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 September 30, 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

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	23,530,260
(Class)	Outstanding at November 12, 2015

VBI VACCINES INC. AND SUBSIDIARIES

FORM 10-Q

INDEX 

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets – September 30, 2015 and December 31, 2014 (unaudited)	1
	Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	2
	Consolidated Statements of Cash Flows – Three and Nine Months Ended September 30, 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	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	20
PART II - OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosure	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
Signatures		22

VBI Vaccines Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	September 30, 2015			December 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$	11,009,396		$	12,604,273
Investment tax credits receivable		167,543			133,696
Prepaid expenses and deposits		557,920			400,827
Government receivables		71,529			33,590
		11,806,388			13,172,386
DEFERRED FINANCING COSTS, NET		251,784			395,184
PROPERTY AND EQUIPMENT, NET		130,527			106,500
INTANGIBLES, NET		388,346			380,148
	$	12,577,045		$	14,054,218
CURRENT LIABILITIES
Accounts payable	$	1,076,618		$	650,142
Accrued liabilities		1,004,521			568,535
Deferred revenue		7,485			-
Current portion of long-term debt		900,000			375,000
		2,988,624			1,593,677
LONG-TERM DEBT, NET		1,419,950			1,770,374
		4,408,574			3,364,051
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (authorized 200,000,000; issued 23,030,260; par value $0.0001) (2014 - issued 20,012,760)		2,304			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		86,186,333			79,098,591
Accumulated other comprehensive income (loss)		27,575			67,513
Accumulated deficit		(79,075,040	)		(69,505,238	)
		8,168,471			10,690,167
	$	12,577,045		$	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 September 30						For the Nine Months Ended September 30
	2015			2014			2015			2014
Collaboration revenue	$	137,515		$	-		$	388,475		$	-
Operating expenses:
Research and development		2,503,115			867,035			5,120,051			1,898,728
General and administration		1,667,558			5,691,492			4,278,764			7,898,872
Total operating expenses		4,170,673			6,558,527			9,398,815			9,797,600
Loss from operations		(4,033,158	)		(6,558,527	)		(9,010,340	)		(9,797,600	)
Interest expense		(91,250	)		(58,136	)		(272,250	)		(865,835	)
Foreign exchange gain (loss)		19,718			(57,107	)		36,358			(50,962	)
Accretion of debt discount		(107,601	)		(61,504	)		(324,576	)		(61,504	)
Interest income		245			2,640			1,006			2,836
NET LOSS	$	(4,212,046	)	$	(6,732,634	)	$	(9,569,802	)	$	(10,773,065	)
Currency translation adjustment		56,899			5,401			39,938			(38,005	)
COMPREHENSIVE LOSS	$	(4,155,147	)	$	(6,727,233	)	$	(9,529,864	)	$	(10,811,070	)
Loss per share of common stock, basic and diluted	$	(0.20	)	$	(0.46	)	$	(0.47	)	$	(1.88	)
Weighted-average number of common shares outstanding, basic and diluted		21,599,244			14,703,833			20,541,588			5,745,478

See accompanying Notes to Consolidated Financial Statements

2

VBI Vaccines Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30
	2015			2014
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES:
OPERATING
Net loss	$	(9,569,802	)	$	(10,773,065	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of property and equipment and intangibles		98,050			84,066
Amortization of deferred financing costs		143,401			165,909
Stock-based compensation expense		820,100			281,800
Accretion of debt discount		324,576			61,504
Interest accrued on convertible notes		-			812,832
Stock-based compensation for services		44,800			-
Stock-based merger transaction costs		-			3,321,537
Net change in operating working capital items		633,583			129,451
		(7,505,292	)		(5,915,966	)
INVESTING
Funds held in escrow		-			777,746
Acquisition of property and equipment		(75,400	)		(64,168	)
Acquisition of intangibles		(112,077	)		(18,234	)
Proceeds from the sale of property and equipment		1,124			-
		(186,353	)		695,344
FINANCING
Proceeds from exercise of stock options		-			1
Proceeds from issuance of common shares		6,285,700			15,214,561
Proceeds from issuance of preferred shares		-			1,035,135
Share issue costs		(62,556	)		(796,247	)
Proceeds from convertible notes		-			1,500,000
Financing costs on notes converted to shares		-			(134,088	)
Proceeds from long-term debt		-			3,000,000
Financing costs of long-term debt		-			(471,345
Repayment of long-term debt		(150,000	)		-
		6,073,144			19,348,017
Effect of exchange rate changes on cash and cash equivalents		23,624			45,802
CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD		(1,594,877	)		14,173,197
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		12,604,273			624,419
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	11,009,396		$	14,797,616
Supplementary information:
Interest paid	$	272,250		$	53,000
Non-cash investing and financing:
Issuance of common stock in connection with conversion of notes payable	$	-		$	20,765,988
Issuance of preferred stock in connection with conversion of notes payable	$	-		$	520,572
Issuance of common stock for services	$	44,800		$	-
Debt discount on long-term debt	$	-		$	1,027,000

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”.

As further described in Note 9, Subsequent Events, on October 26, 2015, the Company, SciVac Therapeutics Inc., a corporation organized under the laws of British Columbia, Canada (“SciVac”), and Seniccav Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of SciVac (the “Sub”), entered into an Agreement and Plan of Merger (the “SciVac Merger Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions, the Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of SciVac (the “Proposed Merger”). The SciVac Merger Agreement also contemplates the closing of public or private equity financing with aggregate gross proceeds of at least $25 million contemporaneously with the SciVac Merger and includes various closing conditions standard to transactions of this nature. The transaction is expected to close during the first quarter of 2016 and is not expected to have a significant impact on the current research operations of 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. To date in 2015, the Company has prepared several batches of vaccine for a toxicology trial, for a proposed Phase I clinical trial and for other regulatory purposes. The Company expects to advance its first product candidate into Phase I clinical trials during the first half of 2016.

On September 8, 2015, the Company announced that VBI Cda had been awarded up to $350,000 Canadian dollars (“CAD”) in grant funding by the National Research Council-Industrial Research Assistance Program (“NRC-IRAP”) to apply VBI’s eVLP platform in the development of a respiratory syncytial virus (“RSV”) vaccine candidate. In addition, on October 8, 2015 the Company announced that it has applied its eVLP platform in the development of a novel therapeutic vaccine candidate for glioblastoma multiforme (“Glioblastoma” or “GBM”) with Columbia University’s Brain Tumor Center.

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.

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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. The Company’s accumulated deficit as of September 30, 2015 was $79.1 million and the Company expects 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 planned product candidates.

As of September 30, 2015, the Company had approximately $11 million of cash and working capital of $8.9 million. The Company will require significant additional funds to conduct pre-clinical research for new vaccine candidates, 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 September 30, 2015 are expected to be adequate to fund the Company’s operations into the second half of 2016, however, the Company intends to explore financing opportunities to provide additional working capital. The Company cannot be certain that additional financing will be available on terms acceptable to the Company or at all. To the extent funds are insufficient to support the Company’s operations and commercialize its technology, the Company may undertake additional offerings of securities, debt financing, selling or licensing developed intellectual or other property, or other alternatives. In that regard, the Company filed a Form S-3 shelf registration statement with the Securities and Exchange Commission (the “Commission”) on April 17, 2015. On July 8, 2015, the Company filed an amended registration statement on Form S-3 with the Commission covering the offering of up to an aggregate of $75 million of the Company’s common stock, preferred stock and warrants from time to time as market conditions permit (the “Shelf Registration Statement”). The Shelf Registration Statement was declared effective on July 10, 2015. This information does not constitute an offer of any securities for sale.

On August 13, 2015, the Company entered into a securities purchase agreement by and among the Company and nineteen accredited investors (the “Purchasers”) pursuant to which the Company agreed to issue and sell up to 3,000,000 shares of the Company’s common stock to the Purchasers at a purchase price per share equal to 85% of the average of the volume weighted average prices of the common stock reported by Bloomberg LP for the ten trading days immediately prior to each closing (the “Private Placement”). Aggregate gross proceeds from the Private Placement amounted to $6,285,700.

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2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The Company’s interim consolidated financial statements included herein as of September 30, 2015 and for the three-and nine-months ended September 30, 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 Commission 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.

Revenue Recognition

Revenue is recognized when all of the following criteria are met:

● Persuasive evidence of an arrangement exists

● Delivery has occurred or services have been rendered and there are no future performance obligations

● The amount of revenue is fixed or determinable

● Collectability is reasonably assured

Milestone payments are immediately recognized as revenue if the Company has no future performance obligations, collectability is reasonably assured and the contractually specified milestone is achieved. Otherwise, revenue is recognized over the term of the agreement or the performance period using a percentage of effort incurred. The level of effort is based on estimates of total expected time or duration to complete the work which is compared to the period of time incurred to date in order to arrive at an estimate of the percentage or revenue earned to date.

Upfront payments in recognition of past research and development efforts are recognized as revenue upon execution of the licensing and collaboration agreements, as there are no future obligations and collections are reasonably assured.

Collaboration revenue consists of non-refundable advance payments received in accordance with licensing and collaboration agreements. Collaboration revenue is deferred and recognized over the performance period which is the period over which the Company maintains substantive contractual obligations. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue (a component of current liabilities). Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as long-term deferred revenue.

The term over which advance payments are recognized is revised if the period over which the Company maintains substantive contractual obligations changes.

6

Certain research and development activities are partially funded with government grants, which are netted against the research and development costs under such caption in the accompanying Consolidated Statements of Comprehensive Loss. 

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 net loss in the statements of comprehensive loss.

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, 2017 and early adoption is not permitted. The Company will adopt this standard in the first quarter of 2018. This accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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.

7

Consolidation

The FASB issued ASU 2015-2 guidance 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.

Presentation of debt issuance costs

The FASB issued ASU 2015-03 guidance to simplify the presentation of debt issuance costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction for the debt liability as opposed to recorded as a separate asset, except when incurred before receipt of the funding from the associated debt liability. This is similar to the presentation of debt discounts or premiums. This ASU requires retrospective application which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. As such, beginning with the interim period ended March 31, 2016, debt issuance costs, also referred to as deferred financing costs, will be presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related debt.

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 September 30, 2015 and 2014 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	September 30, 2015		September 30, 2014
Convertible preferred stock		2,996,482		2,996,482
Warrants		699,281		699,281
Stock options		4,045,239		3,480,055
		7,741,002		7,175,818

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 (including money market funds), 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.

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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 September 30, 2015 and December 31, 2014, the fair value of the long-term debt is estimated to be $3,137,000 and $2,885,000, respectively.

In determining the fair value of the long-term debt, which consists of level 3 inputs, as of September 30, 2015 and December 31, 2014, the Company used the following assumptions:

	September 30, 2015		December 31, 2014
Long-term debt:
Interest rate		12.9%		15%
Expected time to payment in months		23		32

5.     LONG-TERM DEBT

	September 30, 2015			December 31, 2014
Gross proceeds	$	3,000,000		$	3,000,000
Less: Portion of gross proceeds attributable to detachable warrants		(1,027,000	)		(1,027,000	)
Add: Accretion of discount, cumulative		496,950			172,374
Less: Principal repayments		(150,000	)		-
Less: Current portion		(900,000	)		(375,000	)
	$	1,419,950		$	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. The remaining principal payments and exit fee due under the Facility are as follows:

	Principal payments on long-term debt and exit fee
2015	$	225,000
2016		900,000
2017		1,785,000
Total	$	2,910,000

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6. STOCKHOLDERS’ DEFICIENCY AND ADDITIONAL PAID-IN CAPITAL

Common and Preferred Stock

VBIV's authorized share capital consists of 200,000,000 voting common shares with a par value of $0.0001 and 30,000,000 preferred shares.

The preferred shares have been designated Series 1 Convertible Preferred Shares. The Series 1 Convertible Preferred Shares are convertible to common shares at any time at the option of the holder on a one-to-one basis.

On July 30, 2015, the Company issued an aggregate of 17,500 shares of the Company’s common stock pursuant to a consulting agreement as compensation for past services performed by the consultant. An amount of $44,800 was recorded as consulting services expense and included in the general and administration costs under such caption in the accompanying Consolidated Statements of Comprehensive Loss. The amount was based on the NASDAQ official closing price of $2.56 on July 30, 2015.

On August 13, 2015, the Company entered into a securities purchase agreement by and among the Company and nineteen accredited investors (the “Purchasers”) pursuant to which the Company agreed to issue and sell up to 3,000,000 shares of the Company’s common stock to the Purchasers at a purchase price per share equal to 85% of the average of the volume weighted average prices of the common stock reported by Bloomberg LP for the ten trading days immediately prior to each closing (the “Private Placement”). On August 13, 2015, the Company completed the first closing of the Private Placement, whereby the Company sold 2,285,000 shares its of common stock to certain of the Purchasers at a per share price of $2.10 for gross proceeds equal to $4,798,500. On August 14, 2015, the Company completed the final closing of the Private Placement whereby the Company sold 715,000 shares of its common stock at a per share price of $2.08 for gross proceeds equal to $1,487,200. The Company raised aggregate gross proceeds equal to $6,285,700 and does not owe any commissions in connection with the Private Placement. The Company filed the Resale Registration Statement with the Commission on August 27, 2015 and it was declared effective by the Commission on September 2, 2015.

On November 10, 2015, 500,000 shares of the Company's common stock were issued pursuant to the conversion of 500,000 shares of the Series 1 Convertible Preferred Shares.

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 September 30, 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 September 30, 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 1.81%; expected volatility of 87.77%; and an average remaining 5.75 year expected life.

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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. At September 30, 2015, there were 8,871 stock options outstanding under the 2013 Plan.

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 initially reserved 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 ratified an increase in the Share Reserve by 1,000,638 shares of the Company’s common stock, which equaled 5% of the number of outstanding shares of the Company's common stock.

There were 20,001 restricted common shares issued and 164,000 options granted from the 2014 Plan in 2014, 45,000 options were granted during the three months ended June 30, 2015 and an additional 1,203,000 options were granted during the three months ended September 30, 2015. The fair value of the options granted from the 2014 Plan during the three months ended September 30, 2015 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend 0%; risk-free interest rate of 1.68%; expected volatility of 84.72%; and an average remaining 6.25 year expected life.

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		1,412,000		-		20,001		384,325		1,816,326
Total as at September 30, 2015		4,045,239		51,129		360,542		384,325		4,841,235

Unless another employee benefit plan is adopted, all future stock option or share grants will be from the 2014 Plan.

As of September 30, 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 and nine months ended September 30, 2015 and 2014 was as follows:

	Three Months Ended September 30				Nine Months Ended September 30
	2015		2014		2015		2014
Research and development	$	91,500	$	45,000	$	218,700	$	63,200
General and administrative		250,000		212,000		601,400		218,600
Total stock-based compensation expense	$	341,500	$	257,000	$	820,100	$	281,800

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 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 or options equal to $100,000 upon successfully closing a Series B preferred stock financing. The Proposed Merger is expected to have no impact on the Company’s commitment.

On July 18, 2011, VBI Cda acquired ePixis SA (“ePixis”) in order to obtain access to a technology platform. Given ePixis did not meet the definition of a business under the relevant accounting guidance, VBI Cda treated the acquisition as an asset acquisition due to the underlying circumstances of the transaction. In addition to the $450,000 initial payment for the technology and $75,000 in related transaction costs, there was a contingent payment of approximately $120,000. The contingent payment related to the first milestone described below which was achieved during the three-months ended June 30, 2015. The contingent consideration was not recognized as a liability in the prior financial statements as the probability of payment had been previously deemed remote.

As part of the ePixis asset acquisition, the purchase agreement obliges VBI Cda to make the following milestone payments:

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

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

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

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

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

Except for the first milestone payment, the events obliging the Company to make the remaining payments above have not yet occurred and the probability of them occurring is not determinable; consequently, no amounts are accrued in respect of these contingencies.

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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 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 Commission 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.

9. SUBSEQUENT EVENTS

On October 26, 2015, the Company, SciVac, and the Sub entered into the SciVac Merger Agreement, pursuant to which, subject to the satisfaction or waiver of certain conditions, the Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of SciVac (the “Proposed Merger”).

At the effective time of the Proposed Merger (the “Effective Time”), each share of the Company’s common stock, par value $0.0001 per share (the “Company Common Stock”) (including shares of Company Common Stock issued prior to the Effective Time upon conversion of the Company’s Series 1 Convertible Preferred Stock, par value $0.0001 per share (the “Company Preferred Stock”)) will be converted into the right to receive common shares of SciVac, no par value per share (the “SciVac Common Shares”), in the ratio of 20.808356 SciVac Common Shares for each share of Company Common Stock (subject to proportionate adjustments for forward or reverse stock splits pursuant to the terms of the Merger Agreement) (the “Exchange Ratio”). In addition, at the Effective Time, (i) each outstanding warrant to purchase a share of Company Common Stock and (ii) each outstanding option to purchase a share of Company Common Stock, whether vested or unvested, and so long as such warrant or option has not, prior to the Effective Time, been exercised, cancelled, terminated or expired, will be deemed to constitute a warrant or an option, as applicable, to purchase, on the same terms and conditions, a number of SciVac Common Shares (rounded down to the nearest whole share) equal to the product of (i) the number of shares of Company Common Stock subject to such warrant or option multiplied by (ii) the Exchange Ratio, at an exercise price per SciVac Common Share equal to the quotient of (i) the exercise price per share of Company Common Stock (rounded up to the nearest cent) subject to such warrant or option (converted first into Canadian dollars as further described in the Merger Agreement) divided by (ii) the Exchange Ratio. The SciVac Merger Agreement also contemplates the closing of public or private equity financing with aggregate gross proceeds of at least $25 million contemporaneously with the SciVac Merger and includes various closing conditions standard to transactions of this nature. The transaction is expected to close during the first quarter of 2016 and is not expected to have a significant impact on the current research operations of the Company.

On November 10, 2015, 500,000 shares of the Company's common stock were issued pursuant to the conversion of 500,000 shares of the Series 1 Convertible Preferred Shares.

 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 of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “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;

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● 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.

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. and its subsidiaries.

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 Commission 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. To date in 2015, the Company has prepared 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 lasted approximately 6 months and provided 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. The Company expects to advance its first product candidate into Phase I clinical trials during the first half of 2016.

On April 2, 2015, VBI Cda entered into a Collaboration and Option License Agreement (the “Sanofi Agreement”) with Sanofi Vaccines Technologies S.A.S., a company organized under the laws of France (“Sanofi”). The purpose of the Sanofi Agreement is to allow Sanofi to evaluate the feasibility of using VBI Cda’s LPV technology and expertise to reformulate a Sanofi vaccine candidate to provide improved stability. VBI Cda is nearing completion of Stage 2 of the defined research plan included in the Sanofi Agreement.

On September 8, 2015, the Company announced that VBI Cda had been awarded up to $350,000 CAD in grant funding by the  NRC-IRAP to apply VBI’s eVLP Platform in the development of an rRSV vaccine candidate. In addition, on October 8, 2015, the Company announced that it has applied its eVLP Platform in the development of a novel therapeutic vaccine candidate for Glioblastoma or GBM with Columbia University’s Brain Tumor Center.

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 and a collaboration agreement. No revenues have been recorded from the sale of products in connection with our planned principal business activity.

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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 $9.6 million for the nine months ended September 30, 2015. Our accumulated deficit as of September 30, 2015 was $79.1 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, and fund the development of new product candidates. 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 Stock Market.

We expect 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 as well as other product and corporate development opportunities that are deemed to have future potential value.  In that regard, the Company filed a Form S-3 shelf registration statement with the Commission on April 17, 2015 that was declared effective on July 10, 2015.  The registration statement allows the Company to offer up to an aggregate of $75 million of common stock preferred stock or warrants from time to time as market conditions permit. This information does not constitute an offer of any securities for sale. 

On August 13, 2015, the Company entered into the Securities Purchase Agreement by and among the Company and purchasers (the “Purchasers”) pursuant to which the Company agreed to issue and sell up to 3,000,000 shares of the Company’s common stock to the Purchasers at a purchase price per share equal to 85% of the average of the volume weighted average prices of the common stock reported by Bloomberg LP for the ten trading days immediately prior to each closing (the “Private Placement”). On August 13, 2015, the Company completed the first closing of the Private Placement, whereby the Company sold 2,285,000 shares of common stock to certain of the Purchasers at a per share price of $2.10 for gross proceeds equal to $4,798,500. On August 14, 2015, the Company completed the final closing of the Private Placement whereby the Company sold 715,000 shares (of common stock at a per share price of $2.08 for gross proceeds equal to $1,487,200. The Company raised aggregate gross proceeds equal to $6,285,700 and does not owe any commissions in connection with the Private Placement. The Company filed the Resale Registration Statement with the Commission on August 27, 2015 and it was declared effective by the Commission on September 2, 2015.

On October 26, 2015, the Company, SciVac Therapeutics Inc., a corporation organized under the laws of British Columbia, Canada (“SciVac”), and Seniccav Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of SciVac (the “Sub”), entered into an Agreement and Plan of Merger (the “SciVac Merger Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions, the Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of SciVac (the “Proposed Merger”). The SciVac Merger Agreement also contemplates the closing of public or private equity financing with aggregate gross proceeds of at least $25 million contemporaneously with the SciVac Merger and includes various closing conditions standard to transactions of this nature. The transaction is expected to close during the first quarter of 2016 and is not expected to have a significant impact on the current research operations of the Company.

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

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● 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. Certain research and development activities are partially funded with government grants, which are netted against the research and development costs in the accompanying Consolidated Statements of Comprehensive Loss.

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.

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 Facility.

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Results of Operations

Three and Nine Months Ended September 30, 2015 Compared to the Three and Nine Months Ended September 30, 2014

Revenues 

Prior to the three months ended June 30, 2015, 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. On April 2, 2015, VBI Cda entered into the Sanofi Agreement as described above. The term of the Project (as defined in the Sanofi Agreement) commenced on the date of receipt by VBI Cda of Sanofi materials and continues for 9 months unless otherwise agreed in writing by the parties. The term of the Sanofi Agreement began on the Effective Date, which is defined in the Sanofi Agreement as April 15, 2015, and unless earlier terminated or mutually extended in writing, the Sanofi Agreement will expire upon the expiration or termination of an option included in the Sanofi Agreement to negotiate and enter into a royalty bearing license for the commercial use of VBI’s LPV technology. Certain terms of the Sanofi Agreement are subject to confidential treatment through April 15, 2025 pursuant to an Order Granting Confidential Treatment issued by the Commission on June 23, 2015. VBI Cda is nearing completion of Stage 2 of the defined research plan included in the Sanofi Agreement. During the three months ended September 30, 2015, the Company recognized an additional $137,515 of revenue related to the Sanofi Agreement pursuant to the revenue recognition policy described in Note 2, Significant Account Policies, to the Consolidated Financial Statements. During the nine months ended September 30, 2015, the Company recognized $388,475 of revenue which was all related to the Sanofi Agreement.

Research and Development (“R&D”) 

Research and development expenses increased by approximately 189%, to $2,503,115, and by approximately 170%, to $5,120,051, for the three and nine months ended September 30, 2015, respectively, as compared to $867,035 and $1,898,728 for the same periods in the prior year. The significant increases resulted primarily from increased spending on contract research and manufacturing services related to advancing the CMV vaccine through toxicology testing and manufacturing related to the preparation of several batches of vaccine for the toxicology trial, for a proposed Phase I clinical trial and for other regulatory purposes as well as performance based compensation paid to the R&D personnel. To date the vast majority of the research and development expenses relate to our CMV vaccine.

General and Administrative 

General and administrative expenses decreased by approximately 71%, to $1,667,558, and by approximately 46%, to $4,278,764, for the three and nine months ended September 30, 2015, respectively, as compared to $5,691,492 and $7,898,872 for the same periods in the prior year. The decreases in general and administrative expenses were primarily due to the significant professional fees and transaction costs incurred in the prior year related to the Merger. The decrease in costs was somewhat offset subsequent to the Merger with increased costs 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, increased by $13,984 to $98,050 for the nine months ended September 30, 2015 from $84,066 for the nine months ended September 30, 2014 as a result of some additional capital purchases in the nine months ended September 30, 2015. 

Interest Expense 

Interest expense increased by $33,114 from $58,136 for the three months ended September 30, 2014 to $91,250 for the three months ended September 30, 2015 related to the Credit Facility and decreased by $593,585 from $865,835 for the nine months ended September 30, 2014 to $272,250 for the nine months ended September 30, 2015. The decrease in interest expense during the first half of 2015 was due primarily to voluntary conversion of convertible promissory notes and was offset by interest expense related to the contractual interest coupon paid on the $3 million Facility received on August 8, 2014 as described in Note 5, Long-Term Debt of Consolidated Financial Statements. 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 on July 25, 2014.

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 net loss in the statements of comprehensive loss. The foreign exchange gain of $19,718 for the three months ended September 30, 2015 and $36,358 for the nine months ended September 30, 2015 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.

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Net Loss 

The net loss decreased by approximately 37%, from $6,732,634 for the three months ended September 30, 2014 to $4,212,046 for the three months ended September 30, 2015, and by approximately 11%, from $10,773,065 for the nine months ended September 30, 2014 to $9,569,802 for the nine months ended September 30, 2015. The reduction from the professional costs related to the Merger in 2014 were offset in 2015 by increased R&D expenses related to the advancement of the CMV vaccine candidate as well as increased general and administrative expenses related to being a public company.

Liquidity and Capital Resources

Net cash used by Operating Activities 

The Company incurred net losses of $9,569,802 and $10,773,065 in the nine months ended September 30, 2015 and 2014, respectively. The Company used $7,505,292 and $5,915,966 in cash and cash equivalents for operating activities during the nine months ended September 30, 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 September 30, 2015, the Company had an accumulated deficit of $79,075,040 and stockholders’ equity of $8,168,471.

Net cash provided by Investing Activities 

Other than the return of funds previously held in escrow, the Company had no significant investing activities during the nine months ended September 30, 2015 and 2014 other than the purchase of property, equipment and intangibles in the amount of $186,353 and $695,344, respectively.

Net cash received from Financing Activities 

During the nine months ended September 30, 2015, the Company closed the Private Placement, in connection with which it issued 3,000,000 shares of common stock and received $6,285,700 in aggregate gross proceeds. The Company incurred $62,556 in costs related to the Private Placement. In August 2015, the Company also started to make the required principal repayments on the Facility of $75,000 per month.

During the nine months ended September 30, 2014 VBI US received $1.5 million from certain investors which was converted into shares of common and preferred stock of the Company contemporaneously with the Merger. These proceeds were offset by $134,088 of deferred financing costs related to the issuance of the convertible notes. In addition, the Company closed two additional private placements of equity securities with aggregate gross proceeds of approximately $16.25 million and entered into the Facility for up to $6.0 million, half of which was drawn down immediately. These proceeds were offset by $600,000 of deferred financing costs related to the issuance of $1.5 million in convertible notes and the Facility and $800,000 of share issuance costs.

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 nine months ended September 30, 2015. There was only a slight increase, to $75,400 for the nine months ended September 30, 2015 from $64,168 for the nine months ended September 30, 2014, of investment in property and equipment. Capital acquisition primarily related to the purchase of additional R&D equipment including a refresh of the Company’s computer 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.    

18

The increase in costs associated with the acquisition of intangibles to $112,077 for the nine months ended September 30, 2015 from $18,234 for the nine months ended September 30, 2014 is primarily related to the satisfaction of a required milestone payment related to the acquisition of the ePixis SA intellectual property. Note 7, Contingencies, to the financial statements describes additional contingent payments that may be required in future periods as additional milestones are achieved.

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 September 30, 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 September 30, 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 Commission 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. Other than as discussed in this report, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

On October 26, 2015, the Company signed an Agreement and Plan of Merger (“SciVac Merger Agreement”) with SciVac Therapeutics, Inc., a Toronto Stock Exchange listed public company (“SciVac”) whereby the Company would be acquired by Seniccav Acquisition Corporation (“SciVac Sub”), a wholly-owned subsidiary of SciVac (the “SciVac Merger”). The SciVac Merger Agreement also contemplates the closing of a public or private equity financing with aggregate gross proceeds of at least $25 million contemporaneously with the SciVac Merger and includes various closing conditions standard to transactions of this nature. The SciVac Merger and the various transactions contemplated by the SciVac Merger Agreement, including the financing, is expected to close during the first quarter of 2016 and is not expected to have a significant impact on the current research operations of the Company. We cannot guarantee that the SciVac Merger will be consummated.

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 $25,000 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.

19

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. 

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 Commission 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 Commission on March 20, 2015.

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

On July 30, 2015 the Company issued 17,500 shares of common stock at $2.56 per share to a consultant for services rendered pursuant to the terms of a Master Services Agreement by and between the Company and the consultant, dated April 28 2014. The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act in that the consultant was the sole offeree, had access to all information concerning the Company and the Company did not engage in any general solicitation.

Item 3.  Defaults Upon Senior Securities.

Not applicable

Item 4.  Mine Safety Disclosure.

Not applicable.

Item 5.  Other Information.

On November 10, 2015, one holder of our Series 1 Preferred Stock converted 500,000 shares of Series 1 Preferred Stock into 500,000 shares of our common stock.  We relied on the exemption provided by Section 3(a)(9) of the Securities Act of 1933 to issue the common stock inasmuch as there was no commission or other remuneration paid or given directly or indirectly for soliciting the exchange.

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)

20

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)
10.1	Securities Purchase Agreement dated as of August 13, 2015 (4)
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 Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The descriptions of the omitted schedules and exhibits are contained within the Agreement and Plan of Merger. The Company hereby agrees to furnish a copy of any omitted schedule or exhibit to the Commission upon request.

(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.

(4) Incorporated by reference to the Current Report on Form 8-K filed by the registrant with the Commission on August 18, 2015.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 12, 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

22

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: November 12, 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

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: November 12, 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 September 30, 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)

November 12, 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 September 30, 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)

November 12, 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.

XML

Note 5 - Summary of Long-term Debt (Details) - USD ($)	9 Months Ended	12 Months Ended	21 Months Ended
	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2015
Gross proceeds		$ 3,000,000	$ 3,000,000
Less: Portion of gross proceeds attributable to detachable warrants	$ (1,027,000)	(1,027,000)	(1,027,000)
Add: Accretion of discount, cumulative	496,950	$ 172,374	496,950
Less: Principal repayments	(150,000)		(150,000)
Less: Current portion	(900,000)	$ (375,000)	(900,000)
Long-term debt, net	$ 1,419,950	$ 1,770,374	$ 1,419,950

XML

Note 4 - Fair Value Measurements

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

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 (including money market funds), 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 September 30, 2015 and December 31, 2014, the fair value of the long-term debt is estimated to be $3,137,000 and $2,885,000, respectively.

In determining the fair value of the long-term debt, which consists of level 3 inputs, as of September 30, 2015 and December 31, 2014, the Company used the following assumptions:

	September 30, 2015		December 31, 2014
Long-term debt:
Interest rate		12.9%		15%
Expected time to payment in months		23		32

XML

Note 6 - Stock-based Compensation Expense (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Research and Development Expense [Member]
Stock-based compensation expense	$ 91,500	$ 45,000	$ 218,700	$ 63,200
General and Administrative Expense [Member]
Stock-based compensation expense	250,000	212,000	601,400	218,600
Stock-based compensation expense	$ 341,500	$ 257,000	$ 820,100	$ 281,800

XML

Note 6 - Options Issuable under the Option Plans (Details) - shares	9 Months Ended
	Sep. 30, 2015	Jun. 30, 2015	May. 01, 2014	Jun. 19, 2013
VBI US Stock Option Plan 2006 [Member]
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, Options, Expirations in Period
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period	100,541
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	2,724,909
Stock Incentive Plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	8,871
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period	51,129
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period	240,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	300,000			300,000
Equity Incentive Plan 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	1,412,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period	20,001
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	384,325
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,816,326		815,688
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	4,045,239
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period	51,129
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period	360,542
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	384,325
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	4,841,235

XML

Note 7 - Contingencies (Details Textual)			1 Months Ended	3 Months Ended
	Jul. 18, 2011 CAD	Jul. 18, 2011 USD ($)	Jan. 28, 2013 USD ($)	Jun. 30, 2015 USD ($)	Jul. 18, 2011 USD ($)
Minimum [Member] | Performance Bonus [Member]
Other Commitment | $			$ 10,000
Minimum [Member] | Sale and Purchase Agreement [Member] | USFDA Approval [Member]
Other Commitment	CAD 500,000
Minimum [Member] | Sale and Purchase Agreement [Member] | Cumulative Net Sales 1 [Member]
Other Commitment	750,000
Minimum [Member] | Sale and Purchase Agreement [Member] | Cumulative Net Sales 2 [Member]
Other Commitment	1,000,000
Minimum [Member] | Sale and Purchase Agreement [Member] | Sublicense Only [Member]
Other Commitment	500,000
Future Cumulative Sales	75,000,000
Maximum [Member] | Performance Bonus [Member]
Other Commitment | $			125,000
Maximum [Member] | Sale and Purchase Agreement [Member] | USFDA Approval [Member]
Other Commitment	1,000,000
Maximum [Member] | Sale and Purchase Agreement [Member] | Cumulative Net Sales 1 [Member]
Other Commitment	1,500,000
Maximum [Member] | Sale and Purchase Agreement [Member] | Cumulative Net Sales 2 [Member]
Other Commitment	2,000,000
Maximum [Member] | Sale and Purchase Agreement [Member] | Sublicense Only [Member]
Other Commitment	1,000,000
Future Cumulative Sales	100,000,000
Closing Series B Financing [Member]
Other Commitment | $			100,000
Sale and Purchase Agreement [Member] | Technology Transfer [Member]
Other Commitment	101,720
Sale and Purchase Agreement [Member] | Cumulative Net Sales 1 [Member]
Future Cumulative Sales	CAD 25,000,000
Percent of Payment Reduced	50.00%	50.00%
Sale and Purchase Agreement [Member] | Cumulative Net Sales 2 [Member]
Future Cumulative Sales	CAD 50,000,000
Percent of Payment Reduced	50.00%	50.00%
Certain Operational Milestone [Member]
Future Cumulative Sales | $			$ 100,000,000
Technology Transfer [Member] | ePixis SA [Member]
Payments for Milestone Obligation | $				$ 120,000
ePixis SA [Member]
Payments to Acquire Businesses, Gross | $		$ 450,000
Business Acquisition, Transaction Costs | $					$ 75,000

XML

Note 9 - Subsequent Events (Details Textual) - USD ($)	Nov. 10, 2015	Oct. 26, 2015	Oct. 26, 2015	Sep. 30, 2015	Dec. 31, 2014
Subsequent Event [Member] | SciVac Merger Agreement [Member] | Series 1 Convertible Preferred Stock [Member]
Convertible preferred stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Subsequent Event [Member] | SciVac Merger Agreement [Member]
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Stockholders' Equity Note, Stock Split, Conversion Ratio			2080.8356%
Business Combination, Expected Aggregate Gross Proceeds from Equity Financing		$ 25,000,000	$ 25,000,000
Subsequent Event [Member] | Series 1 Convertible Preferred Stock [Member]
Stock Issued During Period, Shares, Conversion of Convertible Securities	500,000
Conversion of Stock, Shares Converted	500,000
Common stock, par value (in dollars per share)				$ 0.0001	$ 0.0001
Convertible preferred stock, par value (in dollars per share)				$ 0.0001	$ 0.0001

XML

Note 3 - Loss Per Share of Common Stock

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

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 September 30, 2015 and 2014 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	September 30, 2015		September 30, 2014
Convertible preferred stock		2,996,482		2,996,482
Warrants		699,281		699,281
Stock options		4,045,239		3,480,055
		7,741,002		7,175,818

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Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Investment Tax Credit Carryforward [Member]
CURRENT ASSETS
Investment tax credits receivable	$ 167,543	$ 133,696
Cash and Cash Equivalents, at Carrying Value	11,009,396	12,604,273
Prepaid expenses and deposits	557,920	400,827
Government receivables	71,529	33,590
Current assets	11,806,388	13,172,386
DEFERRED FINANCING COSTS, NET	251,784	395,184
PROPERTY AND EQUIPMENT, NET	130,527	106,500
INTANGIBLES, NET	388,346	380,148
Assets	12,577,045	14,054,218
CURRENT LIABILITIES
Accounts payable	1,076,618	650,142
Accrued liabilities	1,004,521	$ 568,535
Deferred revenue	7,485
Current portion of long-term debt	900,000	$ 375,000
Current liabilities	2,988,624	1,593,677
LONG-TERM DEBT, NET	1,419,950	1,770,374
Liabilities	4,408,574	3,364,051
STOCKHOLDERS' EQUITY
Common stock (authorized 200,000,000; issued 23,030,260; par value $0.0001) (2014 - issued 20,012,760)	2,304	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	86,186,333	79,098,591
Accumulated other comprehensive income (loss)	27,575	67,513
Retained Earnings (Accumulated Deficit)	(79,075,040)	(69,505,238)
Stockholders' equity	8,168,471	10,690,167
Liabilities and stockholders' equity	$ 12,577,045	$ 14,054,218

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Note 1 - Nature of Business and Continuation of Business

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

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”.

As further described in Note 9, Subsequent Events, on October 26, 2015, the Company, SciVac Therapeutics Inc., a corporation organized under the laws of British Columbia, Canada (“SciVac”), and Seniccav Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of SciVac (the “Sub”), entered into an Agreement and Plan of Merger (the “SciVac Merger Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions, the Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of SciVac (the “Proposed Merger”). The SciVac Merger Agreement also contemplates the closing of public or private equity financing with aggregate gross proceeds of at least $25 million contemporaneously with the SciVac Merger and includes various closing conditions standard to transactions of this nature. The transaction is expected to close during the first quarter of 2016 and is not expected to have a significant impact on the current research operations of 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. To date in 2015, the Company has prepared several batches of vaccine for a toxicology trial, for a proposed Phase I clinical trial and for other regulatory purposes. The Company expects to advance its first product candidate into Phase I clinical trials during the first half of 2016.

On September 8, 2015, the Company announced that VBI Cda had been awarded up to $350,000 Canadian dollars (“CAD”) in grant funding by the National Research Council-Industrial Research Assistance Program (“NRC-IRAP”) to apply VBI’s eVLP platform in the development of a respiratory syncytial virus (“RSV”) vaccine candidate. In addition, on October 8, 2015 the Company announced that it has applied its eVLP platform in the development of a novel therapeutic vaccine candidate for glioblastoma multiforme (“Glioblastoma” or “GBM”) with Columbia University’s Brain Tumor Center.

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. The Company’s accumulated deficit as of September 30, 2015 was $79.1 million and the Company expects 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 planned product candidates.

As of September 30, 2015, the Company had approximately $11 million of cash and working capital of $8.9 million. The Company will require significant additional funds to conduct pre-clinical research for new vaccine candidates, 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 September 30, 2015 are expected to be adequate to fund the Company’s operations into the second half of 2016, however, the Company intends to explore financing opportunities to provide additional working capital. The Company cannot be certain that additional financing will be available on terms acceptable to the Company or at all. To the extent funds are insufficient to support the Company’s operations and commercialize its technology, the Company may undertake additional offerings of securities, debt financing, selling or licensing developed intellectual or other property, or other alternatives. In that regard, the Company filed a Form S-3 shelf registration statement with the Securities and Exchange Commission (the “Commission”) on April 17, 2015. On July 8, 2015, the Company filed an amended registration statement on Form S-3 with the Commission covering the offering of up to an aggregate of $75 million of the Company’s common stock, preferred stock and warrants from time to time as market conditions permit (the “Shelf Registration Statement”). The Shelf Registration Statement was declared effective on July 10, 2015. This information does not constitute an offer of any securities for sale.

On August 13, 2015, the Company entered into a securities purchase agreement by and among the Company and nineteen accredited investors (the “Purchasers”) pursuant to which the Company agreed to issue and sell up to 3,000,000 shares of the Company’s common stock to the Purchasers at a purchase price per share equal to 85% of the average of the volume weighted average prices of the common stock reported by Bloomberg LP for the ten trading days immediately prior to each closing (the “Private Placement”). Aggregate gross proceeds from the Private Placement amounted to $6,285,700.

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Note 4 - Fair Value Measurements (Details Textual) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Long-term Debt, Fair Value	$ 3,137,000	$ 2,885,000

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Note 5 - Long-term Debt (Details Textual) - Term Loan Facility [Member] - USD ($) $ in Millions		9 Months Ended
	Aug. 08, 2014	Sep. 30, 2015	Dec. 31, 2014
Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Applicable Margin [Member]
Debt Instrument, Basis Spread on Variable Rate		1.00%
Applicable Margin		11.00%
Debt Instrument, Interest Rate, Increase (Decrease)		4.00%
Line of Credit Facility, Maximum Borrowing Capacity			$ 6
Proceeds from Lines of Credit	$ 3

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Note 2 - Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The Company’s interim consolidated financial statements included herein as of September 30, 2015 and for the three-and nine-months ended September 30, 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 Commission 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.

Revenue Recognition

Revenue is recognized when all of the following criteria are met:

● Persuasive evidence of an arrangement exists

● Delivery has occurred or services have been rendered and there are no future performance obligations

● The amount of revenue is fixed or determinable

● Collectability is reasonably assured

Milestone payments are immediately recognized as revenue if the Company has no future performance obligations, collectability is reasonably assured and the contractually specified milestone is achieved. Otherwise, revenue is recognized over the term of the agreement or the performance period using a percentage of effort incurred. The level of effort is based on estimates of total expected time or duration to complete the work which is compared to the period of time incurred to date in order to arrive at an estimate of the percentage or revenue earned to date.

Upfront payments in recognition of past research and development efforts are recognized as revenue upon execution of the licensing and collaboration agreements, as there are no future obligations and collections are reasonably assured.

Collaboration revenue consists of non-refundable advance payments received in accordance with licensing and collaboration agreements. Collaboration revenue is deferred and recognized over the performance period which is the period over which the Company maintains substantive contractual obligations. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue (a component of current liabilities). Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as long-term deferred revenue.

The term over which advance payments are recognized is revised if the period over which the Company maintains substantive contractual obligations changes.

Certain research and development activities are partially funded with government grants, which are netted against the research and development costs under such caption in the accompanying Consolidated Statements of Comprehensive Loss.

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 net loss in the statements of comprehensive loss.

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, 2017 and early adoption is not permitted. The Company will adopt this standard in the first quarter of 2018. This accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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 guidance 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.

Presentation of debt issuance costs

The FASB issued ASU 2015-03 guidance to simplify the presentation of debt issuance costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction for the debt liability as opposed to recorded as a separate asset, except when incurred before receipt of the funding from the associated debt liability. This is similar to the presentation of debt discounts or premiums. This ASU requires retrospective application which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. As such, beginning with the interim period ended March 31, 2016, debt issuance costs, also referred to as deferred financing costs, will be presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related debt.

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Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	23,030,260	20,012,760
Convertible preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Convertible preferred stock, shares authorized (in shares)	30,000,000	30,000,000
Convertible preferred stock, shares issued (in shares)	2,996,482	2,996,482

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Note 4 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

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]

	September 30, 2015		December 31, 2014
Long-term debt:
Interest rate		12.9%		15%
Expected time to payment in months		23		32

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 12, 2015
Entity Registrant Name	VBI VACCINES INC.
Entity Central Index Key	0000704159
Trading Symbol	vbiv
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		23,530,260
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Note 5 - Long-term Debt (Tables)

9 Months Ended

Sep. 30, 2015

Notes Tables

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

	September 30, 2015			December 31, 2014
Gross proceeds	$	3,000,000		$	3,000,000
Less: Portion of gross proceeds attributable to detachable warrants		(1,027,000	)		(1,027,000	)
Add: Accretion of discount, cumulative		496,950			172,374
Less: Principal repayments		(150,000	)		-
Less: Current portion		(900,000	)		(375,000	)
	$	1,419,950		$	1,770,374

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

	Principal payments on long-term debt and exit fee
2015	$	225,000
2016		900,000
2017		1,785,000
Total	$	2,910,000

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Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Collaboration revenue	$ 137,515		$ 388,475
Operating expenses:
Research and development	2,503,115	$ 867,035	5,120,051	$ 1,898,728
General and administration	1,667,558	5,691,492	4,278,764	7,898,872
Total operating expenses	4,170,673	6,558,527	9,398,815	9,797,600
Loss from operations	(4,033,158)	(6,558,527)	(9,010,340)	(9,797,600)
Interest expense	(91,250)	(58,136)	(272,250)	(865,835)
Foreign exchange gain (loss)	19,718	(57,107)	36,358	(50,962)
Accretion of debt discount	(107,601)	(61,504)	(324,576)	(61,504)
Interest income	245	2,640	1,006	2,836
NET LOSS	(4,212,046)	(6,732,634)	(9,569,802)	(10,773,065)
Currency translation adjustment	56,899	5,401	39,938	(38,005)
COMPREHENSIVE LOSS	$ (4,155,147)	$ (6,727,233)	$ (9,529,864)	$ (10,811,070)
Loss per share of common stock, basic and diluted (in dollars per share)	$ (0.20)	$ (0.46)	$ (0.47)	$ (1.88)
Weighted-average number of common shares outstanding, basic and diluted (in shares)	21,599,244	14,703,833	20,541,588	5,745,478

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Note 7 - Contingencies

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

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 or options equal to $100,000 upon successfully closing a Series B preferred stock financing. The Proposed Merger is expected to have no impact on the Company’s commitment.

On July 18, 2011, VBI Cda acquired ePixis SA (“ePixis”) in order to obtain access to a technology platform. Given ePixis did not meet the definition of a business under the relevant accounting guidance, VBI Cda treated the acquisition as an asset acquisition due to the underlying circumstances of the transaction. In addition to the $450,000 initial payment for the technology and $75,000 in related transaction costs, there was a contingent payment of approximately $120,000. The contingent payment related to the first milestone described below which was achieved during the three-months ended June 30, 2015. The contingent consideration was not recognized as a liability in the prior financial statements as the probability of payment had been previously deemed remote.

As part of the ePixis asset acquisition, the purchase agreement obliges VBI Cda to make the following milestone payments:

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

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

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

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

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

Except for the first milestone payment, the events obliging the Company to make the remaining payments above have not yet occurred and the probability of them occurring is not determinable; consequently, no amounts are accrued in respect of these contingencies.

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

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

6. STOCKHOLDERS’ DEFICIENCY AND ADDITIONAL PAID-IN CAPITAL

Common and Preferred Stock

VBIV's authorized share capital consists of 200,000,000 voting common shares with a par value of $0.0001 and 30,000,000 preferred shares.

The preferred shares have been designated Series 1 Convertible Preferred Shares. The Series 1 Convertible Preferred Shares are convertible to common shares at any time at the option of the holder on a one-to-one basis.

On July 30, 2015, the Company issued an aggregate of 17,500 shares of the Company’s common stock pursuant to a consulting agreement as compensation for past services performed by the consultant. An amount of $44,800 was recorded as consulting services expense and included in the general and administration costs under such caption in the accompanying Consolidated Statements of Comprehensive Loss. The amount was based on the NASDAQ official closing price of $2.56 on July 30, 2015.

On August 13, 2015, the Company entered into a securities purchase agreement by and among the Company and nineteen accredited investors (the “Purchasers”) pursuant to which the Company agreed to issue and sell up to 3,000,000 shares of the Company’s common stock to the Purchasers at a purchase price per share equal to 85% of the average of the volume weighted average prices of the common stock reported by Bloomberg LP for the ten trading days immediately prior to each closing (the “Private Placement”). On August 13, 2015, the Company completed the first closing of the Private Placement, whereby the Company sold 2,285,000 shares its of common stock to certain of the Purchasers at a per share price of $2.10 for gross proceeds equal to $4,798,500. On August 14, 2015, the Company completed the final closing of the Private Placement whereby the Company sold 715,000 shares of its common stock at a per share price of $2.08 for gross proceeds equal to $1,487,200. The Company raised aggregate gross proceeds equal to $6,285,700 and does not owe any commissions in connection with the Private Placement. The Company filed the Resale Registration Statement with the Commission on August 27, 2015 and it was declared effective by the Commission on September 2, 2015.

On November 10, 2015, 500,000 shares of the Company's common stock were issued pursuant to the conversion of 500,000 shares of the Series 1 Convertible Preferred Shares.

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 September 30, 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 September 30, 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 1.81%; expected volatility of 87.77%; and an average remaining 5.75 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. At September 30, 2015, there were 8,871 stock options outstanding under the 2013 Plan.

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 initially reserved 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 ratified an increase in the Share Reserve by 1,000,638 shares of the Company’s common stock, which equaled 5% of the number of outstanding shares of the Company's common stock.

There were 20,001 restricted common shares issued and 164,000 options granted from the 2014 Plan in 2014, 45,000 options were granted during the three months ended June 30, 2015 and an additional 1,203,000 options were granted during the three months ended September 30, 2015. The fair value of the options granted from the 2014 Plan during the three months ended September 30, 2015 was estimated using the Black-Scholes option pricing model using the following assumptions: expected dividend 0%; risk-free interest rate of 1.68%; expected volatility of 84.72%; and an average remaining 6.25 year expected life.

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		1,412,000		-		20,001		384,325		1,816,326
Total as at September 30, 2015		4,045,239		51,129		360,542		384,325		4,841,235

Unless another employee benefit plan is adopted, all future stock option or share grants will be from the 2014 Plan.

As of September 30, 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 and nine months ended September 30, 2015 and 2014 was as follows:

	Three Months Ended September 30				Nine Months Ended September 30
	2015		2014		2015		2014
Research and development	$	91,500	$	45,000	$	218,700	$	63,200
General and administrative		250,000		212,000		601,400		218,600
Total stock-based compensation expense	$	341,500	$	257,000	$	820,100	$	281,800

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 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 of Long-term Debt and Related Party Convertible (Details) - Fair Value, Inputs, Level 3 [Member] - Long-term Debt [Member]	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Long-term debt:
Interest rate	12.90%	15.00%
Expected time to payment in months	1 year 330 days	2 years 240 days

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

9 Months Ended

Sep. 30, 2015

Notes Tables

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		1,412,000		-		20,001		384,325		1,816,326
Total as at September 30, 2015		4,045,239		51,129		360,542		384,325		4,841,235

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

	Three Months Ended September 30				Nine Months Ended September 30
	2015		2014		2015		2014
Research and development	$	91,500	$	45,000	$	218,700	$	63,200
General and administrative		250,000		212,000		601,400		218,600
Total stock-based compensation expense	$	341,500	$	257,000	$	820,100	$	281,800

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 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 September 30, 2015 and for the three-and nine-months ended September 30, 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 Commission 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.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue is recognized when all of the following criteria are met:

? Persuasive evidence of an arrangement exists

? Delivery has occurred or services have been rendered and there are no future performance obligations

? The amount of revenue is fixed or determinable

? Collectability is reasonably assured

Milestone payments are immediately recognized as revenue if the Company has no future performance obligations, collectability is reasonably assured and the contractually specified milestone is achieved. Otherwise, revenue is recognized over the term of the agreement or the performance period using a percentage of effort incurred. The level of effort is based on estimates of total expected time or duration to complete the work which is compared to the period of time incurred to date in order to arrive at an estimate of the percentage or revenue earned to date.

Upfront payments in recognition of past research and development efforts are recognized as revenue upon execution of the licensing and collaboration agreements, as there are no future obligations and collections are reasonably assured.

Collaboration revenue consists of non-refundable advance payments received in accordance with licensing and collaboration agreements. Collaboration revenue is deferred and recognized over the performance period which is the period over which the Company maintains substantive contractual obligations. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue (a component of current liabilities). Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as long-term deferred revenue.

The term over which advance payments are recognized is revised if the period over which the Company maintains substantive contractual obligations changes.

Certain research and development activities are partially funded with government grants, which are netted against the research and development costs under such caption in the accompanying Consolidated Statements of Comprehensive Loss.

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 net loss in the statements of comprehensive loss.

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, 2017 and early adoption is not permitted. The Company will adopt this standard in the first quarter of 2018. This accounting guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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 guidance 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.

Presentation of debt issuance costs

The FASB issued ASU 2015-03 guidance to simplify the presentation of debt issuance costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction for the debt liability as opposed to recorded as a separate asset, except when incurred before receipt of the funding from the associated debt liability. This is similar to the presentation of debt discounts or premiums. This ASU requires retrospective application which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. As such, beginning with the interim period ended March 31, 2016, debt issuance costs, also referred to as deferred financing costs, will be presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related debt.

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Note 8 - Legal Proceedings

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

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 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 Commission 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

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Subsequent Events [Text Block]

9. SUBSEQUENT EVENTS

On October 26, 2015, the Company, SciVac, and the Sub entered into the SciVac Merger Agreement, pursuant to which, subject to the satisfaction or waiver of certain conditions, the Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of SciVac (the “Proposed Merger”).

At the effective time of the Proposed Merger (the “Effective Time”), each share of the Company’s common stock, par value $0.0001 per share (the “Company Common Stock”) (including shares of Company Common Stock issued prior to the Effective Time upon conversion of the Company’s Series 1 Convertible Preferred Stock, par value $0.0001 per share (the “Company Preferred Stock”)) will be converted into the right to receive common shares of SciVac, no par value per share (the “SciVac Common Shares”), in the ratio of 20.808356 SciVac Common Shares for each share of Company Common Stock (subject to proportionate adjustments for forward or reverse stock splits pursuant to the terms of the Merger Agreement) (the “Exchange Ratio”). In addition, at the Effective Time, (i) each outstanding warrant to purchase a share of Company Common Stock and (ii) each outstanding option to purchase a share of Company Common Stock, whether vested or unvested, and so long as such warrant or option has not, prior to the Effective Time, been exercised, cancelled, terminated or expired, will be deemed to constitute a warrant or an option, as applicable, to purchase, on the same terms and conditions, a number of SciVac Common Shares (rounded down to the nearest whole share) equal to the product of (i) the number of shares of Company Common Stock subject to such warrant or option multiplied by (ii) the Exchange Ratio, at an exercise price per SciVac Common Share equal to the quotient of (i) the exercise price per share of Company Common Stock (rounded up to the nearest cent) subject to such warrant or option (converted first into Canadian dollars as further described in the Merger Agreement) divided by (ii) the Exchange Ratio. The SciVac Merger Agreement also contemplates the closing of public or private equity financing with aggregate gross proceeds of at least $25 million contemporaneously with the SciVac Merger and includes various closing conditions standard to transactions of this nature. The transaction is expected to close during the first quarter of 2016 and is not expected to have a significant impact on the current research operations of the Company.

On November 10, 2015, 500,000 shares of the Company's common stock were issued pursuant to the conversion of 500,000 shares of the Series 1 Convertible Preferred Shares.

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

9 Months Ended

Sep. 30, 2015

Notes Tables

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

	September 30, 2015		September 30, 2014
Convertible preferred stock		2,996,482		2,996,482
Warrants		699,281		699,281
Stock options		4,045,239		3,480,055
		7,741,002		7,175,818

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Note 3 - Potentially Dilutive Securities Outstanding (Details) - shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Convertible Debt Securities [Member]
Dilutive securities outstanding (in shares)	2,996,482	2,996,482
Warrant [Member]
Dilutive securities outstanding (in shares)	699,281	699,281
Employee Stock Option [Member]
Dilutive securities outstanding (in shares)	4,045,239	3,480,055
Dilutive securities outstanding (in shares)	7,741,002	7,175,818

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Note 5 - Significant Contractual Obligations (Details) - Line of Credit [Member]	Sep. 30, 2015 USD ($)
2015	$ 225,000
2016	900,000
2017	1,785,000
Total	$ 2,910,000

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
OPERATING
Net loss	$ (9,569,802)	$ (10,773,065)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of property and equipment and intangibles	98,050	84,066
Amortization of deferred financing costs	143,401	165,909
Stock-based compensation expense	820,100	281,800
Accretion of debt discount	$ 324,576	61,504
Interest accrued on convertible notes		$ 812,832
Stock-based compensation for services	$ 44,800
Stock-based merger transaction costs		$ 3,321,537
Net change in operating working capital items	$ 633,583	129,451
Operating	$ (7,505,292)	(5,915,966)
INVESTING
Funds held in escrow		777,746
Acquisition of property and equipment	$ (75,400)	(64,168)
Acquisition of intangibles	(112,077)	$ (18,234)
Proceeds from the sale of property and equipment	1,124
Investing	$ (186,353)	$ 695,344
FINANCING
Proceeds from exercise of stock options		1
Proceeds from Issuance of Common Stock	$ 6,285,700	15,214,561
Proceeds from issuance of preferred shares		1,035,135
Share issue costs	$ (62,556)	(796,247)
Proceeds from convertible notes		1,500,000
Financing costs on notes converted to shares		(134,088)
Gross proceeds		3,000,000
Financing costs of long-term debt		$ (471,345)
Repayment of long-term debt	$ (150,000)
Financing	6,073,144	$ 19,348,017
Effect of exchange rate changes on cash and cash equivalents	23,624	45,802
CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD	(1,594,877)	14,173,197
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	12,604,273	624,419
CASH AND CASH EQUIVALENTS, END OF PERIOD	11,009,396	14,797,616
Supplementary information:
Interest paid	$ 272,250	53,000
Non-cash investing and financing:
Issuance of common stock in connection with conversion of notes payable		20,765,988
Issuance of preferred stock in connection with conversion of notes payable		$ 520,572
Stock-based compensation for services	$ 44,800
Debt discount on long-term debt		$ 1,027,000

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Note 5 - Long-term Debt

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Long-term Debt [Text Block]

5.     LONG-TERM DEBT

	September 30, 2015			December 31, 2014
Gross proceeds	$	3,000,000		$	3,000,000
Less: Portion of gross proceeds attributable to detachable warrants		(1,027,000	)		(1,027,000	)
Add: Accretion of discount, cumulative		496,950			172,374
Less: Principal repayments		(150,000	)		-
Less: Current portion		(900,000	)		(375,000	)
	$	1,419,950		$	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. The remaining principal payments and exit fee due under the Facility are as follows:

	Principal payments on long-term debt and exit fee
2015	$	225,000
2016		900,000
2017		1,785,000
Total	$	2,910,000

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Note 6 - Stockholders' Deficiency and Additional Paid-in Capital (Details Textual)											3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 10, 2015 shares	Aug. 14, 2015 USD ($) $ / shares shares	Aug. 13, 2015 USD ($) $ / shares shares	Jul. 30, 2015 USD ($) $ / shares shares	Apr. 22, 2015 shares	Jul. 25, 2014 $ / shares shares	Apr. 24, 2014 shares	Apr. 10, 2014 shares	Mar. 19, 2014 shares	Jun. 19, 2013 shares	Sep. 30, 2015 $ / shares shares	Jun. 30, 2015 shares	Sep. 30, 2015 USD ($) $ / shares shares	Sep. 30, 2014 USD ($)	Dec. 31, 2014 $ / shares shares	May. 01, 2014 shares
Stock Option Plan 1999 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number											0		0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period						36,000
VBI US Stock Option Plan 2006 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number											2,624,368	2,624,368	2,624,368
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period													100,541
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized											2,724,909		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													4 years
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													1.81%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate													87.77%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term													5 years 273 days
Stock Option Plan 1999, VBI US Stock Option Plan 2006, Stock Incentive Plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant											0		0
Stock Incentive Plan 2013 [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period								36,000	204,000
Stock Incentive Plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number											8,871		8,871
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period													51,129
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized										300,000	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
Equity Incentive Plan 2014 [Member] | Increase Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized													1,200,000
Equity Incentive Plan 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number											1,412,000		1,412,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant											384,325		384,325
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized											1,816,326		1,816,326			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											1,203,000	45,000			164,000
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													1.68%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate													84.72%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term													6 years 91 days
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized					1,000,638
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															20,001
Series 1 Convertible Preferred Stock [Member] | Subsequent Event [Member]
Stock Issued During Period, Shares, Conversion of Convertible Securities	500,000
Conversion of Stock, Shares Converted	500,000
Series 1 Convertible Preferred Stock [Member]
Convertible preferred stock, shares authorized (in shares)											30,000,000		30,000,000
General and Administrative Expense [Member]
Consulting Services Expense | $				$ 44,800
Private Placement [Member]
Securities Purchase Agreement, Number of Investors			19
Common stock, shares issued (in shares)			3,000,000
Shares Issued, Price per Share, Percentage of Volume Weighted Average Common Stock Price Reported by Bloomberg LP			85.00%
Number of Trading Days Prior to Each Closing			10 days
Proceeds from Issuance of Common Stock | $		$ 6,285,700	$ 6,285,700
Private Placement, First Closing [Member]
Shares Issued, Price Per Share | $ / shares			$ 2.10
Common stock, shares issued (in shares)			2,285,000
Proceeds from Issuance of Common Stock | $			$ 4,798,500
Private Placement, Final Closing [Member]
Shares Issued, Price Per Share | $ / shares		$ 2.08
Common stock, shares issued (in shares)		715,000
Proceeds from Issuance of Common Stock | $		$ 1,487,200
Common Stock [Member] | Certain Operational Milestone [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights											699,281		699,281
Common Stock [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						699,281
Warrant [Member] | Certain Operational Milestone [Member]
Proceeds from Other Equity | $													$ 3,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number											4,045,239		4,045,239
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant											384,325		384,325
Common stock, shares authorized (in shares)											200,000,000		200,000,000		200,000,000
Common stock, par value (in dollars per share) | $ / shares											$ 0.0001		$ 0.0001		$ 0.0001
Convertible preferred stock, shares authorized (in shares)											30,000,000		30,000,000		30,000,000
Stock Issued During Period, Shares, Issued for Services				17,500
Shares Issued, Price Per Share | $ / shares				$ 2.56
Common stock, shares issued (in shares)											23,030,260		23,030,260		20,012,760
Proceeds from Issuance of Common Stock | $													$ 6,285,700	$ 15,214,561
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period													51,129
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized											4,841,235		4,841,235
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period													360,542
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares						$ 2.145

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Note 1 - Nature of Business and Continuation of Business (Details Textual)						9 Months Ended
	Oct. 26, 2015 USD ($)	Oct. 26, 2015 USD ($) Rate	Aug. 14, 2015 USD ($)	Aug. 13, 2015 USD ($) shares	Jul. 25, 2014	Sep. 30, 2015 USD ($) shares	Sep. 30, 2014 USD ($)	Sep. 08, 2015 CAD	Jul. 10, 2015 USD ($)	Dec. 31, 2014 USD ($) shares	Dec. 31, 2013 USD ($)
SciVac Merger Agreement [Member] | Subsequent Event [Member]
Business Combination, Expected Aggregate Gross Proceeds from Equity Financing	$ 25,000,000	$ 25,000,000
Stockholders' Equity Note, Stock Split, Conversion Ratio | Rate		2080.8356%
Reverse Stock Split [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio					5
Private Placement [Member]
Securities Purchase Agreement, Number of Investors				19
Common stock, shares issued (in shares) | shares				3,000,000
Shares Issued, Price per Share, Percentage of Volume Weighted Average Common Stock Price Reported by Bloomberg LP				85.00%
Proceeds from Issuance of Common Stock			$ 6,285,700	$ 6,285,700
Grant Funding Award | CAD								CAD 350,000
Retained Earnings (Accumulated Deficit)						$ (79,075,040)				$ (69,505,238)
Cash and Cash Equivalents, at Carrying Value						11,009,396	$ 14,797,616			$ 12,604,273	$ 624,419
Working Capital						$ 8,900,000
Stock Authorized, Value									$ 75,000,000
Common stock, shares issued (in shares) | shares						23,030,260				20,012,760
Proceeds from Issuance of Common Stock						$ 6,285,700	$ 15,214,561