10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

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: 000-18188

VBI VACCINES INC.

(Exact name of registrant as specified in its charter)

Delaware	93-0589534
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
222 Third Street, Suite 2241, Cambridge, Massachusetts	02142
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: 617-830-3031
(Former name, former address and former fiscal year, if changed since last report)

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 [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.        Large accelerated filer [  ]  Accelerated filer [  ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)           Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $0.0001 par value	20,012,760
(Class)	Outstanding at May 12, 2015

VBI VACCINES INC. AND SUBSIDIARIES

FORM 10-Q

INDEX 

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets – March 31, 2015 and December 31, 2014 (unaudited)	1
	Consolidated Statements of Comprehensive Loss – Three Months Ended March 31, 2015 and 2014 (unaudited)	2
	Consolidated Statements of Cash Flows – Three Months Ended March 31, 2015 and 2014 (unaudited)	3
	Notes to Consolidated Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosure	17
Item 5.	Other Information	17
Item 6.	Exhibits	18
Signatures		19

VBI Vaccines Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	March 31, 2015			December 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$	10,226,389		$	12,604,273
Investment tax credits receivable		172,585			133,696
Prepaid expenses and deposits		583,553			400,827
Government receivables		79,235			33,590
		11,061,762			13,172,386
DEFERRED FINANCING COSTS, NET		347,251			395,184
PROPERTY AND EQUIPMENT, NET		136,020			106,500
INTANGIBLES, NET		333,592			380,148
	$	11,878,625		$	14,054,218
CURRENT LIABILITIES
Accounts payable	$	691,121		$	650,142
Accrued liabilities		412,400			568,535
Current portion of long-term debt		600,000			375,000
		1,703,521			1,593,677
LONG-TERM DEBT, NET OF CURRENT PORTION		1,653,862			1,770,374
		3,357,383			3,364,051
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (authorized 200,000,000; issued 20,012,760; par value $0.0001) (2014 - issued 20,012,760)		2,002			2,002
Convertible preferred stock (authorized 30,000,000; issued 2,996,482; par value $0.0001) (2014 - issued 2,996,482)		299			299
Warrants		1,027,000			1,027,000
Additional paid-in capital		79,338,391			79,098,591
Accumulated other comprehensive income (loss)		15,127			67,513
Accumulated deficit		(71,861,577	)		(69,505,238	)
		8,521,242			10,690,167
	$	11,878,625		$	14,054,218

See accompanying Notes to Consolidated Financial Statements

1

VBI Vaccines Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

(Unaudited)

	For the Three Months Ended March 31
	2015			2014
Expenses
Research and development	$	952,912		$	303,538
General and administration		1,230,851			873,347
Loss from operations		(2,183,763	)		(1,176,885	)
Interest expense		90,000			476,618
Foreign exchange loss (gain)		(25,495	)		197,331
Accretion of debt discount		108,487			-
Interest income		(416	)		-
NET LOSS	$	(2,356,339	)	$	(1,850,834	)
Currency translation adjustment		52,386			195,723
COMPREHENSIVE LOSS	$	(2,303,953	)	$	(1,655,111	)
Loss per share of common stock, basic and diluted	$	(0.12	)	$	( 1.58	)
Weighted-average number of common shares outstanding, basic and diluted		20,012,760			1,171,892

See accompanying Notes to Consolidated Financial Statements

2

VBI Vaccines Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended March 31
	2015			2014
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES:
OPERATING
Net loss	$	(2,356,339	)	$	(1,850,834	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of property and equipment and intangibles		24,560			25,551
Amortization of deferred financing costs		47,933			14,980
Stock-based compensation expense		239,800			12,700
Accretion of debt discount		108,488			-
Interest accrued on convertible notes		-			476,618
Net change in operating working capital items		(382,416	)		172,505
		(2,317,974	)		(1,148,480	)
INVESTING
Funds held in escrow		-			10,937
Acquisition of property and equipment		(48,185	)		(778	)
Proceeds from the sale of property and equipment		806			-
		(47,379	)		10,159
FINANCING
Proceeds from convertible notes		-			1,500,000
Financing costs of term loan facility		-			(134,088	)
		-			1,365,912
Effect of exchange rate changes on cash and cash equivalents		(12,531	)		195,723
CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD		(2,377,884	)		423,314
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		12,604,273			624,419
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	10,226,389		$	1,047,733
Supplementary information:
Interest paid	$	90,000		$	-

See accompanying Notes to Consolidated Financial Statements

3

VBI Vaccines Inc. and Subsidiaries

Notes to Consolidated Financial Statements

 (Unaudited)

1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS

Nature of business

The Company, VBI Vaccines Inc. (formerly Paulson Capital (Delaware) Corp. (“Paulson”), a Delaware corporation (the “Company” or VBI”), is dedicated to the innovative formulation, development and delivery of safe and effective vaccines that expand and enhance vaccine protection in both established and emerging markets. VBI, its wholly-owned subsidiary, Variation Biotechnologies (US), Inc. (“VBI US”) and Variation Biotechnologies, Inc. (“VBI Cda”) a Canadian company and the wholly-owned subsidiary of VBI US, are collectively referred to as the “Company”.

Planned Principal Operations

The Company is a pharmaceutical company developing novel technologies that seek to expand vaccine protection in large, underserved markets. The Company has developed an enveloped “Virus-Like Particle” or “eVLP” vaccine platform that allows for the design of enveloped virus-like particle vaccines that closely mimic the target viruses. Using this proprietary technology platform, the Company has undertaken specific projects related to human cytomegalovirus (“CMV”) and other antigens. The Company plans, during 2015, to prepare several batches of vaccine for a toxicology trial, for a proposed Phase I clinical trial and for other regulatory purposes. The Company does not expect to advance its first product candidate into Phase I clinical trials prior to the fourth quarter of 2015. All costs incurred to date by the Company have directly or indirectly contributed to the advancement of these projects. The Company has not deferred or capitalized any costs related to any of these projects.

The Merger

On May 8, 2014, Paulson and VBI Acquisition Corp., a special purpose wholly owned subsidiary of Paulson (the “Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions, the Merger Sub would merge with and into VBI US (the transaction referred to as the “Merger”), with VBI US surviving as a wholly owned subsidiary of Paulson. VBI US was incorporated on December 20, 2006 under the laws of the State of Delaware. On December 28, 2006, VBI US completed a private round of financing and, contemporaneously acquired, through an exchange of shares, all of the outstanding common shares of VBI Cda, a Canadian company incorporated on August 24, 2001 under the Canada Business Corporations Act.

On July 14, 2014, Paulson held a Special Meeting of Stockholders at which 67.4% of the outstanding shares of Paulson’s common stock were cast and more than 98% of the votes cast were voted in favor of each of a group of proposals related to the Merger.

On July 25, 2014, the Merger closed and Paulson changed its name to VBI Vaccines Inc. Beginning on July 29, 2014, the Company’s stock began trading on The NASDAQ Capital Market under the symbol “VBIV” following the consummation of a 1 for 5 reverse split.

The financial statements of VBI US are treated as the historical financial statements of the combined company, with the results of Paulson being included from July 25, 2014.  The equity of VBI US has been retroactively restated to reflect the number of shares issued in the transaction. 

Continuation of business and liquidity

The Company has not generated any product revenues and has incurred operating losses since inception. There is no assurance that profitable operations will ever be achieved, and if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and preclinical testing, and commercialization of the Company’s product candidates will require significant additional financing. Our accumulated deficit as of March 31, 2015 was $71.9 million and we expect to incur substantial losses in future periods. The Company plans to finance future operations with a combination of existing cash reserves, proceeds from the issuance of equity securities, the issuance of additional debt, and revenues from potential collaborations, if any. The Company has not generated positive cash flows from operations, and there is no assurance that it will be successful in obtaining an adequate level of financing for the development and commercialization of our planned product candidates.

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As of March 31, 2015, the Company had approximately $10.2 million of cash and working capital of $9.4 million. The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products. The Company has funded its operations to date through the issuance of convertible preferred stock, the issuance of common stock, the issuance of secured convertible and other notes payable to certain stockholders and financial institutions, and funding received from government research and development grants. The Company’s long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of its products, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or alternatively advance the products and technology to such a point that an acquirer would find the Company attractive. The Company’s cash and cash equivalents balance as of March 31, 2015 are expected to be adequate to fund the Company’s operations into 2016.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The Company’s interim consolidated financial statements included herein as of March 31, 2015 and for the three-months ended March 31, 2015 and 2014 are unaudited.

The financial information as of December 31, 2014 is derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on March 20, 2015. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and are the responsibility of the Company’s management. These financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and use assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates reflected in these consolidated financial statements include the estimated fair values of the Company’s common shares used in the valuation of the stock-based compensation, warrants, the long-term debt, investment tax credits, certain accruals, useful lives of intangibles and the valuation allowance recognized on the deferred tax assets.

Foreign currency translation

Transactions in foreign currencies are translated at the rate of exchange in effect at the transaction date and transaction gains and losses are included in the results of operations.

The functional currency of VBI Cda is the Canadian dollar. The accounts of VBI Cda are translated from its functional currency to U.S. dollars using the current rate method. Any gain or loss arising from translation is recorded to other comprehensive loss.

The Company does not use derivative financial products for hedging or speculative purposes and, as a result, is exposed to currency fluctuations. The Company is subject to foreign currency exchange risk in the form of exposures to changes in currency exchange rates between the United States and Canada; however, it maintains cash in each home currency to minimize the exposure of these fluctuations.

Recent accounting pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB’) issued Accounting Standards Update (“ASU”) 2014-9 “Revenue from Contracts with Customers (Topic 606).” This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. At its April 1, 2015 meeting, the FASB agreed to propose a one-year deferral of the revenue recognition standard’s effective date for all entities. The FASB intends to issue an exposure draft in the near term with a 30-day comment period. The Company will adopt this standard in the first quarter of 2017. This accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements or financial statement disclosures.

Going Concern Assessment and Disclosure Requirements

In May 2014, the FASB issued ASU 2014-15 to provide guidance in relation to management’s assessment of an entity’s ability to continue as a going concern and to provide disclosure requirements in certain circumstances. The amendment becomes effective for the Company in the first quarter of 2016. The Company is evaluating whether the adoption of this amendment will have a material impact on its consolidated financial statements.

Hybrid Financial Instruments

The FASB issued ASU 2014-16 that will require a company that issues or invests in a hybrid financial instrument to determine the nature of the host contract by considering the economic characteristics of the entire instrument, including the embedded derivative feature that is being evaluated for separate accounting. Concluding the host contract is debt-like (versus equity-like) may result in substantially different answers about whether certain features must be accounted for separately. The guidance provides a modified retrospective transition for all existing hybrid financial instruments in the form of a share, with the option for full retrospective application. The guidance is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 Eliminating the Concept of Extraordinary Items

The FASB issued ASU 2015-1 that eliminates the concept of extraordinary items from U.S. GAAP as part of its simplification initiative. The ASU eliminates the need for entities to evaluate whether transactions or events are both unusual in nature and infrequently occurring. Entities will continue to evaluate whether items are unusual in nature or infrequent in their occurrence for presentation and disclosure purposes and when estimating the annual effective tax rate for interim periods. The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

Consolidation

The FASB issued ASU 2015-2 standard to improve targeted areas of the consolidation guidance and reduce the number of consolidation models. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (VIE), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The new guidance is effective in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

6

3. LOSS PER SHARE OF COMMON STOCK

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock, warrants and stock options, which would result in the issuance of incremental shares of common stock. 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. These potentially dilutive securities are more fully described in Note 6, Stockholders’ Deficiency and Additional Paid-in Capital.

The following potentially dilutive securities outstanding at March 31, 2015 and 2014 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	March 31, 2015		March 31, 2014
Convertible preferred stock		2,996,482		10,218,628
Warrants		699,281		882,627
Stock options		2,797,239		820,820
		6,493,002		11,922,075

4. FAIR VALUE MEASUREMENTS

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, the Company uses quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources.

The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3 — Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement.

Financial instruments recognized in the Consolidated Balance Sheet consist of cash and cash equivalents, investment tax credits, receivables and government receivables, accounts payable, accrued liabilities and long-term debt. 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.

Money market funds are highly liquid investments. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk on its cash and cash equivalents. The carrying value of cash and cash equivalents approximates their fair value based on their short-term maturities.

At March 31, 2015 and December 31, 2014, the fair value of the long-term debt is estimated to be $2,903,600 and $2,885,000, respectively.

7

In determining the fair value of the long-term debt, which consists of level 3 instruments, as of March 31, 2015 and December 31, 2014, the Company used the following assumptions:

	March 31, 2015		December 31, 2014
Long-term debt:
Interest rate		15%		15%
Expected time to payment in months		29		32

5.     LONG-TERM DEBT

	March 31, 2015			December 31, 2014
Gross proceeds and detachable warrants	$	3,000,000		$	3,000,000
Less: Portion of gross proceeds attributable to warrants to detachable warrants		(1,027,000	)		(1,027,000	)
Add: accretion of discount, cumulative		280,862			172,374
Less: current portion		(600,000	)		(375,000	)
	$	1,653,862		$	1,770,374

During 2014, the Company executed a term loan facility (the “Facility”) in the amount of $6 million, with the initial advance of $3 million drawn down on August 8, 2014 and the balance becoming available once certain product development milestones have been achieved. The amounts drawn on the Facility accrue interest at an annual rate equal to the greater of (a) one-month LIBOR (subject to a 5.00% cap) or (b) 1.00%, plus the Applicable Margin. The Applicable Margin will be 11.00%. Upon the occurrence, and during the continuance, of an event of default, the Applicable Margin, defined above, will be increased by 4.00% per annum. Principal payments due under the term loan facility are as follows:

	Principal payments on credit facility and exit fee
2015	$	375,000
2016		900,000
2017		1,785,000
Total	$	3,060,000

6. STOCKHOLDERS’ DEFICIENCY 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.

1999 Stock Option Plan

The Company’s 1999 Stock Option Plan expired in September 2009. On July 25, 2014 the remaining 36,000 shares of Common Stock were cancelled and as a result there are no longer any common shares reserved for potential future issuance pursuant to this plan. At March 31, 2015, there were no stock options outstanding.

8

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. At March 31, 2015, the maximum number of stock options issuable under the 2006 Plan was 2,724,909 of which 100,541 have been issued and exercised and 2,624,368 were assumed by the Company as part of the Merger described in Note 1 and remain outstanding. The 2006 Plan is now administered by the Company’s Board, in connection with recommendations from the Compensation Committee.

On April 24, 2014, the Company granted 1,844,592 stock options to existing employees. The options began to vest on the closing of the Merger, which occurred on July 25, 2014. The options vest on a monthly basis over 48 months. The fair value of the options when granted from the 2006 Plan was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend 0%; risk-free interest rate of 1.51%; expected volatility of 84.35%; and a 10 year expected life.

2013 Stock Incentive Plan

The 2013 Equity Incentive Plan (the “2013 Plan”) reserved 300,000 shares of common stock for issuance for equity and cash and equity-linked awards to certain management, consultants and others. On June 19, 2013, the Board granted 60,000 options to purchase shares of common stock at a purchase price equal to the closing price of stock on that date, subject to the adoption of the 2013 Plan by the Company’s shareholders. The 2013 Plan was approved by the shareholders on November 8, 2013. On March 19, 2014, the Board granted 204,000 common shares to officers and directors under the 2013 Plan, which was recorded as commissions and salaries expense based on the closing price of stock on that date. On April 10, 2014, the Board granted an additional 36,000 common shares to officers and directors under the same terms as the March 2014 grant.

2014 Equity Incentive Plan

On May 1, 2014, the Board adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”), an omnibus equity incentive plan pursuant to which the Company may grant equity and cash and equity-linked awards to certain directors, management, consultants and others in order to promote the success of the Company following the Merger by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2014 Plan. The 2014 Plan was approved by the Company’s shareholders on July 14, 2014.

The 2014 Plan reserves 815,688 shares of the Company’s common stock for issuance (the "Share Reserve"). On the first day of each fiscal year during the period beginning in fiscal year 2014, and ending on the second day of fiscal year 2024, the Share Reserve shall be increased by an amount equal to the lesser of (i) 1,200,000 shares of the Company’s common stock or the equivalent of such number of shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction; (ii) 5% of the number of outstanding shares of the Company’s common stock on such date; and (iii) an amount determined by the Board. On April 22, 2015, the Board approved an increase to the Share Reserve of 1,000,638 shares of common stock, which represented 5% of the number of shares of common stock outstanding on that date.  

There were 20,001 restricted common shares issued and 164,000 options granted from the 2014 Plan in 2014. None were issued during the three months ended March 31, 2015.

The maximum number of options issuable under the option plans is summarized in the following table:

	Number of Options or Shares
	Options Outstanding		Options Expired		Shares Issued or Exercised		Available for Future Grants		Total
2006 VBI US Stock Option Plan		2,624,368		-		100,541		-		2,724,909
2013 Stock Incentive Plan		8,871		51,129		240,000		-		300,000
2014 Equity Incentive Plan		164,000		-		20,001		631,687		815,688
Total as at March 31, 2015		2,797,239		51,129		360,542		631,687		3,840,597

All future stock option or share grants will be from the 2014 Plan.

As of March 31, 2015, no shares of Common Stock were available for issuance under the previously adopted 1999 Plan, 2006 Plan or the 2013 Plan (other than shares issuable upon the exercise of currently outstanding stock options).

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The fair value of the options expected to vest is recognized as an expense on a straight-line basis over the vesting period. The total stock-based compensation expense recorded in the three months ended March 31, 2015 and 2014 was as follows:

	Three Months Ended March 31
	2015		2014
Research and development	$	63,600	$	9,400
General and administrative		176,200		3,300
Total stock-based compensation expense	$	239,800	$	12,700

Warrants

The warrants issued on July 25, 2014, as part of the Facility described in Note 5 entitle the holders to purchase 699,281 common shares. The exercise price for the warrants is $2.145. Assuming the funding of an additional $3 million advance under the Facility, which is contingent on the Company achieving certain operational milestones, the Company will issue to the lender warrants to purchase an additional 699,281 shares of the Common Stock at an exercise price equal to the 10-day volume weighted average price of the Common Stock reported by Bloomberg LP for the 10 trading days preceding the date of the advance.

7. CONTINGENCIES

The Company entered into two consulting agreements with non-affiliated parties on January 17 and 28, 2013, respectively, whereby the Company has agreed to pay each of the consultants performance bonuses ranging from $10,000 to $125,000 for the achievement of the following milestones for a novel vaccine: patent filing; regulatory approval of clinical testing; start of Phase II and III studies; regulatory approval; and reaching cumulative sales of $100 million. Furthermore, the Company is committed to grant each consultant stock options equal to $100,000 upon successfully closing a Series B financing. Except for the initial EUR 101,720 which became due on April 20, 2015, the events obliging the Company to make the payments below have not yet occurred and the probability of them occurring is not determinable; consequently, no amounts are accrued in respect of these contingencies.

On July 18, 2011, as part of the ePixis asset acquisition, the Company entered into a Sale and Purchase Agreement where it is obligated to make the following milestone payments:

● EUR 101,720 upon successful technology transfer to a contract manufacturing organization and the commencement of a toxicity study;

● EUR 500,000 to EUR 1,000,000 upon first approval by the United States Food and Drug Administration;

● EUR 750,000 to EUR 1,500,000 upon reaching Cumulative Net Sales, as defined in the Sale and Purchase Agreement, of EUR 25,000,000, in the case of a sublicense the payments, are reduced by 50%;

● EUR 1,000,000 to EUR 2,000,000 upon reaching Cumulative Net Sales, as defined in the Sale and Purchase Agreement, of EUR 50,000,000 , in the case of a sublicense, the payments are reduced by 50%; and

● in the case of a sublicense only, EUR 500,000 to EUR 1,000,000 upon reaching Cumulative Net Sales, as defined in the Sale and Purchase Agreement, of EUR 75,000,000 and EUR 100,000,000

8. LEGAL PROCEEDINGS

On November 26, 2014, a putative class action complaint was filed in the United States District Court, Southern District of New York, Case No. 14-cv-9435, as amended on February 11, 2015 and March 25, 2015, on behalf of pre-Merger shareholders of Paulson Capital (Delaware) Corp. who held shares on October 11, 2013 and were entitled to vote at the 2013 Shareholder Meeting, against the Company and certain individuals who were directors as of the date of the vote, in a matter captioned Furlong et al. v. VBI Vaccines, Inc. et al., making claims arising under Section 20(a) and Section 14(a) of the Exchange Act and Rule 14a-9, 17 C.F.R. § 240.14a-9, promulgated thereunder by the SEC. The claims allege false and misleading information provided to investors in the Definitive Proxy Statement on Schedule 14A filed by the Company with the SEC on October 18, 2013 related to the solicitation of votes from shareholders to authorize the Board to pursue potential restructuring transactions. If the plaintiffs were able to prove their allegations in this matter and to establish the damages they assert, then an adverse ruling could have a material impact on the Company. However, the Company disputes the claims asserted in this putative class action case and is vigorously contesting the matter.

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9. SUBSEQUENT EVENTS

On April 2, 2015, VBI Cda, entered into a Collaboration and Option License Agreement (the “Agreement”) with Sanofi Vaccines Technologies S.A.S., a company organized under the laws of France (“Sanofi”). The purpose of the Agreement is to allow Sanofi to evaluate the feasibility of using VBI Cda’s LPV technology and expertise to reformulate a vaccine candidate from Sanofi to provide improved stability. The term of the Project (as defined in the Agreement), will commence on the date of receipt by VBI Cda of Sanofi materials and continue for 9 months unless otherwise agreed in writing by the parties. The term of the Agreement begins on the Effective Date, which is defined as April 15, 2015, and unless earlier terminated or mutually extended in writing, the Agreement will expire upon the expiration or termination of an option to negotiate and enter into a royalty bearing license for the commercial use of VBI’s LPV technology.

On April 17, 2015, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission covering the offering of up to $75 million of common stock, preferred stock and warrants (the “Registration Statement”). As of the date of this report the Registration Statement has not yet been declared effective.

On April 22, 2015, the Company granted 45,000 stock options to existing employees under the 2014 Equity Incentive Plan. The options have an exercise price equivalent to the closing price of the common stock on the NASDAQ Capital Market on the date of grant and began to vest on the date of grant with 25% vesting on the first anniversary and the remaining 75% on a monthly basis over an additional 36 months.

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

FORWARD-LOOKING STATEMENTS

This report, including, without limitation, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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, 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,” “may,” or other similar expressions in this report. 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. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

● our history of losses;

● our ability to eventually generate revenues and achieve profitability;

● our limited operating history as a public company;

● emerging competition and rapidly advancing technology in our industry that may outpace our technology;

● eventual customer demand for the products we are currently developing;

● the impact of competitive or alternative products, technologies and pricing;

● our ability to manufacture, or to have manufactured, any products we develop;

● 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, as and when we need it;

● our ability to continue as a going concern;

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

● other factors discussed in this report.

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The forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance on these forward-looking statements.

Unless otherwise stated or the context otherwise requires, the terms “VBI,” “we,” “us,” “our” and the “Company” refer to VBI Vaccines Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this report as well as our audited 2014 consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on March 20, 2015. In addition to historical information, the 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 as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” in Part II, Item 1A of this report.

Overview

We are a pharmaceutical company developing novel technologies that seek to expand vaccine protection in large, underserved markets. We have developed an eVLP vaccine platform that allows for the design of enveloped virus-like particle vaccines that closely mimic the target viruses. Using this proprietary technology platform, we have undertaken specific projects related to human CMV and other antigens. In 2015, we plan to prepare several batches of vaccine for a toxicology trial, for a Phase I clinical trial and for other regulatory purposes. In April 2015, we began the toxicology trial for our human CMV vaccine. The toxicology trial is expected to last approximately 6 months and is expected to provide data that will then be used in a regulatory submission, along with other information, in order to obtain regulatory approval to proceed with the Phase I clinical trial in humans. We do not expect to advance this first product candidate into Phase I clinical trial prior to the fourth quarter of 2015.

Our corporate headquarters is located in Cambridge, Massachusetts and our operations in the U.S. are carried out through VBI US, our wholly owned subsidiary. Our primary research facility is located in Ottawa, Ontario, Canada. Those operations are carried out by VBI Cda, a subsidiary of VBI US. Our consolidated financial statements include the accounts of VBI, VBI US and VBI Cda.

Our income generating activities have been limited to research and development services pursuant to certain governmental research and development grants. No revenues have been recorded from the sale of products in connection with our planned principal business activity.

We have incurred operating losses since inception, have not generated any product sales revenue and have not achieved profitable operations. We incurred net losses of $2.4 million for the three months ended March 31, 2015. Our accumulated deficit as of March 31, 2015 was $71.9 million, and we expect to continue to incur substantial losses in future periods. We anticipate that our operating expenses will increase substantially as we continue to advance our pre-clinical-stage product candidate, CMV. These include expenses related to:

● continuing the research and development of our product candidates, including the exploration and development of new product candidates;

● scaling-up manufacturing capabilities through sub-contractors to commercialize products and dose forms for which we may obtain regulatory approval;

● conducting human proof-of-concept clinical trials with our initial targeted vaccine;

● maintaining, expanding and protecting our intellectual property portfolio;

● hiring additional clinical, manufacturing, and scientific personnel or contractors; and

● adding operational, financial and management information systems and human resources support, including additional personnel to support our vaccine development

In addition, we have incurred and will continue to incur significant expenses as a result of becoming a public company, which subjects us to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 and the rules and regulations of the NASDAQ Capital Market.

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To date, we have financed our operations through sales of our common and preferred stock, loans from financial institutions and affiliates and income received from government research and development grants and investment tax credits. On July 25, 2014, we completed two private equity financings for gross proceeds of $16.25 million and obtained a $6 million credit facility. We believe the proceeds from the two private equity financings and the loan proceeds will be sufficient to fund our activities, including capital expenditure requirements into 2016. We expect, however, that we will need to secure additional financing in the future to carry out all of our planned research and development activities with respect to the CMV vaccine.

Merger

On May 8, 2014, Paulson Capital (Delaware) Corp. (“Paulson”) and VBI Acquisition Corp., a special purpose wholly owned subsidiary of Paulson (the “Merger Sub”), entered into an Agreement and Plan of Merger pursuant to which the Merger Sub merged with and into VBI US (the “Merger”). At the effective time of the Merger:

● each share of VBI US common and preferred stock was cancelled and converted into the right to receive 0.2452 (i.e.1.226/5) (“Exchange Ratio”) shares of Paulson’s common stock, which resulted in 8,554,535 shares of common stock being issued to the former holders of VBI US’s common stock and preferred stock; and

● each outstanding option to purchase a share of VBI US common stock, whether vested or unvested, and so long as such option had not, prior to the effective time of the Merger, been exercised, cancelled or terminated nor expired, was replaced with an option to purchase, on the same terms and conditions, a number of shares of Paulson common stock equal to the product of (i) the number of shares of VBI US common stock or preferred stock subject to such option multiplied by (ii) the Exchange Ratio, at an exercise price per share equal to the quotient of (i) the exercise price per share of VBI US common stock and preferred stock (rounded up to the nearest cent) subject to such option divided by (ii) the Exchange Ratio.

In conjunction with the Merger, Paulson changed its name to VBI Vaccines Inc.

Financial Overview

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred for the development of our CMV vaccine, which include:

● the cost of acquiring, developing and manufacturing clinical trial materials and other consumables and lab supplies used in our pre-clinical studies;

● employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; and

● expenses incurred under agreements with contractors or Contract Manufacturing Organizations to advance the CMV vaccine into clinical trials.

We expense research and development costs when we incur them. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information our vendors provide to us.

General and Administrative Expenses

General and administrative expenses consist principally of 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, including Board and scientific advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies and expenses, insurance and other general expenses. General and administrative expenses are expensed when incurred.

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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 advancing a clinical candidate and establishing 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 Income

Interest income consists principally of interest income earned on cash balances, US federal government guaranteed money market funds and on R&D tax refunds.

Interest Expense

Interest expense is associated with our previously outstanding convertible notes and the credit facility entered into on July 25, 2014.

Results of Operations

Three Months Ended March 31, 2015 Compared to the Three Months Ended March 31, 2014

Revenues 

Income generating activities have been limited to research and development services pursuant to certain governmental research and development grants, which have been netted against the related R&D expenses as described below. To date, no revenues have been recorded from the sale of products from the Company’s principal business activity.

Research and Development (“R&D”) 

Research and development expenses increased by $649,374, or approximately 214%, to $952,912 for the three months ended March 31, 2015, as compared to $303,538 for the same period in the prior year. The increases resulted primarily from increased spending on contract research and manufacturing services related to advancing the CMV vaccine and performance based compensation paid to the R&D personnel. Substantially all research and development expenses relate to our CMV vaccine.

General and Administrative 

General and administrative expenses increased by $357,504, or approximately 41%, to $1,230,851 for the three months ended March 31, 2015 as compared to $873,347 for the same period in the prior year. The increases in general and administrative expenses were primarily due to the significant professional fees incurred related to being a public company, including investor related activities and Board fees as well as non-cash expenses related to performance based compensation paid to the administrative personnel.

Depreciation costs, which are included in general and administrative expenses, decreased by $961 to $24,509 for the three months ended March 31, 2015 from $25,551 for the three months ended March 31, 2014. 

Interest Expense 

Interest expense decreased by $386,618, or approximately 81%, to $90,000 for the three months ended March 31, 2015 from $476,618 for the three months ended March 31, 2014. The decrease was due primarily to voluntary conversion by all of the holders of convertible promissory notes. All convertible notes issued prior to December 31, 2013 were voluntarily converted into VBI US preferred shares and then exchanged for common shares as part of the Merger. The convertible notes issued on March 10, 2014 were converted into 558,837 common shares and 284,602 preferred shares of VBIV. The interest expense incurred during the three months ended March 31, 2015 relates to the contractual interest coupon paid on the $3 million credit Facility described in Note 5 of Notes to Consolidated Financial Statements. 

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Foreign Exchange Loss (Gain) 

Transactions in foreign currencies are translated at the rate of exchange in effect at the transaction date and transaction gains and losses are included in the results of operations. The foreign exchange transaction gain of $25,495 for the three months ended March 31, 2015 and the $197,331 foreign exchange transaction loss for the three months ended March 31, 2014 is derived from the fluctuation in the foreign exchange rate of the Canadian dollar relative to the level of intercompany balances during the respective quarters.

Net Loss 

The net loss increased to $2,356,339 for the three months ended March 31, 2015 from $1,850,834 for the three months ended March 31, 2014, an increase of $505,505 or approximately 27%, largely as a result of increases in general and administrative expenses as well as increased R&D expenses related to the advancement of the CMV vaccine candidate and increased general and administrative expenses. These increases were partially off-set by decreased interest expenses and a foreign exchange gain.  

Liquidity and Capital Resources

Net cash used by Operating Activities 

The Company incurred net losses of $2,356,339 and $1,850,834 in the three months ended March 31, 2015 and 2014, respectively. The Company used $2,317,974 and $1,148,480 in cash outflows from operating activities during the three months ended March 31, 2015 and 2014, respectively. The increase in cash outflows is largely as a result of increased professional fees included in the general and administrative expenses as well as increased R&D expenses related to the advancement of the CMV vaccine.

The Company has incurred net losses and negative operating cash flows since inception. As of March 31, 2015, the Company had an accumulated deficit of $71,861,577 and stockholders’ equity of $8,521,242.

Net cash provided by Investing Activities 

The Company had no significant investing activities during the three months ended March 31, 2015 and 2014 other than the purchase of property and equipment in the amount of $48,185 and $778, respectively.

Net cash received from Financing Activities 

The Company had no financing activities during the three months ended March 31, 2015. During the three months ended March 31, 2014 VBI US received $1,500,000 from certain investors which was converted into common and preferred shares contemporaneously with the Merger. These proceeds were offset by $134,088 of deferred financing costs related to the issuance of the convertible notes.

Capital Sources

Management's Assessment of Liquidity 

Prior to the Merger, VBI US’s capital sources consisted largely of venture capital investors. The Company’s long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of its products, 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.

Capital Expenditures

The Company did not make significant capital purchases in 2014 or during the three months ended March 31, 2015. The increase to $48,185 for the three months ended March 31, 2015 from $778 for the three months ended March 31, 2014 is primarily related to the purchase of additional R&D equipment including a refresh of its computers and information technology equipment. Going forward, the Company will be required to purchase additional R&D equipment in order to continue the development of its vaccine candidates.    

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Off-Balance Sheet Arrangements

The Company did not engage in any “off-balance sheet arrangements” (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of March 31, 2015.

Discussion of Critical Accounting Policies and Significant Judgments and Estimates

The preparation of financial statements in conformity with GAAP requires us to use judgments in making certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in our financial statements and accompanying notes. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require difficult, subjective and complex judgments by management in order to make estimates about the effect of matters that are inherently uncertain. During the three months ended March 31, 2015, there were no significant changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on March 20, 2015.

Trends, Events and Uncertainties 

As with other companies in the development stage that are in the process of commercializing novel vaccines, 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. Furthermore, we, other than as discussed in this report, 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 quarterly filing, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.    

Significant Contractual Obligations and Commitments

VBI Cda entered into a forty month lease ending December 31, 2017 for 6,473 square feet of lab and office space in Ottawa, Ontario which it can terminate with six months’ notice after the first year. Similarly, the landlord can terminate the lease with six months’ notice after the second year. The lease provides for approximately $24,870 of free rent which we will record on a straight-line basis over the term of the lease.

VBI US entered into a three year lease amendment ending April 30, 2017 for 2,359 square feet of office space in Cambridge, MA. The lease can be terminated by VBI US with six months’ notice after the first year.

NEW ACCOUNTING GUIDANCE

See Note 2 of Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

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 (our principal financial officer), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report 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 have concluded that, as of the end of the period covered by this report, 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, as appropriate, to allow timely decisions regarding required disclosure. 

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Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings 

On November 26, 2014, a putative class action complaint was filed in the United States District Court, Southern District of New York, Case No. 14-cv-9435, as amended on February 11, 2015 and March 25, 2015, on behalf of pre-Merger shareholders of Paulson Capital (Delaware) Corp. who held shares on October 11, 2013 and were entitled to vote at the 2013 Shareholder Meeting, against the Company and certain individuals who were directors as of the date of the vote, in a matter captioned Furlong et al. v. VBI Vaccines, Inc. et al., making claims arising under Section 20(a) and Section 14(a) of the Exchange Act and Rule 14a-9, 17 C.F.R. § 240.14a-9, promulgated thereunder by the SEC. The claims allege false and misleading information provided to investors in the Definitive Proxy Statement on Schedule 14A filed by the Company with the SEC on October 18, 2013 related to the solicitation of votes from shareholders to authorize the Board to pursue potential restructuring transactions. If the plaintiffs were able to prove their allegations in this matter and to establish the damages they assert, then an adverse ruling could have a material impact on the Company. However, the Company disputes the claims asserted in this putative class action case and is vigorously contesting the matter.

Item 1A. Risk Factors

We incorporate by reference the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on March 20, 2015.

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

None.

Item 3.  Defaults Upon Senior Securities.

Not applicable

Item 4.  Mine Safety Disclosure.

Not applicable.

Item 5.  Other Information.

Not applicable.

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Item 6. Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index: 

2.1		Agreement and Plan of Merger (1)
3.1		Amended and Restated Certificate of Incorporation (2)
3.1.1		Certificate of Designation of Rights and Limitations of Series 1 Convertible Preferred Stock (2)
3.2		Amended and Restated Bylaws (3)
4.1		Warrant dated July 25, 2014 issued to PCOF 1, LLC (2)
4.2		Form of Delayed Draw Warrant (2)
4.3		Form of Delayed Draw Note (2)
4.4		Initial Term Note issued to PCOF 1, LLC (2)
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1**	Certification of Principal 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 Chief Financial 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	XBRL Instance*
101.SCH	XBRL Taxonomy Extension Schema*
101.CAL	XBRL Taxonomy Extension Calculation*
101.DEF	XBRL Taxonomy Extension Definition*
101.LAB	XBRL Taxonomy Extension Labels*
101.PRE	XBRL Taxonomy Extension Presentation*

*	Filed herewith
**	Furnished herewith

(1) Incorporated by reference to Annex A to the registrant’s definitive proxy statement on Schedule 14A filed with the Commission on June 30, 2014.

(2) Incorporated by reference to the Current Report on Form 8-K filed by the registrant with the Commission on July 28, 2014.

(3) Incorporated by reference to the Annual Report on Form 10-K filed by the registrant with the Commission on March 20, 2015.

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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: May 13, 2015	VBI VACCINES INC.
	By:	/s/ Jeff Baxter
		Jeff Baxter President & Chief Executive Officer Principal Executive Officer
	By:	/s/ Egidio Nascimento
		Egidio Nascimento
		Chief Financial Officer Principal Financial Officer

19

EX-31.1

EXHIBIT 31.1 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Jeff Baxter, certify that:

1. I have reviewed this quarterly report on Form 10-Q of VBI Vaccines Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 13, 2015

/s/Jeff Baxter                                       
Jeff Baxter

President & Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Egidio Nascimento, certify that:

1. I have reviewed this quarterly report on Form 10-Q of VBI Vaccines Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

4.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 13, 2015       

/s/ Egidio Nascimento                               
Egidio Nascimento

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1 

CERTIFICATION OF PRINCIPAL 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

In connection with the Quarterly Report of VBI Vaccines Inc. (the "Company") on Form 10-Q for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeff Baxter, President & CEO of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

          (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Jeff Baxter                                           

Jeff Baxter 

President & Chief Executive Officer

(Principal Executive Officer)

May 13, 2015

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to VBI Vaccines Inc. and will be retained by VBI Vaccines Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2 

CERTIFICATION OF CHIEF FINANCIAL 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

In connection with the Quarterly Report of VBI Vaccines Inc. (the "Company") on Form 10-Q for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Egidio Nascimento, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

          (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Egidio Nascimento                               

Egidio Nascimento 

Chief Financial Officer

(Principal Financial and Accounting Officer)

May 13, 2015

This certification is made solely for the purpose of 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 has been provided to VBI Vaccines Inc. and will be retained by VBI Vaccines Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Note 5 - Long-term Debt (Details) - Summary of Long-term Debt (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Summary of Long-term Debt [Abstract]
Gross proceeds and detachable warrants	$ 3,000,000	$ 3,000,000
Less: Portion of gross proceeds attributable to warrants to detachable warrants	(1,027,000)	(1,027,000)
Add: accretion of discount, cumulative	280,862	172,374
Less: current portion	(600,000)	(375,000)
	$ 1,653,862	$ 1,770,374

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Note 4 - Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

4. FAIR VALUE MEASUREMENTS

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, the Company uses quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources.

The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3 — Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement.

Financial instruments recognized in the Consolidated Balance Sheet consist of cash and cash equivalents, investment tax credits, receivables and government receivables, accounts payable, accrued liabilities and long-term debt. 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.

Money market funds are highly liquid investments. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk on its cash and cash equivalents. The carrying value of cash and cash equivalents approximates their fair value based on their short-term maturities.

At March 31, 2015 and December 31, 2014, the fair value of the long-term debt is estimated to be $2,903,600 and $2,885,000, respectively.

In determining the fair value of the long-term debt, which consists of level 3 instruments, as of March 31, 2015 and December 31, 2014, the Company used the following assumptions:

	March 31, 2015		December 31, 2014
Long-term debt:
Interest rate		15%		15%
Expected time to payment in months		29		32

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Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) - Stock-Based Compensation Expense (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 239,800	$ 12,700
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	63,600	9,400
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation expense	$ 176,200	$ 3,300

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Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) - Options Issuable under the Option Plans	3 Months Ended
	Mar. 31, 2015	Jun. 19, 2013
2006 VBI US Stock Option Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) - Options Issuable under the Option Plans [Line Items]
Options Outstanding	2,624,368
Shares Issued or Exercised	100,541
Available for Future Grants	0
Total	2,724,909
2013 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) - Options Issuable under the Option Plans [Line Items]
Options Outstanding	8,871
Options Expired	51,129
Shares Issued or Exercised	240,000
Available for Future Grants	0
Total	300,000	300,000
2014 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) - Options Issuable under the Option Plans [Line Items]
Options Outstanding	164,000
Shares Issued or Exercised	20,001
Available for Future Grants	631,687
Total	815,688
2014 Combined Option Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) - Options Issuable under the Option Plans [Line Items]
Options Outstanding	2,797,239
Options Expired	51,129
Shares Issued or Exercised	360,542
Available for Future Grants	631,687
Total	3,840,597

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Note 7 - Contingencies (Details)	1 Months Ended						1 Months Ended			1 Months Ended
	Jan. 28, 2013 Certain Operational Milestone [Member] USD ($)	Jul. 18, 2011 Technology Transfer [Member] Sale and Purchase Agreement [Member] EUR (€)	Jul. 18, 2011 USFDA Approval [Member] Sale and Purchase Agreement [Member] Minimum [Member] EUR (€)	Jul. 18, 2011 USFDA Approval [Member] Sale and Purchase Agreement [Member] Maximum [Member] EUR (€)	Jul. 18, 2011 Cumulative Net Sales 1 [Member] Sale and Purchase Agreement [Member] Minimum [Member] EUR (€)	Jul. 18, 2011 Cumulative Net Sales 1 [Member] Sale and Purchase Agreement [Member] Maximum [Member] ETB	Jul. 18, 2011 Cumulative Net Sales 1 [Member] Sale and Purchase Agreement [Member] EUR (€)	Jul. 18, 2011 Cumulative Net Sales 2 [Member] Sale and Purchase Agreement [Member] Minimum [Member] EUR (€)	Jul. 18, 2011 Cumulative Net Sales 2 [Member] Sale and Purchase Agreement [Member] Maximum [Member] EUR (€)	Jul. 18, 2011 Cumulative Net Sales 2 [Member] Sale and Purchase Agreement [Member] EUR (€)	Jul. 18, 2011 Sublicense Only [Member] Sale and Purchase Agreement [Member] Minimum [Member] EUR (€)	Jul. 18, 2011 Sublicense Only [Member] Sale and Purchase Agreement [Member] Maximum [Member] EUR (€)	Jan. 28, 2013 Performance Bonus [Member] Minimum [Member] USD ($)	Jan. 28, 2013 Performance Bonus [Member] Maximum [Member] USD ($)	Jan. 28, 2013 Closing Series B Financing [Member] USD ($)
Note 7 - Contingencies (Details) [Line Items]
Other Commitment		€ 101,720	€ 500,000	€ 1,000,000	€ 750,000	1,500,000		€ 1,000,000	€ 2,000,000		€ 500,000	€ 1,000,000	$ 10,000	$ 125,000	$ 100,000
Future Cumulative Sales	$ 100,000,000						€ 25,000,000			€ 50,000,000	€ 75,000,000	€ 100,000,000
Percent of Payment Reduced							50.00%			50.00%

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Note 9 - Subsequent Events (Details)	0 Months Ended		12 Months Ended
	Apr. 22, 2015	Apr. 17, 2015	Dec. 31, 2014
Subsequent Event [Member] | 2014 Equity Incentive Plan [Member] | Vest in First Anniversary [Member]
Note 9 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Percent	25.00%
Subsequent Event [Member] | 2014 Equity Incentive Plan [Member] | Vests on a Monthly Basis [Member]
Note 9 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Percent	75.00%
Subsequent Event [Member] | 2014 Equity Incentive Plan [Member]
Note 9 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	45,000
Subsequent Event [Member]
Note 9 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, New Issues		75,000,000
2014 Equity Incentive Plan [Member]
Note 9 - Subsequent Events (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			164,000

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Note 3 - Loss Per Share of Common Stock

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

3. LOSS PER SHARE OF COMMON STOCK

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock, warrants and stock options, which would result in the issuance of incremental shares of common stock. 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. These potentially dilutive securities are more fully described in Note 6, Stockholders’ Deficiency and Additional Paid-in Capital.

The following potentially dilutive securities outstanding at March 31, 2015 and 2014 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	March 31, 2015		March 31, 2014
Convertible preferred stock		2,996,482		10,218,628
Warrants		699,281		882,627
Stock options		2,797,239		820,820
		6,493,002		11,922,075

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Consolidated Balance Sheets (Unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$ 10,226,389	$ 12,604,273
Prepaid expenses and deposits	583,553	400,827
Government receivables	79,235	33,590
	11,061,762	13,172,386
DEFERRED FINANCING COSTS, NET	347,251	395,184
PROPERTY AND EQUIPMENT, NET	136,020	106,500
INTANGIBLES, NET	333,592	380,148
	11,878,625	14,054,218
CURRENT LIABILITIES
Accounts payable	691,121	650,142
Accrued liabilities	412,400	568,535
Current portion of long-term debt	600,000	375,000
	1,703,521	1,593,677
LONG-TERM DEBT, NET OF CURRENT PORTION	1,653,862	1,770,374
	3,357,383	3,364,051
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (authorized 200,000,000; issued 20,012,760; par value $0.0001) (2014 - issued 20,012,760)	2,002	2,002
Convertible preferred stock (authorized 30,000,000; issued 2,996,482; par value $0.0001) (2014 - issued 2,996,482)	299	299
Warrants	1,027,000	1,027,000
Additional paid-in capital	79,338,391	79,098,591
Accumulated other comprehensive income (loss)	15,127	67,513
Accumulated deficit	(71,861,577)	(69,505,238)
	8,521,242	10,690,167
	11,878,625	14,054,218
Investment Tax Credit Carryforward [Member]
CURRENT ASSETS
Investment tax credits receivable	$ 172,585	$ 133,696

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Note 1 - Nature of Business and Continuation of Business

3 Months Ended

Mar. 31, 2015

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS

Nature of business

The Company, VBI Vaccines Inc. (formerly Paulson Capital (Delaware) Corp. (“Paulson”), a Delaware corporation (the “Company” or VBI”), is dedicated to the innovative formulation, development and delivery of safe and effective vaccines that expand and enhance vaccine protection in both established and emerging markets. VBI, its wholly-owned subsidiary, Variation Biotechnologies (US), Inc. (“VBI US”) and Variation Biotechnologies, Inc. (“VBI Cda”) a Canadian company and the wholly-owned subsidiary of VBI US, are collectively referred to as the “Company”.

Planned Principal Operations

The Company is a pharmaceutical company developing novel technologies that seek to expand vaccine protection in large, underserved markets. The Company has developed an enveloped “Virus-Like Particle” or “eVLP” vaccine platform that allows for the design of enveloped virus-like particle vaccines that closely mimic the target viruses. Using this proprietary technology platform, the Company has undertaken specific projects related to human cytomegalovirus (“CMV”) and other antigens. The Company plans, during 2015, to prepare several batches of vaccine for a toxicology trial, for a proposed Phase I clinical trial and for other regulatory purposes. The Company does not expect to advance its first product candidate into Phase I clinical trials prior to the fourth quarter of 2015. All costs incurred to date by the Company have directly or indirectly contributed to the advancement of these projects. The Company has not deferred or capitalized any costs related to any of these projects.

The Merger

On May 8, 2014, Paulson and VBI Acquisition Corp., a special purpose wholly owned subsidiary of Paulson (the “Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions, the Merger Sub would merge with and into VBI US (the transaction referred to as the “Merger”), with VBI US surviving as a wholly owned subsidiary of Paulson. VBI US was incorporated on December 20, 2006 under the laws of the State of Delaware. On December 28, 2006, VBI US completed a private round of financing and, contemporaneously acquired, through an exchange of shares, all of the outstanding common shares of VBI Cda, a Canadian company incorporated on August 24, 2001 under the Canada Business Corporations Act.

On July 14, 2014, Paulson held a Special Meeting of Stockholders at which 67.4% of the outstanding shares of Paulson’s common stock were cast and more than 98% of the votes cast were voted in favor of each of a group of proposals related to the Merger.

On July 25, 2014, the Merger closed and Paulson changed its name to VBI Vaccines Inc. Beginning on July 29, 2014, the Company’s stock began trading on The NASDAQ Capital Market under the symbol “VBIV” following the consummation of a 1 for 5 reverse split.

The financial statements of VBI US are treated as the historical financial statements of the combined company, with the results of Paulson being included from July 25, 2014.  The equity of VBI US has been retroactively restated to reflect the number of shares issued in the transaction. 

Continuation of business and liquidity

The Company has not generated any product revenues and has incurred operating losses since inception. There is no assurance that profitable operations will ever be achieved, and if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and preclinical testing, and commercialization of the Company’s product candidates will require significant additional financing. Our accumulated deficit as of March 31, 2015 was $71.9 million and we expect to incur substantial losses in future periods. The Company plans to finance future operations with a combination of existing cash reserves, proceeds from the issuance of equity securities, the issuance of additional debt, and revenues from potential collaborations, if any. The Company has not generated positive cash flows from operations, and there is no assurance that it will be successful in obtaining an adequate level of financing for the development and commercialization of our planned product candidates.

As of March 31, 2015, the Company had approximately $10.2 million of cash and working capital of $9.4 million. The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products. The Company has funded its operations to date through the issuance of convertible preferred stock, the issuance of common stock, the issuance of secured convertible and other notes payable to certain stockholders and financial institutions, and funding received from government research and development grants. The Company’s long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of its products, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or alternatively advance the products and technology to such a point that an acquirer would find the Company attractive. The Company’s cash and cash equivalents balance as of March 31, 2015 are expected to be adequate to fund the Company’s operations into 2016.

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Note 4 - Fair Value Measurements (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Long-term Debt, Fair Value	$ 2,903,600	$ 2,885,000

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Note 5 - Long-term Debt (Details) (Term Loan Facility [Member], USD $) In Millions, unless otherwise specified	0 Months Ended	5 Months Ended
	Aug. 08, 2014	Dec. 31, 2014
Note 5 - Long-term Debt (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity (in Dollars)		6
Proceeds from Lines of Credit (in Dollars)	3
Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Note 5 - Long-term Debt (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Applicable Margin [Member]
Note 5 - Long-term Debt (Details) [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Applicable Margin		11.00%
Debt Instrument, Interest Rate, Increase (Decrease)		4.00%

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Note 2 - Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The Company’s interim consolidated financial statements included herein as of March 31, 2015 and for the three-months ended March 31, 2015 and 2014 are unaudited.

The financial information as of December 31, 2014 is derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on March 20, 2015. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and are the responsibility of the Company’s management. These financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and use assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates reflected in these consolidated financial statements include the estimated fair values of the Company’s common shares used in the valuation of the stock-based compensation, warrants, the long-term debt, investment tax credits, certain accruals, useful lives of intangibles and the valuation allowance recognized on the deferred tax assets.

Foreign currency translation

Transactions in foreign currencies are translated at the rate of exchange in effect at the transaction date and transaction gains and losses are included in the results of operations.

The functional currency of VBI Cda is the Canadian dollar. The accounts of VBI Cda are translated from its functional currency to U.S. dollars using the current rate method. Any gain or loss arising from translation is recorded to other comprehensive loss.

The Company does not use derivative financial products for hedging or speculative purposes and, as a result, is exposed to currency fluctuations. The Company is subject to foreign currency exchange risk in the form of exposures to changes in currency exchange rates between the United States and Canada; however, it maintains cash in each home currency to minimize the exposure of these fluctuations.

Recent accounting pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB’) issued Accounting Standards Update (“ASU”) 2014-9 “Revenue from Contracts with Customers (Topic 606).” This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. At its April 1, 2015 meeting, the FASB agreed to propose a one-year deferral of the revenue recognition standard’s effective date for all entities. The FASB intends to issue an exposure draft in the near term with a 30-day comment period. The Company will adopt this standard in the first quarter of 2017. This accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements or financial statement disclosures.

Going Concern Assessment and Disclosure Requirements

In May 2014, the FASB issued ASU 2014-15 to provide guidance in relation to management’s assessment of an entity’s ability to continue as a going concern and to provide disclosure requirements in certain circumstances. The amendment becomes effective for the Company in the first quarter of 2016. The Company is evaluating whether the adoption of this amendment will have a material impact on its consolidated financial statements.

Hybrid Financial Instruments

The FASB issued ASU 2014-16 that will require a company that issues or invests in a hybrid financial instrument to determine the nature of the host contract by considering the economic characteristics of the entire instrument, including the embedded derivative feature that is being evaluated for separate accounting. Concluding the host contract is debt-like (versus equity-like) may result in substantially different answers about whether certain features must be accounted for separately. The guidance provides a modified retrospective transition for all existing hybrid financial instruments in the form of a share, with the option for full retrospective application. The guidance is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 Eliminating the Concept of Extraordinary Items

The FASB issued ASU 2015-1 that eliminates the concept of extraordinary items from U.S. GAAP as part of its simplification initiative. The ASU eliminates the need for entities to evaluate whether transactions or events are both unusual in nature and infrequently occurring. Entities will continue to evaluate whether items are unusual in nature or infrequent in their occurrence for presentation and disclosure purposes and when estimating the annual effective tax rate for interim periods. The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

Consolidation

The FASB issued ASU 2015-2 standard to improve targeted areas of the consolidation guidance and reduce the number of consolidation models. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (VIE), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The new guidance is effective in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

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Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Common shares, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common shares, shares authorized	200,000,000	200,000,000
Common shares, shares issued	20,012,760	20,012,760
Convertible preferred shares, authorized	30,000,000
Convertible preferred shares, par value (in Dollars per share)	$ 0.0001
Convertible preferred shares, issued	2,996,482	2,996,482

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Note 4 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Schedule of Assumptions for Fair Value as of Balance Sheet Date of Assets or Liabilities that relate to Transferor's Continuing Involvement [Table Text Block]

	March 31, 2015		December 31, 2014
Long-term debt:
Interest rate		15%		15%
Expected time to payment in months		29		32

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Document And Entity Information	3 Months Ended
	Mar. 31, 2015	May 12, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	VBI VACCINES INC.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		20,012,760
Amendment Flag	false
Entity Central Index Key	0000704159
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

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Note 5 - Long-term Debt (Tables)

3 Months Ended

Mar. 31, 2015

Disclosure Text Block [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

	March 31, 2015			December 31, 2014
Gross proceeds and detachable warrants	$	3,000,000		$	3,000,000
Less: Portion of gross proceeds attributable to warrants to detachable warrants		(1,027,000	)		(1,027,000	)
Add: accretion of discount, cumulative		280,862			172,374
Less: current portion		(600,000	)		(375,000	)
	$	1,653,862		$	1,770,374

Contractual Obligation, Fiscal Year Maturity Schedule [Table Text Block]

	Principal payments on credit facility and exit fee
2015	$	375,000
2016		900,000
2017		1,785,000
Total	$	3,060,000

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Expenses
Research and development	$ 952,912	$ 303,538
General and administration	1,230,851	873,347
Loss from operations	(2,183,763)	(1,176,885)
Interest expense	90,000	476,618
Foreign exchange loss (gain)	(25,495)	197,331
Accretion of debt discount	108,487
Interest income	(416)
NET LOSS	(2,356,339)	(1,850,834)
Currency translation adjustment	52,386	195,723
COMPREHENSIVE LOSS	$ (2,303,953)	$ (1,655,111)
Loss per share of common stock, basic and diluted (in Dollars per share)	$ (0.12)	$ (1.58)
Weighted-average number of common shares outstanding, basic and diluted (in Shares)	20,012,760	1,171,892

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Note 7 - Contingencies

3 Months Ended

Mar. 31, 2015

Loss Contingency [Abstract]

Contingencies Disclosure [Text Block]

7. CONTINGENCIES

The Company entered into two consulting agreements with non-affiliated parties on January 17 and 28, 2013, respectively, whereby the Company has agreed to pay each of the consultants performance bonuses ranging from $10,000 to $125,000 for the achievement of the following milestones for a novel vaccine: patent filing; regulatory approval of clinical testing; start of Phase II and III studies; regulatory approval; and reaching cumulative sales of $100 million. Furthermore, the Company is committed to grant each consultant stock options equal to $100,000 upon successfully closing a Series B financing. Except for the initial EUR 101,720 which became due on April 20, 2015, the events obliging the Company to make the payments below have not yet occurred and the probability of them occurring is not determinable; consequently, no amounts are accrued in respect of these contingencies.

On July 18, 2011, as part of the ePixis asset acquisition, the Company entered into a Sale and Purchase Agreement where it is obligated to make the following milestone payments:

● EUR 101,720 upon successful technology transfer to a contract manufacturing organization and the commencement of a toxicity study;

● EUR 500,000 to EUR 1,000,000 upon first approval by the United States Food and Drug Administration;

● EUR 750,000 to EUR 1,500,000 upon reaching Cumulative Net Sales, as defined in the Sale and Purchase Agreement, of EUR 25,000,000, in the case of a sublicense the payments, are reduced by 50%;

● EUR 1,000,000 to EUR 2,000,000 upon reaching Cumulative Net Sales, as defined in the Sale and Purchase Agreement, of EUR 50,000,000 , in the case of a sublicense, the payments are reduced by 50%; and

● in the case of a sublicense only, EUR 500,000 to EUR 1,000,000 upon reaching Cumulative Net Sales, as defined in the Sale and Purchase Agreement, of EUR 75,000,000 and EUR 100,000,000

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Note 6 - Stockholders' Deficiency and Additional Paid-In Capital

3 Months Ended

Mar. 31, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

6. STOCKHOLDERS’ DEFICIENCY 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.

1999 Stock Option Plan

The Company’s 1999 Stock Option Plan expired in September 2009. On July 25, 2014 the remaining 36,000 shares of Common Stock were cancelled and as a result there are no longer any common shares reserved for potential future issuance pursuant to this plan. At March 31, 2015, there were no stock options outstanding.

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. At March 31, 2015, the maximum number of stock options issuable under the 2006 Plan was 2,724,909 of which 100,541 have been issued and exercised and 2,624,368 were assumed by the Company as part of the Merger described in Note 1 and remain outstanding. The 2006 Plan is now administered by the Company’s Board, in connection with recommendations from the Compensation Committee.

On April 24, 2014, the Company granted 1,844,592 stock options to existing employees. The options began to vest on the closing of the Merger, which occurred on July 25, 2014. The options vest on a monthly basis over 48 months. The fair value of the options when granted from the 2006 Plan was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend 0%; risk-free interest rate of 1.51%; expected volatility of 84.35%; and a 10 year expected life.

2013 Stock Incentive Plan

The 2013 Equity Incentive Plan (the “2013 Plan”) reserved 300,000 shares of common stock for issuance for equity and cash and equity-linked awards to certain management, consultants and others. On June 19, 2013, the Board granted 60,000 options to purchase shares of common stock at a purchase price equal to the closing price of stock on that date, subject to the adoption of the 2013 Plan by the Company’s shareholders. The 2013 Plan was approved by the shareholders on November 8, 2013. On March 19, 2014, the Board granted 204,000 common shares to officers and directors under the 2013 Plan, which was recorded as commissions and salaries expense based on the closing price of stock on that date. On April 10, 2014, the Board granted an additional 36,000 common shares to officers and directors under the same terms as the March 2014 grant.

2014 Equity Incentive Plan

On May 1, 2014, the Board adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”), an omnibus equity incentive plan pursuant to which the Company may grant equity and cash and equity-linked awards to certain directors, management, consultants and others in order to promote the success of the Company following the Merger by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2014 Plan. The 2014 Plan was approved by the Company’s shareholders on July 14, 2014.

The 2014 Plan reserves 815,688 shares of the Company’s common stock for issuance (the "Share Reserve"). On the first day of each fiscal year during the period beginning in fiscal year 2014, and ending on the second day of fiscal year 2024, the Share Reserve shall be increased by an amount equal to the lesser of (i) 1,200,000 shares of the Company’s common stock or the equivalent of such number of shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction; (ii) 5% of the number of outstanding shares of the Company’s common stock on such date; and (iii) an amount determined by the Board. On April 22, 2015, the Board approved an increase to the Share Reserve of 1,000,638 shares of common stock, which represented 5% of the number of shares of common stock outstanding on that date.  

There were 20,001 restricted common shares issued and 164,000 options granted from the 2014 Plan in 2014. None were issued during the three months ended March 31, 2015.

The maximum number of options issuable under the option plans is summarized in the following table:

	Number of Options or Shares
	Options Outstanding		Options Expired		Shares Issued or Exercised		Available for Future Grants		Total
2006 VBI US Stock Option Plan		2,624,368		-		100,541		-		2,724,909
2013 Stock Incentive Plan		8,871		51,129		240,000		-		300,000
2014 Equity Incentive Plan		164,000		-		20,001		631,687		815,688
Total as at March 31, 2015		2,797,239		51,129		360,542		631,687		3,840,597

All future stock option or share grants will be from the 2014 Plan.

As of March 31, 2015, no shares of Common Stock were available for issuance under the previously adopted 1999 Plan, 2006 Plan or the 2013 Plan (other than shares issuable upon the exercise of currently outstanding stock options).

The fair value of the options expected to vest is recognized as an expense on a straight-line basis over the vesting period. The total stock-based compensation expense recorded in the three months ended March 31, 2015 and 2014 was as follows:

	Three Months Ended March 31
	2015		2014
Research and development	$	63,600	$	9,400
General and administrative		176,200		3,300
Total stock-based compensation expense	$	239,800	$	12,700

Warrants

The warrants issued on July 25, 2014, as part of the Facility described in Note 5 entitle the holders to purchase 699,281 common shares. The exercise price for the warrants is $2.145. Assuming the funding of an additional $3 million advance under the Facility, which is contingent on the Company achieving certain operational milestones, the Company will issue to the lender warrants to purchase an additional 699,281 shares of the Common Stock at an exercise price equal to the 10-day volume weighted average price of the Common Stock reported by Bloomberg LP for the 10 trading days preceding the date of the advance.

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Note 4 - Fair Value Measurements (Details) - Fair Value of Long-term Debt and Related Party Convertible (Long-term Debt [Member], Fair Value, Inputs, Level 3 [Member])	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Long-term Debt [Member] | Fair Value, Inputs, Level 3 [Member]
Assumption for Fair Value as of Balance Sheet Date of Assets or Liabilities that relate to Transferor's Continuing Involvement [Line Items]
Interest rate	15.00%	15.00%
Expected time to payment in months	29 months	32 months

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Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Tables)

3 Months Ended

Mar. 31, 2015

Stockholders' Equity Note [Abstract]

Schedule of Share-based Compensation, Activity [Table Text Block]

	Number of Options or Shares
	Options Outstanding		Options Expired		Shares Issued or Exercised		Available for Future Grants		Total
2006 VBI US Stock Option Plan		2,624,368		-		100,541		-		2,724,909
2013 Stock Incentive Plan		8,871		51,129		240,000		-		300,000
2014 Equity Incentive Plan		164,000		-		20,001		631,687		815,688
Total as at March 31, 2015		2,797,239		51,129		360,542		631,687		3,840,597

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended March 31
	2015		2014
Research and development	$	63,600	$	9,400
General and administrative		176,200		3,300
Total stock-based compensation expense	$	239,800	$	12,700

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Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of presentation

The Company’s interim consolidated financial statements included herein as of March 31, 2015 and for the three-months ended March 31, 2015 and 2014 are unaudited.

The financial information as of December 31, 2014 is derived from the audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on March 20, 2015. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and are the responsibility of the Company’s management. These financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year.

Use of Estimates, Policy [Policy Text Block]

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and use assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates reflected in these consolidated financial statements include the estimated fair values of the Company’s common shares used in the valuation of the stock-based compensation, warrants, the long-term debt, investment tax credits, certain accruals, useful lives of intangibles and the valuation allowance recognized on the deferred tax assets.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign currency translation

Transactions in foreign currencies are translated at the rate of exchange in effect at the transaction date and transaction gains and losses are included in the results of operations.

The functional currency of VBI Cda is the Canadian dollar. The accounts of VBI Cda are translated from its functional currency to U.S. dollars using the current rate method. Any gain or loss arising from translation is recorded to other comprehensive loss.

The Company does not use derivative financial products for hedging or speculative purposes and, as a result, is exposed to currency fluctuations. The Company is subject to foreign currency exchange risk in the form of exposures to changes in currency exchange rates between the United States and Canada; however, it maintains cash in each home currency to minimize the exposure of these fluctuations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent accounting pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB’) issued Accounting Standards Update (“ASU”) 2014-9 “Revenue from Contracts with Customers (Topic 606).” This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. At its April 1, 2015 meeting, the FASB agreed to propose a one-year deferral of the revenue recognition standard’s effective date for all entities. The FASB intends to issue an exposure draft in the near term with a 30-day comment period. The Company will adopt this standard in the first quarter of 2017. This accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements or financial statement disclosures.

Going Concern Assessment and Disclosure Requirements

In May 2014, the FASB issued ASU 2014-15 to provide guidance in relation to management’s assessment of an entity’s ability to continue as a going concern and to provide disclosure requirements in certain circumstances. The amendment becomes effective for the Company in the first quarter of 2016. The Company is evaluating whether the adoption of this amendment will have a material impact on its consolidated financial statements.

Hybrid Financial Instruments

The FASB issued ASU 2014-16 that will require a company that issues or invests in a hybrid financial instrument to determine the nature of the host contract by considering the economic characteristics of the entire instrument, including the embedded derivative feature that is being evaluated for separate accounting. Concluding the host contract is debt-like (versus equity-like) may result in substantially different answers about whether certain features must be accounted for separately. The guidance provides a modified retrospective transition for all existing hybrid financial instruments in the form of a share, with the option for full retrospective application. The guidance is effective for public business entities in fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 Eliminating the Concept of Extraordinary Items

The FASB issued ASU 2015-1 that eliminates the concept of extraordinary items from U.S. GAAP as part of its simplification initiative. The ASU eliminates the need for entities to evaluate whether transactions or events are both unusual in nature and infrequently occurring. Entities will continue to evaluate whether items are unusual in nature or infrequent in their occurrence for presentation and disclosure purposes and when estimating the annual effective tax rate for interim periods. The ASU applies to all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

Consolidation

The FASB issued ASU 2015-2 standard to improve targeted areas of the consolidation guidance and reduce the number of consolidation models. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity (VIE), and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. It also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The new guidance is effective in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

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Note 8 - Legal Proceedings

3 Months Ended

Mar. 31, 2015

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

8. LEGAL PROCEEDINGS

On November 26, 2014, a putative class action complaint was filed in the United States District Court, Southern District of New York, Case No. 14-cv-9435, as amended on February 11, 2015 and March 25, 2015, on behalf of pre-Merger shareholders of Paulson Capital (Delaware) Corp. who held shares on October 11, 2013 and were entitled to vote at the 2013 Shareholder Meeting, against the Company and certain individuals who were directors as of the date of the vote, in a matter captioned Furlong et al. v. VBI Vaccines, Inc. et al., making claims arising under Section 20(a) and Section 14(a) of the Exchange Act and Rule 14a-9, 17 C.F.R. § 240.14a-9, promulgated thereunder by the SEC. The claims allege false and misleading information provided to investors in the Definitive Proxy Statement on Schedule 14A filed by the Company with the SEC on October 18, 2013 related to the solicitation of votes from shareholders to authorize the Board to pursue potential restructuring transactions. If the plaintiffs were able to prove their allegations in this matter and to establish the damages they assert, then an adverse ruling could have a material impact on the Company. However, the Company disputes the claims asserted in this putative class action case and is vigorously contesting the matter.

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Note 9 - Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

9. SUBSEQUENT EVENTS

On April 2, 2015, VBI Cda, entered into a Collaboration and Option License Agreement (the “Agreement”) with Sanofi Vaccines Technologies S.A.S., a company organized under the laws of France (“Sanofi”). The purpose of the Agreement is to allow Sanofi to evaluate the feasibility of using VBI Cda’s LPV technology and expertise to reformulate a vaccine candidate from Sanofi to provide improved stability. The term of the Project (as defined in the Agreement), will commence on the date of receipt by VBI Cda of Sanofi materials and continue for 9 months unless otherwise agreed in writing by the parties. The term of the Agreement begins on the Effective Date, which is defined as April 15, 2015, and unless earlier terminated or mutually extended in writing, the Agreement will expire upon the expiration or termination of an option to negotiate and enter into a royalty bearing license for the commercial use of VBI’s LPV technology.

On April 17, 2015, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission covering the offering of up to $75 million of common stock, preferred stock and warrants (the “Registration Statement”). As of the date of this report the Registration Statement has not yet been declared effective.

On April 22, 2015, the Company granted 45,000 stock options to existing employees under the 2014 Equity Incentive Plan. The options have an exercise price equivalent to the closing price of the common stock on the NASDAQ Capital Market on the date of grant and began to vest on the date of grant with 25% vesting on the first anniversary and the remaining 75% on a monthly basis over an additional 36 months.

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Note 3 - Loss Per Share of Common Stock (Tables)

3 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	March 31, 2015		March 31, 2014
Convertible preferred stock		2,996,482		10,218,628
Warrants		699,281		882,627
Stock options		2,797,239		820,820
		6,493,002		11,922,075

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Note 3 - Loss Per Share of Common Stock (Details) - Potentially Dilutive Securities Outstanding	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	6,493,002	11,922,075
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	2,996,482	10,218,628
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	699,281	882,627
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities	2,797,239	820,820

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Note 5 - Long-term Debt (Details) - Significant Contratual Obligations (Line of Credit [Member], USD $)	Mar. 31, 2015
Line of Credit [Member]
Note 5 - Long-term Debt (Details) - Significant Contratual Obligations [Line Items]
2015	$ 375,000
2016	900,000
2017	1,785,000
Total	$ 3,060,000

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
OPERATING
Net loss	$ (2,356,339)	$ (1,850,834)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of property and equipment and intangibles	24,560	25,551
Amortization of deferred financing costs	47,933	14,980
Stock-based compensation expense	239,800	12,700
Accretion of debt discount	108,487
Interest accrued on convertible notes		476,618
Net change in operating working capital items	(382,416)	172,505
	(2,317,974)	(1,148,480)
INVESTING
Funds held in escrow		10,937
Acquisition of property and equipment	(48,185)	(778)
Proceeds from the sale of property and equipment	806
	(47,379)	10,159
FINANCING
Proceeds from convertible notes		1,500,000
Financing costs of term loan facility		(134,088)
		1,365,912
Effect of exchange rate changes on cash and cash equivalents	(12,531)	195,723
CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD	(2,377,884)	423,314
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	12,604,273	624,419
CASH AND CASH EQUIVALENTS, END OF PERIOD	10,226,389	1,047,733
Supplementary information:
Interest paid	$ 90,000

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Note 5 - Long-term Debt

3 Months Ended

Mar. 31, 2015

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

5.     LONG-TERM DEBT

	March 31, 2015			December 31, 2014
Gross proceeds and detachable warrants	$	3,000,000		$	3,000,000
Less: Portion of gross proceeds attributable to warrants to detachable warrants		(1,027,000	)		(1,027,000	)
Add: accretion of discount, cumulative		280,862			172,374
Less: current portion		(600,000	)		(375,000	)
	$	1,653,862		$	1,770,374

During 2014, the Company executed a term loan facility (the “Facility”) in the amount of $6 million, with the initial advance of $3 million drawn down on August 8, 2014 and the balance becoming available once certain product development milestones have been achieved. The amounts drawn on the Facility accrue interest at an annual rate equal to the greater of (a) one-month LIBOR (subject to a 5.00% cap) or (b) 1.00%, plus the Applicable Margin. The Applicable Margin will be 11.00%. Upon the occurrence, and during the continuance, of an event of default, the Applicable Margin, defined above, will be increased by 4.00% per annum. Principal payments due under the term loan facility are as follows:

	Principal payments on credit facility and exit fee
2015	$	375,000
2016		900,000
2017		1,785,000
Total	$	3,060,000

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Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended	0 Months Ended	1 Months Ended	59 Months Ended	1 Months Ended		12 Months Ended
	Apr. 22, 2015	Mar. 31, 2015	Apr. 10, 2014	Mar. 19, 2014	Jul. 25, 2014	Apr. 24, 2014	Jun. 19, 2013	Dec. 31, 2014
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)					2.145
Subsequent Event [Member] | 2013 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,000,638
Share-based Compensation Arrangement by Share-based Payment Award, Percent of Additional Shares Authorized	5.00%
Subsequent Event [Member] | 2014 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	45,000
Increase Event [Member] | 2014 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized		1,200,000
Certain Operational Milestone [Member] | Common Stock [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		699,281
Certain Operational Milestone [Member] | Warrant [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Proceeds from Other Equity (in Dollars)		3
Common Stock [Member] | 2013 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			36,000	204,000
Common Stock [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					699,281
1999 Stock Option Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period					36,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		0
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		0
2006 VBI US Stock Option Plan [Member] | VBI US [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		2,724,909
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		100,541
2006 VBI US Stock Option Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		2,624,368						2,624,368
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		2,724,909
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		100,541
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						1,844,592
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		48 months
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate		0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate		1.51%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate		84.35%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term		10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		0
2013 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period		51,129
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number								8,871
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		300,000					300,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		240,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							60,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		0
2014 Equity Incentive Plan [Member]
Note 6 - Stockholders' Deficiency and Additional Paid-In Capital (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number								164,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		815,688
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		20,001
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								164,000
Share-based Compensation Arrangement by Share-based Payment Award, Percent of Additional Shares Authorized		5.00%
Stock Issued During Period, Shares, Restricted Stock Award, Gross		0						20,001
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		631,687

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Note 1 - Nature of Business and Continuation of Business (Details) (USD $)	1 Months Ended
	Jul. 25, 2014	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Dec. 31, 2013
Note 1 - Nature of Business and Continuation of Business (Details) [Line Items]
Retained Earnings (Accumulated Deficit)		$ (71,861,577)	$ (69,505,238)
Cash and Cash Equivalents, at Carrying Value		10,226,389	12,604,273	1,047,733	624,419
Working Capital		$ 9,400,000
Reverse Stock Split [Member]
Note 1 - Nature of Business and Continuation of Business (Details) [Line Items]
Stockholders' Equity Note, Stock Split, Conversion Ratio	5