30, 2021, the Company recognized $68 and $68, respectively as a reduction in expenses.

Strategic Innovation Fund (“SIF”)

On September 16, 2020, the Company and Her Majesty the Queen in Right of Canada as represented by the Minister of Industry (“ISED”) signed a contribution agreement (the “Contribution Agreement”) for a contribution from SIF whereby ISED agreed to contribute up to CAD $55,976 to support the development of the Company’s coronavirus vaccine program, through Phase II clinical studies, for a period commencing on April 15, 2020 and ending on or before the first quarter of 2022 (the “Project Completion Date”). On March 28, 2022, the Company and ISED signed an amendment to the Contribution Agreement, the main purpose of which was to extend the collaboration and move the Project Completion Date from March 31, 2022 to December 31, 2023.

For the three and nine months ended September 30, 2022, the Company recognized $1,831 and $3,783, respectively, as a reduction in expenses. As of September 30, 2022, the Company had $716 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.

For the three and nine months ended September 30, 2021, the Company recognized $2,365 and $6,377, respectively as a reduction in expenses.

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 ($530,483). The second claim is a civil action brought by two minors and their parents against SciVac and the Israel Ministry of Health 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.

SciVac believes these matters to be without merit and intends to defend these claims vigorously.

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, and June 9, 2022. The next preliminary hearing is scheduled to be held on January 12, 2023.

Operating 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 United States (“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. The lease agreement for our research facility in Canada, which comprises office and laboratory space, has a term ending on December 31, 2022 with an option to extend the term for one additional period of three years. A lease for additional office space at our research facility commenced on October 1, 2020 with a term ending April 30, 2023. In September 2022, we decided to extend the term of our lease for our research facility in Canada for three additional years, which now has a term ending on December 31, 2025.

During the three and nine months ended September 30, 2022, the Company entered into new lease agreements and recognized a ROU asset of $339 and $1,134, respectively.

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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.

 SUMMARY OF LEASE COST AND OTHER INFORMATION

Lease cost:
Operating lease costs:
Three months ended September 30, 2022	$	489
Nine months ended September 30, 2022		1,383
Three months ended September 30, 2021		385
Nine months ended September 30, 2021		1,069

Other information:
Weighted average remaining lease term	3.27 years
Weighted average discount rate		13	%

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:

SCHEDULE OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES  

Remaining 2022	$	321
2023		1,295
2024		1,196
2025		710
2026		614
2027		167
Total	$	4,303
Effect of discounting		(818	)
Total lease liability	$	3,485
Less: current portion		914
Lease liability, net of current portion	$	2,571

15. 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  

	Three Months Ended September 30				Nine Months Ended September 30
	2022		2021		2022		2021
United States	$	238	$	-	$	444	$	-
Israel		60		44		281		300
China / Hong Kong		19		63		58		246
Europe		-		-		6		4
Total	$	317	$	107	$	789	$	550

There was no revenue attributed to our country of domicile, Canada, for the three and nine months ended September 30, 2022 and 2021.

16. SUBSEQUENT EVENTS 

On October 18, 2022, the Company, Ferring International Center S.A., a company incorporated pursuant to the laws of Switzerland and SciVac, a wholly owned subsidiary of the Company, amended and restated that certain license agreement, dated as of June 3, 2004 and amended by the parties on each of January 24, 2005, March 15, 2005, June 15, 2005 and February 14, 2012 (the “Amended and Restated Ferring License Agreement”). The Amended and Restated Ferring License Agreement 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 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 (collectively, the “Technology”). In connection with the Amended and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac’s 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.

In October 2022, the Company received notice from the U.S. Food and Drug Administration (the “FDA”) that we qualified as a small business and that the Prescription Drug User Fee Act program application fee of $2,876 for PreHevbrio would be refunded.

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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 audited consolidated financial statements and related notes included elsewhere in 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

VBI Vaccines Inc. (“VBI”) is a commercial stage biopharmaceutical company driven by immunology in the pursuit of powerful prevention and treatment of disease. Through our innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology, we develop vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. We are 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. We are headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.

Product Pipeline

VBI’s 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, virus-like particles (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.

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 therapeutics is preliminary and investigative. The investigational programs have not been approved by the United States Food and Drug Administration, 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.

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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 (MMWR), 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 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”).

The virus that causes COVID-19 continues to evolve and several SARS-CoV-2 variants have emerged and certain of these variants have been identified as having a significant public health impact. To date, notable Variants of Concern (“VOC”) have included:

● Alpha (B.1.1.7) – First identified as in the United Kingdom (“UK”), VOC in December 2020

● Beta (B.1.351) – First identified in South Africa, VOC in December 2020

● Gamma (P.1) – First identified in Brazil, VOC in January 2021

● Delta (B.1.617.2) – First identified in India, VOC in May 2021

● Omicron and subvairants – First identified in South Africa, VOC in November 2021

Glioblastoma (“GBM”)

Glioblastoma (“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 14 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.

Zika

Zika is a mosquito-borne virus that is spread primarily through the bite of an infected Aedes species mosquito, but can also be transmitted sexually, during pregnancy, or during childbirth. Acute infections are typically mild, but Zika has been associated with a number of neurological complications in newborns. The first formal description of Zika virus was published in 1952, but it was not until 2007 that the first Zika outbreak in humans was recorded. Over the past decade, Zika has begun to spread globally, and between January 2014 and February 2016, 33 countries reported circulation of the Zika virus, including in North America. There is currently no vaccine to prevent Zika infection.

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Pipeline Programs 

The table below is an overview of our commercial vaccine and our investigational programs as of October 31, 2022:

Indication	Program	Technology	Current Status
Approved Vaccine ● Hepatitis B	PreHevbrio1,2,3 Hepatitis B Vaccine	VLP	Registration/Commercial
	(Recombinant)
Prophylactic Candidates
● Coronaviruses (Multivalent)	VBI-2901	eVLP	Ongoing Phase I
● COVID-19 (Beta variant)	VBI-2905	eVLP	Phase Ib
● COVID-19 (Ancestral)	VBI-2902	eVLP	Phase Ia
● Coronaviruses (Multivalent)	Undisclosed	eVLP	Pre-Clinical
● Cytomegalovirus	VBI-1501	eVLP	Phase I Completed
● Coronaviruses (Multivalent)	Undisclosed	eVLP	Pre-Clinical
● Zika	VBI-2501	eVLP	Pre-Clinical
Therapeutic Candidates
● Hepatitis B	VBI-2601	VLP	Ongoing Phase II
● Glioblastoma	VBI-1901	eVLP	Ongoing Phase I/IIa
● Other CMV-Associated Cancers	Undisclosed	eVLP	Preclinical

¹Approved for use in the U.S. for the prevention of infection caused by all known subtypes of hepatitis B virus in adults 18 years of age and older

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

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

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 will be included in the next annual update of the CDC Adult Immunization Schedule in 2023, which will summarize changes throughout the coming year. 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.

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

● European Union (“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 European Economic Area (“EEA”) countries (Iceland, Liechtenstein, and Norway). VBI expects PreHevbri will available in certain European countries beginning in early 2023. On September 8, 2022, we announced a partnership with Valneva SE (“Valneva”) in connection with the marketing and distribution of PreHevbri in select EU markets, initially including Sweden, Norway, Denmark, Finland, Belgium and the Netherlands, as well as the UK.

● United Kingdom (“UK”): On June 1, 2022, we announced that the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) granted marketing authorization for PreHevbri [Hepatitis B vaccine (recombinant, adsorbed)]. This follows the EC centralized marketing authorization received and was conducted as part of the EC Decision Reliance Procedures (“ESCDRP”). VBI expects to make PreHevbri available in the UK in early 2023 as part of the partnership with Valneva.   

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

● Canada: On December 9, 2021, we completed the filing of a New Drug Submission (“NDS”) to Health Canada for our 3-antigen hepatitis B vaccine candidate. Discussions are underway with regulatory agencies to determine the brand name for our 3-antigen HBV vaccine in Canada. 

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Prophylactic Investigational Candidates

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

In response to the ongoing SARS-CoV-2 (COVID-19) pandemic, VBI initiated development of a prophylactic coronavirus vaccine program. Coronaviruses are enveloped viruses by nature which make them a prime target for VBI’s flexible eVLP platform technology.

On August 26, 2020, we announced data from three pre-clinical studies conducted to enable selection of optimized clinical candidates for our coronavirus vaccine program. As a result of these studies, 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 ongoing 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 1b study (n=53). A single-dose booster of VBI-2905 increased the geometric mean titer (“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 (“PNA”) benchmarked against the WHO reference standard demonstrated that VBI-2902 elicited neutralizing antibody responses of 176 IU50/mL in its Phase 1a 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 continued 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.

The VBI-2900 program is supported by a partnership with CEPI (the “CEPI Funding Agreement”), with contributions of up to $33 million; a partnership with the Strategic Innovation Fund (“SIF”), established by the Government of Canada, with an award of up to CAD $56 million; contribution of up to CAD $1 million from the Industrial Research Assistance Program (“IRAP”) of the National Research Council of Canada (“NRC”); and a collaboration with the NRC.

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 (“gB”) 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 the timing of the Phase II study.

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Therapeutic Investigational Candidates

VBI-2601: HBV Immunotherapeutic Candidate

VBI-2601 (BRII-179) is our novel, recombinant, protein-based immunotherapeutic candidate in development for the treatment of chronic HBV infection. VBI-2601 (BRII-179) is formulated to induce broad immunity against HBV, including T-cell immunity which plays an important role in controlling HBV infection.

On April 12, 2021 and June 23, 2021, we announced data from the completed Phase Ib/IIa clinical study in patients with chronic HBV infection, which was conducted by our partner Brii Biosciences Limited (“Brii Bio”). The study was a randomized, controlled study designed to assess the safety, tolerability, antiviral and immunologic activity of VBI-2601. The study was a two-part, dose-escalation study assessing different dose levels of VBI-2601 (BRII-179) with and without an immunomodulatory adjuvant, conducted at multiple study sites in New Zealand, Australia, Thailand, South Korea, Hong Kong SAR, and China.

The data from the Phase Ib/IIa for 33 evaluable patients across all study arms suggest: (1) VBI-2601 (BRII-179) is well tolerated at all dose levels with and without the adjuvant with no significant adverse events identified; (2) VBI-2601 (BRII-179) induced both B cell (antibody) and T cell responses in chronically-infected HBV patients, (3) VBI-2601 (BRII-179) induced restimulation of T cell responses to HBV surface antigens, including S, Pre-S1 and Pre-S2, in greater than 50% of the evaluable patients compared to no detectable response in the control arm; (4) the T cell responses and antibody responses were comparable across the 20µg and 40µg unadjuvanted study arms; and (5) T cell response rates between the adjuvanted and unadjuvanted cohorts were also comparable. Based on the acceptable safety profile and vaccine-induced adaptive immune responses seen in this study, VBI-2601 (BRII-179) advanced to Phase II studies.

On April 21, 2021, we announced that the first patient had been dosed in a Phase II clinical study evaluating VBI-2601 (BRII-179) in combination with BRII-835 (VIR-2218), an investigational small interfering ribonucleic acid (siRNA) targeting HBV, for the treatment of chronic HBV infection. To the best of our knowledge, this is the first clinical trial in the field to evaluate the combination of these two HBV mechanisms of action. The multi-center, randomized, open-label study is designed to evaluate the safety and efficacy of this combination with and without interferon-alpha as a co-adjuvant. Brii Bio has led the design and implementation of this functional cure proof-of-concept study with the support of VBI and Vir Biotechnology (“VIR”). The study is being conducted at sites in Australia, China, Taiwan, Hong Kong SAR, South Korea, New Zealand, Singapore, and Thailand. Interim topline clinical data from this study is expected by the end of 2022.

On January 5, 2022, we announced that the first patient was dosed in a second Phase IIa/IIb clinical study evaluating VBI-2601 (BRII-179). This Phase II study assesses VBI-2601 as an add-on therapy to the standard-of-care nucleos(t)ide reverse transcriptase inhibitor (nrtl) and pegylated interferon (PEG-IFN-α,) therapy. Interim topline clinical data from part one of this Phase IIa/IIb clinical study is expected in the third quarter of 2023.

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 glioblastoma (“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, is a subsequent extension of the 10 µg doses level cohort. This phase is a two-arm study that enrolled 20 first-recurrent GBM patients to receive 10 µg of VBI-1901 in combination with either GM-CSF or GlaxoSmithKline Biologicals S.A. (“GSK”) proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 is provided pursuant to a Clinical Collaboration and Support Study Agreement (“Collaboration Agreement”) we entered into with GSK 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 was completed in October 2020.

Data from the ongoing Phase IIa portion of the study was announced throughout 2020 and 2021, with the latest data presented in December 2021 at the World Vaccine & Immunology Congress. 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, 18-month OS not yet reached in the VBI-1901 + AS01 study arm; (3) 2 partial tumor responses, one of which remains on protocol past week 86 with a 93% tumor reduction relative to initiation of treatment at the start of the study, and 7 stable disease observations across both study arms; and (4) VBI-1901 continues to be safe and well tolerated at all doses tested, with no safety signals observed.

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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.

Based on the data seen to-date, as part of the next phase of development, we anticipate assessing VBI-1901 in randomized, controlled studies in both primary and recurrent GBM patients. In the recurrent setting, we aim to expand the number of patients in the current trial and add a control arm, with the potential to support an accelerated approval application based on tumor response rates and improvement in overall survival. Subject to discussion with the FDA, the amended protocol is expected to initiate enrollment of additional patients in early 2023.

In the primary setting, on October 12, 2022, we announced a collaboration with Agenus to evaluate VBI-1901 in combination with Anti-PD-1 Balstilimab in a Phase II study as part of the INSIGhT adaptive platform trial in patients first diagnosed with GBM. Subject to approval from regulatory bodies, we expect enrollment to initiate in the VBI-1901 study arms in INSIGhT early 2023.

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 “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.

On October 18, 2022, the Company amended and restated the 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 (collectively, the “Technology”). In connection with the Amended and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac’s 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 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 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 $0.1 million. 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 had an exclusive license to a family of patents that expired in the United States in 2022 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 currently negotiating an agreement with UPMC to cover this patent family. During the three and nine months ended September 30, 2022, we did not make any milestone payments.

Financial Operations Overview 

At present, our operations are focused on:

● continuing our commercial launch of PreHevbrio in the United States;  

● 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 may obtain marketing authorization;

● preparing for commercialization of our 3-antigen HBV vaccine in Europe where we have received regulatory approval under the brand name PreHevbri, and in Canada, where we may obtain regulatory approval; 

● supporting the ongoing review of the regulatory submissions for our 3-antigen HBV vaccine by Health Canada in Canada;

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● conducting the Phase I/IIa clinical study of our GBM vaccine immunotherapeutic candidate, VBI-1901;

● preparing for the next phase of development for our GBM vaccine immunotherapeutic candidate, VBI-1901;

● conducting the Phase I clinical study of our prophylactic monovalent COVID-19 vaccine candidates, VBI-2902 and VBI-2905 (Beta variant);

● conducting 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;

● developing VBI-2601 (BRII-179), our protein-based immunotherapeutic candidate for treatment of chronic HBV, in collaboration with Brii Bio;

● 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 in Israel under the name Sci-B-Vac, and the sale of PreHevbrio in the U.S. In addition, we have sold through named patient programs in countries where our 3-antigen HBV vaccine was not approved, though those markets have generated a limited number of sales.  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 common stock, 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 September 30, 2022, VBI had an accumulated deficit of approximately $468.5 million and stockholders’ equity of approximately $83.8 million. 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, structured asset financings, 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 should we be unable to continue as a going concern.

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 $92.2 million for the nine months ended September 30, 2022, 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 United States, PreHevbri in Europe, and, if approved, our 3-antigen HBV vaccine in Canada. 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.

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Overall Performance

The Company had net losses of $25,209 and $15,847 for the three months ended September 30, 2022, and 2021, respectively, and $92,162 and $50,970 for the nine months ended September 30, 2022 and 2021, respectively. We had an accumulated deficit of $468,468 at September 30, 2022. We had $83,550 of cash and net working capital of $61,535 as of September 30, 2022.

Revenues, net

Revenues, net consist of product sales of PreHevbrio in the U.S and Sci-B-Vac in Israel, as well as R&D services revenue recognized as part of the License Agreement with Brii Bio and other R&D services.

In the U.S., beginning in the second quarter, PreHevbrio was sold to a limited number of wholesalers and specialty distributors (collectively, our “Customers”). We expect to continue to expand this group of Customers over the coming months. 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. If our estimates differ significantly from actuals, we will record adjustments that would affect product revenue, net in the period of adjustment.

Pursuant to the License Agreement with Brii Bio, we provide R&D services to Brii Bio as part of the development of VBI-2601 (BRII-179).

In addition, pursuant to an agreement with the Israel Innovation Authority (formerly the Office of the Chief Scientist of Israel), we are required to make services available for the biotechnology industry in Israel. These services include relevant activities for development and manufacturing of therapeutic proteins according to international standards and cGMP quality level suitable for toxicological studies in animals. Service activities include analytics/bio analytics methods for development and process development of therapeutic proteins starting with a candidate clone through manufacturing. These R&D services are primarily marketed to the Israeli research community in academia and Israeli biotechnology companies in the life sciences industry lacking the infrastructure or experience in the development and production of therapeutic proteins to the standards and quality required for clinical trials for human use. During the three and nine months ended September 30, 2022, we provided services to biotechnology companies including analytical development.

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 salaries.

Research and Development (“R&D”) 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 (BRII-179), 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 vaccines 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.

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General and Administrative (“G&A”) Expenses

G&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 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. G&A expenses are expensed when incurred.

We expect that our general and administrative expenses will increase in the future as a result of adding employees and scaling our operations commensurate with commercializing products, advancing clinical candidates, and continuing to support a public company infrastructure. These increases will likely include increased costs for insurance, hiring of additional personnel, board committees, outside consultants, investor relations, lawyers and accountants, among other expenses.

Interest Expense, Net of Interest Income

Interest expense is associated with our long-term debt as discussed in Note 9 of the Notes to the Condensed Consolidated Financial Statements.

Results of Operations

Three and Nine Months Ended September 30, 2022 Compared to the Three and Nine Months Ended September 30, 2021

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

	Three months ending September 30
	2022			2021			Change $			Change %
Revenues, net	$	317		$	107		$	210			196	%
Expenses:
Cost of revenues		2,672			2,466			206			8	%
Research and development		4,983			2,972			2,011			68	%
General and administrative		14,220			9,693			4,527			47	%
Total operating expenses		21,875			15,131			6,744			45	%
Loss from operations		(21,558	)		(15,024	)		(6,534	)		43	%
Interest expense, net of interest income		(958	)		(1,026	)		68			(7	)%
Foreign exchange (loss) gain		(2,693	)		203			(2,896	)		(1,427	)%
Loss before income taxes		(25,209	)		(15,847	)		(9,362	)		59	%
Income tax expense		-			-			-			-	%
NET LOSS	$	(25,209	)	$	(15,847	)	$	(9,362	)		59	%

	Nine months ending September 30
	2022			2021			Change $			Change %
Revenues, net	$	789		$	550		$	239			43	%
Expenses:
Cost of revenues		7,948			7,511			437			6	%
Research and development		12,988			14,392			(1,404	)		(10	)%
General and administrative		40,234			25,807			14,427			56	%
Total operating expenses		61,170			47,710			13,460			28	%
Loss from operations		(60,381	)		(47,160	)		(13,221	)		28	%
Interest expense, net of interest income		(2,799	)		(3,683	)		884			(24	)%
Foreign exchange loss		(28,982	)		(127	)		(28,855	)		22,720	%
Loss before income taxes		(92,162	)		(50,970	)		(41,192	)		81	%
Income tax expense		-			-			-			-	%
NET LOSS	$	(92,162	)	$	(50,970	)	$	(41,192	)		81	%

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Revenues, net

Revenues, net for the three months ended September 30, 2022 was $317 as compared to $107 for the three months ended September 30, 2021. Revenues for the three months ended September 30, 2022 increased by $210 or 196% due to an increase in product revenue as a result of the launch of PreHevbrio in the U.S. in late Q1 2022 with revenue generation beginning in Q2 2022. Over the coming months, VBI expects to expand the number of Customers, continuing to broaden access to PreHevbrio in the U.S.

Revenues, net for the nine months ended September 30, 2022 was $789 as compared to $550 for the nine months ended September 30, 2021. Revenues, net for the nine months ended September 30, 2022 increased by $239 or 43% due to an increase in product revenue as a result of the launch of PreHevbrio in the U.S. in late Q1 2022 with revenue generation beginning in Q2 2022, offset by a decrease in R&D services revenue for VBI-2601, being developed in collaboration with Brii Bio, as fewer manufacturing and non-clinical research services were required in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2022.

Revenues, net Composition

	Three months ended September 30				Nine months ended September 30
	2022		2021		2022		2021
Product revenue, net	$	258	$	24	$	680	$	262
R&D service revenue		59		83		109		288
Total revenues, net	$	317	$	107	$	789	$	550

Revenues, net by Geographic Region

	Three months ending September 30
	2022		2021		$ Change			% Change
Revenue, net in United States	$	238	$	-	$	238			100	%
Revenue, net in Israel		60		44		16			36	%
Revenue, net in China / Hong Kong		19		63		(44	)		(70	)%
Total Revenues, net	$	317	$	107	$	210			196	%

	Nine months ending September 30
	2022		2021		$ Change			% Change
Revenue, net in United States	$	444	$	-	$	444			100	%
Revenue, net in Israel		281		300		(19	)		(6	)%
Revenue, net in China / Hong Kong		58		246		(188	)		(76	)%
Revenue, net in Europe		6		4		2			50	%
Total Revenues, net	$	789	$	550	$	239			43	%

Cost of Revenues

Cost of revenues for the three months ended September 30, 2022 were $2,672 as compared to $2,466 for the three months ended September 30, 2021. The cost of revenues in the three months ended September 30, 2022 has increased compared to the three months ended September 30, 2021 due to the increase in sales.

Cost of revenues for the nine months ended September 30, 2022 were $7,948 as compared to $7,511 for the nine months ended September 30, 2021. The cost of revenues in the nine months ended September 30, 2022 has increased compared to the nine months ended September 30, 2021 due to the increase in sales.

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Research and Development Expenses

R&D expenses, net of government grants and funding arrangements, for the three months ended September 30, 2022 were $4,983 as compared to $2,972 for the three months ended September 30, 2021. R&D expenses were offset by $2,354 for the three months ended September 30, 2022 and $5,144 for the three months ended September 30, 2021 due to government grants and funding arrangements. The increase in net R&D expenses of $2,011 or 68% is mainly a result of (1) an increase in R&D expenses related to continued development of our vaccine and vaccine candidates, specifically VBI-1901, our GBM vaccine immunotherapeutic candidate, as we prepare for the next phases of development, offset by (2) a decrease in the costs related to our coronavirus vaccine program that are not offset by government grants and funding arrangements, as we had two clinical trials ongoing, VBI-2902 and VBI-2905, during the three months ended September 30, 2021 compared to only one clinical trial ongoing, VBI-2901, during the three months ended September 30, 2022.

R&D expenses, net of government grants and funding arrangements, for the nine months ended September 30, 2022 were $12,988 as compared to $14,392 for the nine months ended September 30, 2021. R&D expenses were offset by $6,210 for the nine months ended September 30, 2022 and $11,363 for the nine months ended September 30, 2021 due to government grants and funding arrangements. The decrease in net R&D expenses of $1,404 or 10% is mainly a result of the items discussed above in addition to a decrease in U.S. regulatory fees related to PreHevbrio that occurred during the nine months ended September 30, 2021, with no similar regulatory fees that occurred during the nine months ended September 30, 2022.

General and Administrative Expenses

G&A expenses, net of government grants and funding arrangements, for the three months ended September 30, 2022 were $14,220 as compared to $9,693 for the three months ended September 30, 2021. G&A expenses were offset by $148 for the three months ended September 30, 2022 and $111 for the three months ended September 30, 2021 due to government grants and funding arrangements. The net G&A expense increase of $4,527 or 47% is mainly a result of the increase in commercial activities related to our 3-antigen HBV vaccine, most notably the deployment of our commercial field teams and development of our distribution infrastructure, as FDA regulatory approval of PreHevbrio occurred in late 2021. Additional increase in costs include increased insurance costs, increased professional costs, and increased labor costs.

G&A expenses, net of government grants and funding arrangements, for the nine months ended September 30, 2022 were $40,234 as compared to $25,807 for the nine months ended September 30, 2021. G&A expenses were offset by $567 for the nine months ended September 30, 2022 and $306 for the nine months ended September 30, 2021 due to government grants and funding arrangements. The net G&A expense increase of $14,427 or 56% is a result of the items discussed above.

Loss from Operations

The net loss from operations for the three months ended September 30, 2022 was $21,558 as compared to $15,024 for the three months ended September 30, 2021. The $6,534 increase in the net loss from operations resulted from the items discussed above.

The net loss from operations for the nine months ended September 30, 2022 was $60,381 as compared to $47,160 for the nine months ended September 30, 2021. The $13,221 increase in the net loss from operations resulted from the items discussed above.

Interest Expense, Net of Interest Income

Interest expense, net of interest income for the three months ended September 30, 2022 was $958 as compared to $1,026 for the three months ended September 30, 2021. The decrease in interest expense, net of interest income of $68 or 7% is due to increased interest rates on our long-term debt, offset by increased interest rates earned on cash.

Interest expense, net of interest income for the nine months ended September 30, 2022 was $2,799 as compared to $3,683 for the three months ended September 30, 2021. The decrease in interest expense, net of interest income of $884 or 24% is due to the conversion of $2,000 of the secured term loan to common shares in the nine months ended September 30 2021, which resulted in $1,161 of additional interest accretion being recognized in interest expense, net of interest income and an increased interest rates earned on cash for the nine months ended September 30, 2022. This decrease is partially offset by an increase in long-term debt of $12,000 beginning in May 2021 and an increase in interest rates on our long-term debt during the nine months ended September 30, 2022.

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Foreign Exchange Loss

Foreign exchange loss for the three months ended September 30, 2022 was $2,693 as compared to a gain of $203 for the three months ended September 30, 2021. Certain intercompany loans between us and our subsidiaries are denominated in a currency other than the functional currency of each entity. The primary driver of the increase in foreign exchange loss was the impact of the relative strengthening of the U.S. and Canadian Dollars against the New Israeli Shekel upon translation of these intercompany loans.

Foreign exchange loss for the nine months ended September 30, 2022 was $28,982 as compared to $127 for the nine months ended September 30, 2021. The increase in foreign exchange loss is the result of the changes discussed above.

Net Loss

Net loss for the three months ended September 30, 2022 was $25,209 compared to $15,847 for the three months ended September 30, 2021 and was a result of the items discussed above.

Net loss for the nine months ended September 30, 2022 was $92,162 compared to $50,970 for the nine months ended September 30, 2021 and was a result of the items discussed above.

Liquidity and Capital Resources

	September 30, 2022			December 31, 2021			$ Change			% Change
Cash	$	83,550		$	121,694		$	(38,144	)		(31	)%
Current Assets		96,216			130,284			(34,068	)		(26	)%
Current Liabilities		34,681			32,586			2,095			6	%
Working Capital		61,535			97,698			(36,163	)		(37	)%
Accumulated Deficit		(468,468	)		(378,371	)		(90,097	)		24	%

As of September 30, 2022, we had cash of $83,550 as compared to $121,694 as of December 31, 2021. As of September 30, 2022, we had working capital of $61,535 as compared to working capital of $97,698 at December 31, 2021. Working capital is calculated by subtracting current liabilities from current assets.

Net Cash Used in Operating Activities

The Company incurred net losses of $92,162 and $50,970 in the nine months ended September 30, 2022 and 2021, respectively. The Company used $54,649 and $21,392 in cash for operating activities during the nine months ended September 30, 2022 and 2021, respectively. The increase in cash outflows is largely a result of an increase in net loss attributable to commercial expenses for the launch of PreHevbrio, and a decrease in net change in operating working capital related to purchase of inventory for commercial production of PreHevbrio and cash received in advance from the CEPI Funding Agreement of $18,363 during the nine months ended September 30, 2021, compared to $964 cash received in advance from the CEPI Funding Agreement during the nine months ended September 30, 2022.

Net Cash Used in Investing Activities

Net cash flows used by investing activities was $2,892 for the nine months ended September 30, 2022 compared to cash provided by investing activities of $23,766 for the nine months ended September 30, 2021. The decrease in cash flows in investing activities is largely as a result of the redemption of short-term investments of $25,151 during the nine months ended September 30, 2021.

Net Cash Provided by Financing Activities

Net cash flows provided by financing activities was $19,449 for the nine months ended September 30, 2022 compared to cash flows provided by financing activities of $41,401 during the nine months ended September 30, 2021. During the nine months ended September 30, 2022 we received proceeds from our refinanced long-term debt compared to the nine months ended September 30, 2021 whereby we issued common shares for cash and received proceeds from our long-term debt amendment.

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Sources of Liquidity

Jefferies Open Market Sale Agreement

On August 26, 2022, the Company 1) filed a registration statement for 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 “ATM Program”). The ATM Program replaces the Open Market Sale Agreements previously entered into with Jefferies on July 31, 2020 and September 3, 2021, pursuant to each of which we could offer and sell our common shares having an aggregate price of up to $125,000 from time to time, through “at the market” (“ATM”) equity offering programs. Prior to termination, $27,022 of our common shares remained available for sale pursuant to the first ATM program, and $125,000 of our common shares remained available for sale pursuant to the second ATM program. Neither ATM program was utilized in 2022. We have not made any sales under the ATM Program during the three months ended September 30, 2022.

K2 HealthVentures LLC Long Term Debt 

On May 22, 2020, the Company (along with its subsidiary VBI Cda) entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2 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 $1.46 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 1,369,863 common shares at a conversion price of $1.46 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 up to four tranches the subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants to the Second Amendment, (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 second tranche of term loans of up to $15,000 will be available from April 1, 2023, through June 30, 2023, subject to the achievement of certain clinical milestones and compliance with a liquidity requirement which requires the Company to have sufficient cash on hand to funds its operations for at least nine months (the “Liquidity Requirement”). The third tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain of the milestones for the second tranche of term loans were achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The fourth 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 1,369,863 shares of common stock at a conversion price of $1.46 per share and $5,000 of the term loans shall be convertible into 4,792,026 shares of common stock at a conversion price of $1.0434 per share (“K2 conversion feature”).

In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 625,000 common shares (the “Original K2 Warrant”) at an exercise price of $1.12 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2 Warrant to purchase an additional 312,500 common shares for a total of 937,500 common shares (the “First Amendment Warrant”) with the same exercise price of $1.12 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 2,180,413 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $0.8026. If the full remaining $50,000 available in the K2 tranches is advanced pursuant to the Second Amendment, up to an additional 2,180,413 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.

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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 second, third and fourth 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 second tranche, third tranche and fourth tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $0.8026, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.

The total principal amount of the loan under the Loan Agreement as amended by the Second Amendment, outstanding at September 30, 2022, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $3,475 in connection with the Second Amendment, is $55,699. The principal amount of the loan made under the Loan Agreement as amended by the Second Amendment accrues interest at an annual rate equal to the greater of (a) 8.00% or (b) prime rate plus 4.00%. The interest rate as of September 30, 2022 was 10.25%. The Company is required to pay only interest until September 14, 2026.

CEPI Partnership 

On March 9, 2021, the Company 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.

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, 2021 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 pipeline candidates. As of September 30, 2022, VBI had an accumulated deficit of $468,468 and stockholders’ equity of $83,817

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, structured asset financings, 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. The accompanying financial statements have been prepared assuming that we will continue as a going concern; however, the above conditions raise substantial doubt about our ability to do so. 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 should we be unable to continue as a going concern. 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 regulatory approvals, and, subject to such approvals, commercially launch 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 outside of Israel, 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.

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We expect to finance our future cash needs through public or private equity offerings, debt financings, government grants or non-government funding, structured asset financings, 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, we will receive up to $33,018 in funding to support the development of the Company’s coronavirus vaccine program, specifically SARS-COV-2 variants. 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, structured asset financing, 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, 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.

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 COVID-19 pandemic and the continuing armed conflict between Russia and Ukraine, and inflation has 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 September 30, 2022, 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.

NASDAQ Minimum Bid Price Requirement

On July 1, 2022, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“NASDAQ”) indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between May 18, 2022 through June 30, 2022, 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 December 28, 2022 (the “Compliance Period”), in which to regain compliance pursuant to NASDAQ Listing Rule 5810(c)(3)(A).

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 during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for NASDAQ, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. We have not regained compliance as of the date of this Form 10-Q, and if we fail to regain compliance during the Compliance Period or any subsequent grace period granted by NASDAQ, our common shares will be subject to delisting by NASDAQ, which 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.

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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. The impact of the ongoing COVID-19 pandemic, including the Omicron variant of COVID-19, which appears to be the most transmissible variant to-date, and the new subvariant, BA.5, is currently indeterminable and rapidly evolving, and has adversely affected and may continue to adversely affect our operations and the global economy. In addition, the consequences of the ongoing conflict between Russia and Ukraine, 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 nine months ended September 30, 2022. 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 Annual Report on Form 10-K for the year ended December 31, 2021, as well as in our consolidated financial statements and the footnotes thereto, included in the Annual Report on Form 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 Business 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 Business 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 Business 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 September 30, 2022, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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 ($530,483). The second claim is a civil action brought by two minors and their parents against SciVac and the Israel Ministry of Health 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.

SciVac believes these matters to be without merit and intends to defend these claims vigorously.

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, and June 9, 2022. The next preliminary hearing is scheduled to be held on January 12, 2023.

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 our annual report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 7, 2022. 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.

Risks Related to our Intellectual Property

We may not be able to monetize intangible assets, including IPR&D and goodwill, which may result in the need to record an impairment charge.

Our consolidated balance sheet contains approximately $57.7 million of intangible assets. For IPR&D assets, which consist of the CMV and GBM programs, the risk of failure is significant, and there can be no certainty that these assets ultimately will yield successful products. The nature of our business is high-risk and requires that we invest in a large number of projects in an effort to achieve a successful portfolio of approved products. Our ability to realize value on these significant investments is often contingent upon, among other things, regulatory approvals, availability of resources, and market acceptance. These IPR&D and goodwill assets may become impaired and be written off at some time in the future, which can have a material adverse effect on the financial statements. The fair value of our CMV asset was in excess of its carrying value by approximately 25% as of August 31, 2022. In the event we continue to experience challenging market conditions, insufficient internal resources due to competing programs, and changes in the competitive and technological landscape for CMV vaccines, this may give rise to a triggering event that may require the Company to record impairment charges on our IPR&D assets and/or goodwill in the future.

While all intangible assets can face events and circumstances that can lead to impairment, in general, intangible assets that are most at risk of impairment include IPR&D assets. IPR&D assets are high-risk, as research and development is an inherently risky activity.

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Risks Related to Development and Commercialization of Product and our Pipeline Programs

Successful commercialization of our 3-antigen HBV vaccine and our pipeline candidates face significant obstacles, including establishing complex commercial capabilities or partnerships and obtaining regulatory approvals. We may not be able to achieve and sustain commercial success and/or we may fail to obtain regulatory approval in foreign jurisdictions which will prevent us from marketing or selling our products in such jurisdictions.

Our 3-antigen HBV vaccine is approved for sale in the United States (brand name PreHevbrio), in the EU/EEA (brand name PreHevbri), in the UK (brand name PreHevbri), and in Israel (brand name Sci-B-Vac). In countries where we have obtained the required regulatory approvals, we will require significant resources, partnerships, time, expertise, and experience to be commercially successful. For the UK and certain EU countries, initially including Sweden, Norway, Denmark, Finland, Belgium, the Netherlands, we are partnering with Valneva SE for the marketing and distribution of PreHevbri. Although we selected Valneva based on their local knowledge, experience, and relationships, which we believe to be substantial, in each of the aforementioned European countries, because this is the first vaccine to be marketed and distributed as part of this partnership, there is no assurance that our partnership will be successful, and we and Valneva may not be able to successfully commercialize PreHevbri in such countries.

In international countries outside of the Valneva partnership, successful commercialization of our 3-antigen HBV vaccine and our pipeline candidates will require us to identify and establish additional partnerships or the required resources, experience, and expertise. There is no guarantee that we will be able to do so.

In countries where we do not currently have the required approvals, we will need to obtain separate approvals from the relevant regulatory, pricing, and reimbursement authorities to market or sell our 3-antigen HBV vaccine or any of our pipeline candidates. Pursuing regulatory approvals will be time-consuming and expensive, and we may not obtain foreign regulatory approvals on a timely basis, if at all. The regulations vary among countries, and regulatory authorities in one market may require different or additional clinical trials than those required to obtain approval in another market, and the time required to obtain approval may differ in one market from that required to obtain approval in another market. Obtaining approval in one country does not ensure approval by regulatory authorities in other countries.

In addition, for our pipeline programs, we have limited international regulatory, clinical, and commercial resources. We entered into a collaborative relationship with Brii Bio for development of a HBV recombinant protein-based immunotherapeutic in China, Hong Kong, Taiwan, and Macau, and may plan to do so with other pipeline candidates in the future, and, as such, current and future partners are critical to our international success. We may not be able to maintain current, or enter into future, collaboration agreements with appropriate partners for important foreign markets on acceptable terms, if at all. Current and future collaborations with foreign partners may not be effective or profitable.

The failure by our wholly owned manufacturing facility, our current or future contract manufacturers, or contract testing organizations to obtain or maintain FDA or other regulatory agencies’ approval for manufacturing or testing facilities could have a material adverse impact on our business, results of operations, financial condition, and prospects.

Our wholly owned manufacturing facility and any of our current and future manufacturers, whether the facilities are ours or third-party manufacturer facilities, must be inspected by the FDA, after we submit a BLA and before approval. This same process is applicable when a regulatory dossier is submitted to a regulatory body outside of the U.S. before our pipeline candidates can be manufactured for commercial production. When we are approved to market a drug product in the U.S., we or our third-party manufacturers must register the manufacturing facilities and contract testing organizations with the FDA and these facilities and organizations are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with the FDA’s cGMP regulations. Similar rules apply in the EU, Israel and the UK. Other than for our 3-antigen HBV vaccine and VBI-2601, which are currently manufactured by us at our manufacturing site in Israel, we are completely dependent on third-party manufacturers for compliance with the requirements of U.S. and ex-U.S. regulators for the manufacture of our finished products and pipeline candidates.

If we or our third-party manufacturers or contract testing organizations cannot successfully produce material that conforms to our specifications and cGMP requirements of any applicable regulatory agency, we may not be able to secure or maintain approval for our manufacturing or testing facilities. If the FDA or another regulatory agency does not approve these facilities for commercial production, or if they do not maintain a satisfactory regulatory standing, we will need to find alternative suppliers, which would result in significant delays in obtaining required regulatory approvals. In addition, if we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured or tested, a regulatory agency may impose restrictions on that product, the manufacturing or testing facility, or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling changes to limit use of the drug, requiring that we conduct additional clinical trials, imposing new monitoring requirements or requiring that we establish a REMS program. These challenges may have a material adverse impact on our business, results of operations, financial condition and prospects.

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If we are unable to manufacture our pipeline candidates and products in sufficient quantities, at sufficient yields or are unable to obtain or maintain regulatory approvals for a manufacturing facility for our vaccines, we may experience delays in product development, clinical trials, regulatory approval, commercial distribution, and the In Process Research & Development (“IPR&D”) assets may become impaired and be written off at some time in the future.

Completion of our clinical trials and commercialization of our pipeline candidates and products require access to, or development of, facilities to manufacture our pipeline candidates and products at sufficient yields and at commercial-scale. We have limited experience manufacturing any of our pipeline candidates and products in the volumes that will be necessary to support large-scale clinical trials or commercial sales. Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency, or quality.

If we are unable to manufacture our pipeline candidates and products in clinical or commercial quantities, as the case may be, in sufficient yields, with sufficient purity, potency, quality, and identity, we may not be able to supply pipeline candidates or products for clinical or commercial purposes, and we may be required to find, qualify, and rely on third parties. Any new third-party manufacturers must also receive FDA approval and/or approval from similar regulatory agencies before we may use product manufactured by them as our commercial products and pipeline candidates. Our products may be in competition with other products for access to these facilities and may be subject to delays in manufacture if our third-party manufacturers give other products greater priority. Any delays experienced by third-party manufacturers, whether directly or by its raw material suppliers in relation to our project, may result in delays in clinical development of our pipeline candidates and products.

As a result, any delay or interruption, could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, the IPR&D assets may become impaired and be written off at some time in the future, which could also have a material adverse effect on the financial statements.

We rely on CROs, collaborators, third-party investigators, and independent sites to conduct our clinical trials. If these third parties do not fulfill their contractual obligations or meet expected deadlines, our planned clinical trials may be extended, delayed, modified, or terminated and we may fail to obtain the regulatory approvals necessary to commercialize our pipeline candidates.

We rely on third-party CROs and collaborators to conduct our clinical trials. CROs, collaborators, third-party investigators, and independent sites are subject to cGCPs that include conducting, recording, and reporting the results of clinical trials and to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The FDA enforces cGCPs through periodic inspections. If these CROs or collaborators do not perform their obligations, comply with laws or cGCPs, or meet expected deadlines, our planned clinical trials may be extended, delayed, modified, or terminated. We rely on the processes of our CROs and collaborators to ensure that accurate records are maintained to support the results of the clinical trials. While we or our CROs or collaborators conduct regular monitoring of clinical sites, we are dependent on the processes and quality control efforts of our third-party contractors to ensure that detailed, quality records are maintained to support the results of the clinical trials that they are conducting on our behalf. Any extension, delay, modification, or termination of our clinical trials or failure to ensure adequate documentation and the quality of the results in the clinical trials could delay or otherwise adversely affect our ability to commercialize our products and pipeline candidates and could have a material adverse effect on our business and operations.

We rely upon independent sites and third-party investigators, such as universities and medical institutions and their faculty or staff, to conduct our clinical trials. These sites and third-party investigators are not our employees and we cannot control the amount or timing of resources that they devote to our programs. If these third-party investigators or collaborators fail to devote sufficient time and resources to our product development programs, do not conduct their activities in compliance with the law, or if their performance is substandard, the approval of our regulatory submissions and our introductions of new products will be delayed or prevented.

Our potential CROs and collaborators may also have relationships with other commercial entities, some of which may compete with us. If outside collaborators assist our competitors to our detriment, the approval of our regulatory submissions will be delayed and the sales from our products, if and when commercialized, will be less than expected. Even if clinical trials are completed as planned, their results may not support expectations or intended marketing claims. The clinical trials process may fail to demonstrate that our pipeline candidates are safe and effective for indicated uses. Such failure could cause us to abandon one or more pipeline candidates and could delay development of other pipeline candidates.

Risks Related to Our Common Shares

Our failure to meet the continued listing requirements of The NASDAQ Capital Market could result in a delisting of our common shares.

As previously reported, on July 1, 2022, we received a letter from NASDAQ indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between May 18, 2022 through June 30, 2022, 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). 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 at least ten consecutive business days during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for The NASDAQ Capital Market, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to NASDAQ that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, NASDAQ will provide notice that our common shares will be subject to delisting.

To resolve the noncompliance, 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 SEC. It is not uncommon for the market price of a company’s shares to decline in the period following a reverse share split.

Although we expect to take actions intended to restore our compliance with the listing requirements, we can provide no assurance that any action taken by us would be successful, or that any such action would stabilize the market price or improve the liquidity of our 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.

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

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 Disclosure

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.

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EXHIBIT INDEX

Exhibit No.	Description
1.1*	Open Market Sale AgreementSM, dated August 26, 2022, by and between VBI Vaccines, Inc. and Jefferies LLC.
10.1	Second Amendment to Loan and Guaranty Agreement, dated as of September 14, 2022, 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 (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 September 15, 2022).
10.2	Warrant, dated September 14, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on September 15, 2022).
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.

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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: November 10, 2022	VBI VACCINES INC.
	By:	/s/ Jeffrey Baxter
		Jeffrey Baxter President & Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Christopher McNulty
		Christopher McNulty
		Chief Financial Officer and Head of Business Development
		(Principal Financial and Accounting Officer)

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