UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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:
VBI VACCINES INC.
(Exact name of registrant as specified in its charter)
| N/A | ||
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☒ |
| Non-accelerated filer ☐ | Smaller
reporting company |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Common Shares, no par value per share | ||
| (Class) | Outstanding at October 30, 2020 |
VBI VACCINES INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED September 30, 2020
TABLE OF CONTENTS
| 2 |
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION
CONTAINED IN THIS REPORT
This quarterly report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “will,” “may,” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers, and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from our historical experience and our present expectations, or projections described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2019 annual report on the Form 10-K filed with the Securities and Exchange Commission on March 5, 2020. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | the timing of, and our ability to, obtain and maintain regulatory approvals for our clinical trials, products, and pipeline candidates; |
| ● | the timing and results of our ongoing and planned clinical trials for products and pipeline candidates; |
| ● | the amount of funds we require for our infectious disease and immuno-oncology pipeline candidates; |
| ● | the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements; |
| ● | the impact of the recent COVID-19 pandemic on our clinical studies, research programs, manufacturing, business plan, and the global economy; |
| ● | our ability to effectively execute and deliver our plans related to commercialization, marketing and manufacturing capabilities and strategy; |
| ● | our ability to maintain a good relationship with our employees; |
| ● | the suitability and adequacy of our office, manufacturing, and research facilities and our ability to secure term extensions or expansions of leased space; |
| ● | our ability to manufacture, or to have manufactured, any products we develop to the standards and requirements of regulatory agencies; |
| ● | the ability of our vendors to manufacture and deliver materials that meet regulatory agency and our standards and requirements to meet planned timelines and milestones; |
| ● | any disruption in the operations of our manufacturing facility where we manufacture all of our clinical and commercial supplies of Sci-B-Vac and clinical supplies of VBI-2601; |
| ● | our compliance with all laws, rules, and regulations applicable to our business and products; |
| ● | our ability to continue as a going concern; |
| 3 |
| ● | our history of losses; |
| ● | our ability to generate revenues and achieve profitability; |
| ● | emerging competition and rapidly advancing technology in our industry that may outpace our technology; |
| ● | customer demand for our products and pipeline candidates; |
| ● | the impact of competitive or alternative products, technologies, and pricing; |
| ● | general economic conditions and events and the impact they may have on us and our potential customers; |
| ● | our ability to obtain adequate financing in the future on reasonable terms, as and when we need it; |
| ● | our ability to implement network systems and controls that are effective at preventing cyber-attacks, malware intrusions, malicious viruses, and ransomware threats; |
| ● | our ability to secure and maintain protection over our intellectual property; |
| ● | our ability to maintain our existing licenses with licensors of intellectual property, or obtain new licenses for intellectual property; |
| ● | changes to legal and regulatory processes for biosimilar approval and marketing that could reduce the duration of market exclusivity for our products; |
| ● | our success at managing the risks involved in the foregoing items; |
| ● | our ability to maintain compliance with the NASDAQ Capital Market’s listing standards; and |
| ● | other factors discussed in this Form 10-Q. |
| 4 |
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Unless otherwise stated or the context otherwise requires, the terms “VBI,” “we,” “us,” “our,” and the “Company” refer to VBI Vaccines Inc. and its subsidiaries.
Unless indicated otherwise, all references to the U.S. Dollar, Dollar or $ are to the United States Dollar, the legal currency of the United States of America and all references to € mean Euros, the legal currency of the European Union. We may also refer to NIS, which is the New Israeli Shekel, the legal currency of Israel, and the Canadian Dollar or CAD, which is the legal currency of Canada.
Except for share and per share amounts or as otherwise specified to be in millions, amounts presented are stated in thousands.
| 5 |
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
| September
30, 2020 | December 31, 2019 | |||||||
| (unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | - | |||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Other long-term assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Other current liabilities | ||||||||
| Current portion of deferred revenues | ||||||||
| Current portion of lease liability | ||||||||
| Current portion of long-term debt, net of debt discount - related party | - | |||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Lease liability, net of current portion | ||||||||
| Long-term debt, net of debt discount | - | |||||||
| Liabilities for severance pay | ||||||||
| Deferred revenues, net of current portion | ||||||||
| Total non-current liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 13) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common shares ( authorized; | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 6 |
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
Three
Months September
30, | Three
Months Ended September 30, 2019 | Nine
Months September
30, | Nine
Months Ended September 30, 2019 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, net of interest income (including related party - see Note 8) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange (loss) gain | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | - | - | - | - | ||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share of common shares, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average number of common shares outstanding, basic and diluted | ||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 7 |
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share amounts)
| Number
of Common Shares | Share Capital | Additional Paid-in Capital | Accumulated
Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ | |||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Currency translation adjustments | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| BALANCE AS OF MARCH 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| BALANCE AS OF APRIL 1, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common shares issued in financing transaction, net of issuance costs | - | - | - | |||||||||||||||||||||
| Warrants issued in connection with financing transactions | ( | ) | - | - | ||||||||||||||||||||
| Conversion feature issued in debt financing transaction | - | - | - | - | ||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Currency translation adjustments | - | - | - | - | ||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| BALANCE AS OF JULY 1, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common shares issued in financing transaction, net of issuance costs | - | - | - | |||||||||||||||||||||
| Common shares issued upon exercise of warrants | - | - | - | |||||||||||||||||||||
| Common shares issued up on exercise of options | - | - | - | |||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Unrealized holding gains on short-term investments | - | - | - | - | ||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | ||||||||||||||||||||
| BALANCE AS OF SEPTEMBER 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| BALANCE AS OF DECEMBER 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||
| Warrant modification in connection with debt amendment | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Currency translation adjustments | - | - | - | - | ||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| BALANCE AS OF APRIL 1, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Currency translation adjustments | - | - | - | - | ||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| BALANCE AS OF JULY 1, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common shares issued in financing transaction | - | - | - | |||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Currency translation adjustments | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| BALANCE AS OF SEPTEMBER 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 8 |
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For
the Nine September
30, | For
the Nine September
30, | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash and cash equivalents used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Impairment of goodwill | - | |||||||
| Interest accrued on short-term investments | ( | ) | - | |||||
| Net change in operating working capital items: | ||||||||
| Change in accounts receivable | ( | ) | ||||||
| Change in inventory | ( | ) | ( | ) | ||||
| Change in prepaid expenses | ( | ) | ( | ) | ||||
| Change in other current assets | ( | ) | ( | ) | ||||
| Change in other long-term assets | ( | ) | ||||||
| Change in operating right of use assets | ||||||||
| Change in accounts payable | ( | ) | ||||||
| Change in deferred revenues | ( | ) | ( | ) | ||||
| Change in other current liabilities | ( | ) | ( | ) | ||||
| Payments made on operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of short-term investments | ( | ) | - | |||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common shares for cash | ||||||||
| Share issuance costs | ( | ) | ( | ) | ||||
| Proceeds from issuance of common shares for cash, upon exercise of warrants | - | |||||||
| Proceeds from issuance of common shares for cash, upon exercise of stock options | - | |||||||
| Proceeds from debt financing | - | |||||||
| Debt issuance costs | ( | ) | - | |||||
| Repayment of long-term debt | ( | ) | - | |||||
| Net cash flows provided by financing activities | ||||||||
| Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
| CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| Supplementary information: | ||||||||
| Interest paid | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Warrant modification in connection with debt amendment | - | |||||||
| Warrants issued in connection with financing activities | - | |||||||
| K2 conversion feature in connection with financing activities | - | |||||||
| Capital expenditures included in accounts payable and other current liabilities | ( | ) | ( | ) | ||||
| Share issuance costs included in other current liabilities | ( | ) | ( | ) | ||||
| Unrealized holding gains on short term investment | ( | ) | - | |||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 9 |
VBI Vaccines Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(in thousands, except share and per share amounts)
1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS
Corporate Overview
VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.
The Company and its wholly-owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly-owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies Inc. a Canadian company and a wholly-owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd. an Israeli company (“SciVac”), and SciVac Hong Kong Limited (“SciVac HK”) are collectively referred to as the “Company,” “we,” “us,” “our,” or “VBI”.
The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 222 Third Street, Suite 2241, Cambridge, MA 02142.
Principal Operations
VBI is a commercial-stage, biopharmaceutical company developing a next generation of vaccines to address unmet needs in infectious disease and immuno-oncology. We are advancing the prevention and treatment of hepatitis B, with: (1) the only 3-antigen hepatitis B vaccine, Sci-B-Vac, which is approved for use and commercially available in Israel, and recently completed a pivotal Phase III program in the United States, Europe, and Canada; and (2) VBI-2601 (BRII-179), an immunotherapeutic candidate in development in collaboration with Brii Biosciences Limited (“Brii Bio”) for a functional cure for chronic hepatitis B. Our enveloped virus-like particle (“eVLP”) platform technology enables the development of eVLP vaccines that closely mimic the target virus to elicit a potent immune response. Our lead eVLP program candidates include VBI-1901, a glioblastoma (“GBM”) vaccine immunotherapeutic candidate, VBI-1501, our prophylactic cytomegalovirus (“CMV”) vaccine candidate, and VBI-2900, our prophylactic coronavirus vaccine program. Our coronavirus vaccine program includes both (1) VBI-2901, a trivalent pan-coronavirus vaccine candidate expressing the SARS-CoV-2 (COVID-19), SARS-CoV (SARS), and MERS-CoV (MERS) spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing the SARS-CoV-2 (COVID-19) spike protein. We are headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada. Our manufacturing site in Rehovot, Israel produces Sci-B-Vac and VBI-2601 while our eVLP vaccine candidates are manufactured using contract development and manufacturing organizations located in the United States and Canada.
The ongoing COVID-19 pandemic has materially negatively affected and continues to affect the global economy, and there is continued severe uncertainty about the duration and intensity of the impacts of the pandemic. As a result, the Company’s business and results of operations have also been adversely affected and could continue to be adversely affected by COVID-19 which has necessitated restricting the number of personnel in the Company’s research laboratories and manufacturing facility at any given point in time, and has slowed recruitment to clinical trials. The extent to which the COVID-19 pandemic will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted. We do not yet know the full extent of potential delays or impacts on our business, our clinical studies, our research programs, the recoverability of our assets, and our manufacturing; however, the COVID-19 pandemic may disrupt or delay our business operations, including with respect to efforts relating to potential business development transactions, and it could disrupt the marketplace which could have an adverse effect on our operations.
| 10 |
Liquidity and Going Concern
The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development of its products.
The
Company had an accumulated deficit of $
The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products. The Company plans to finance near term future operations with existing cash and cash equivalents reserves. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, structured asset financings, government grants or other subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In
April 2020, the Company closed an underwritten public offering of common shares at a price of $ per share for total
gross proceeds of $
In
May 2020, the Company refinanced its existing term loan facility with Perceptive Credit Holdings, LP and entered into a Loan and
Guaranty Agreement (the “Loan Agreement”) with K2 HealthVentures LLC for net proceeds of $
On
July 21, 2020, we issued
On
July 31, 2020, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC (“Jefferies”),
pursuant to which the Company may offer and sell its common shares having an aggregate price of up to $
On July 3, 2020, the Company and the National
Research Council of Canada (“NRC”) signed a contribution agreement as represented by its Industrial Research Assistance
Program (“IRAP”) whereby the NRC agrees to contribute up to CAD $
On September 16, 2020, the Company and Her
Majesty the Queen in Right of Canada as represented by the Minister of Industry (“ISED”) signed a contribution agreement
(the “Contribution Agreement”) for a contribution from the Strategic Innovation Fund (“SIF”) whereby ISED
agrees to contribute up to CAD $
Financial instruments recognized in the condensed consolidated balance sheet consist of cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
The carrying amounts of the Company’s long-term assets approximate their respective fair values.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2019 consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form 10-Q”) does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 10-K”), as filed with the SEC on March 5, 2020.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, and SciVac HK. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements.
In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.
| 11 |
Significant Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2019 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2020, other than the polices discussed below.
Cash and cash equivalents
Cash and cash equivalents include cash investments in interest-bearing accounts and term deposits which can readily be redeemed for cash or are issued for terms of three months or less from the date of acquisition.
Short-term investments
Short-term investments consist of redeemable short-term investments held with Schedule 1 Canadian banks for maturity terms greater than 3 months but less than a year from the date of acquisition. Short-term investments were initially classified as available for sale and were measured at fair value whereby unrealized holding gains or losses on these investments are reported in other comprehensive income or loss and accrued interest income was recognized in interest expense, net of interest income in the condensed consolidated statement of operations and comprehensive loss.
On September 30, 2020 we re-assessed the classification of our short-term investment and we determined that the short-term investment shall be classified as held to maturity. The transfer on September 30, 2020 occurred at fair value with the unrealized holding gains remaining in other comprehensive income or loss. The unrealized holding gains will be amortized over the remaining life of the security until April 2021.
Our short-term investments are considered level 2 in the fair value hierarchy. The fair value of the short-term investment was determined using the market approach method and the inputs include comparable market interest rates at September 30, 2020.
Government Grants
Government grants are recognized in the statement of operations and comprehensive loss in the same period as the relevant expenses, in compliance with the agreement, as a reduction in the related expense or reduce the carrying value of the asset being acquired.
3. NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
Intangibles – Goodwill and Other, Internal-Use Software
In August 2018, the FASB issued ASU 2018-15: Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, the amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Our adoption of this ASU, effective January 1, 2020, was applied prospectively and did not have a material impact on our condensed consolidated financial statements and the related footnote disclosures.
Recently Issued Accounting Standards, not yet Adopted
None
| 12 |
4. INVENTORY, NET
Inventory is stated at the lower of cost or market and consists of the following:
| September
30, 2020 | December 31, 2019 | |||||||
| Finished goods | $ | $ | ||||||
| Work-in-process | ||||||||
| Raw materials | ||||||||
| $ | $ | |||||||
5. INTANGIBLE ASSETS AND GOODWILL
The Company’s intangible assets determined to have indefinite useful lives including In-Process Research and Development (“IPR&D”) and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. Such circumstances could include but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company has established August 31st as the date for its annual impairment test of IPR&D and goodwill.
The costs of rights to IPR&D projects acquired in an asset acquisition are expensed in the consolidated statements of operations unless the project has an alternative future use. These costs include initial payments incurred prior to regulatory approval in connection with research and development agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products.
The
IPR&D assets, which consist of the CMV and GBM programs, were acquired in a business combination, capitalized
as an intangible asset and are tested for impairment at least annually until commercialization, after which time the IPR&D
will be amortized over its estimated useful life. The impairment test compares the carrying amount of the IPR&D asset
to its fair value. If the carrying amount exceeds the fair value of the asset, such excess is recorded as an impairment loss.
There was no IPR&D impairment determined as a result of the Company’s annual testing on August 31, 2020. The fair value
of the IPR&D assets included in the impairment test was determined using the income approach method and is considered Level
3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value
of IPR&D assets include the amount and timing of costs to develop the IPR&D into viable products, the amount and timing
of future cash inflows, the discount rate and the probability of technical and regulatory success applied to the cash flows.
| September 30, 2020 | ||||||||||||||||||||
Gross Carrying | Accumulated Amortization | Cumulative Impairment Charge | Cumulative Currency Translation | Net Book Value | ||||||||||||||||
| Patents | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| IPR&D assets | ( | ) | ( | ) | ||||||||||||||||
| $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
| December 31, 2019 | ||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Cumulative Impairment Charge | Cumulative Currency Translation | Net Book Value | ||||||||||||||||
| Patents | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| IPR&D assets | ( | ) | ( | ) | ||||||||||||||||
| $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||
The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives.
The
change in carrying value for IPR&D assets from December 31, 2019 relates to currency translation adjustments which decreased
by $
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary, after step zero), if the carrying value of a reporting unit exceeded its fair value an impairment would be recorded. We would perform our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. There was no goodwill impairment determined as a result of the Company’s annual testing on August 31, 2020. The fair value of the Company, which consists of a single reporting unit, included in the impairment test was determined using the closing market stock price of VBI as of August 31, 2020.
| September 30, 2020 | ||||||||||||||||
Gross Carrying Amount | Cumulative Impairment | Cumulative Translation | Net Book Value | |||||||||||||
| Goodwill | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| December 31, 2019 | ||||||||||||||||
| Gross Carrying Amount | Cumulative Impairment | Cumulative Translation | Net Book Value | |||||||||||||
| Goodwill | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
The
change in carrying value for goodwill from December 31, 2019 relates to currency translation adjustments which decreased by $
| 13 |
6. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
| September 30, 2020 | December 31, 2019 | |||||||
| Accrued research and development expenses (including clinical trial accrued expenses) | $ | $ | ||||||
| Accrued professional fees | ||||||||
| Payroll and employee-related costs | ||||||||
| Other current liabilities | ||||||||
| $ | $ | |||||||
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 9, Stockholders’ Equity and Additional Paid-in Capital.
| September
30, 2020 |
September
30, 2019 |
|||||||
| Warrants | ||||||||
| Stock options and equity awards | ||||||||
| K2 conversion feature | ||||||||
| 14 |
8. LONG-TERM DEBT
As of September 30, 2020, and December 31, 2019, the long-term debt is as follows:
| September
30, 2020 |
December
31, 2019* |
||||||||
| Long-term debt, net of debt discount | $ | $ | |||||||
| Less: current portion, net of debt discount | - | ||||||||
| $ | $ | ||||||||
| * |
On
May 22, 2020, the Company (along with its subsidiary VBI Cda) entered into the Loan Agreement with K2 HealthVentures LLC
and any other lender from time to time party thereto (the “Lenders”) pursuant to which we received the first tranche
secured term loan of $
In
connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to
The
total proceeds attributed to the K2 Warrant was $
Upon
receipt of additional funds under the Loan Agreement,
The
total principal amount of the loan under the Loan Agreement outstanding at September 30, 2020, including the $
| 15 |
Upon
the occurrence of an Event of Default, and during the continuance of an Event of Default, the applicable rate of interest, described
above, will be increased by
The obligations under the Loan Agreement are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries other than intellectual property. The subsidiaries of the Company, other than VBI Cda and SciVac HK, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.
Approximately
$
On
May 6, 2016, the Company through VBI US assumed a term loan facility with Perceptive in the amount of $
On
July 17, 2018, the Company amended the Amended Credit Facility (the “Second Amendment”) to extend the period the Company
was required to pay only the interest on the loan from
On
January 31, 2019, the Company further amended the
The
total debt discount related to the Loan Agreement of $
At
September 30, 2020 and December 31, 2019, the fair value of our outstanding debt, which is considered level 3 in the fair value
hierarchy, is estimated to be approximately $
Interest expense, net of interest income recorded in the three and nine months ended September 30, 2020 and 2019 was as follows:
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Interest expense | $ | $ | $ | $ | ||||||||||||
| Amortization of debt discount | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total interest expense, net of interest income | $ | $ | $ | $ | ||||||||||||
Interest expense and amortization of debt discount for the three months ended September 30, 2020 does not include any amounts incurred to a related party.
Interest
expense and amortization of debt discount for the nine months ended September 30, 2020 includes $
Interest expense and amortization of debt discount for the three and nine months ended September 2019 was fully incurred to a related party.
The following table summarizes the future principal payments due under long-term debt:
| Principal
payments on Loan Agreement and final payment |
||||
| Remaining 2020 | $ | |||
| 2021 | - | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| Total | $ | |||
| 16 |
9. STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL
Stock option plans
The Company’s stock option plans are approved by and administered by the Company’s Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price, and vesting period of the new options.
2006 VBI US Stock Option Plan
No further options will be issued under the 2006 VBI US Stock Option Plan (the “2006 Plan”). As of September 30, 2020, there were options outstanding under the 2006 Plan.
2013 Equity Incentive Plan
No further options will be issued under the 2013 Equity Incentive Plan (the “2013 Plan”). As of September 30, 2020, there were options outstanding under the 2013 Plan.
2014 Equity Incentive Plan
No further options will be issued under the 2014 Equity Incentive Plan (the “2014 Plan”). As of September 30, 2020, there were options outstanding under the 2014 Plan.
2016 VBI Incentive Plan
The
2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares
issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of
% of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan.
The
The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan total at September 30, 2020.
| 17 |
| Number of Stock Options | Weighted Average Exercise Price | |||||||
| Balance outstanding at December 31, 2019 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | $ | |||||
| Balance outstanding at September 30, 2020 | $ | |||||||
| Exercisable at September 30, 2020 | $ | |||||||
Information relating to RSUs is as follow:
| Number of Stock Awards | Weighted Average Fair Value at Grant Date | |||||||
| Unvested shares outstanding at December 31, 2019 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | $ | |||||
| Unvested shares outstanding at September 30, 2020 | $ | |||||||
| 2020 | 2019 | |||||||
| Volatility | % | % | ||||||
| Risk free interest rate | % | % | ||||||
| Expected term in years | ||||||||
| Expected dividend yield | % | % | ||||||
| Weighted average fair value per option | $ | $ | ||||||
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
| 18 |
Warrants
In
April 2020, the Company engaged National to provide financial advisory services in connection with the offering. As consideration
for such services, the Company issued to National or its designees warrants to purchase up to an aggregate of
On
May 22, 2020, in connection with the Loan Agreement, as described in Note 8, the Company issued a warrant, the K2 Warrant,
to purchase up to an aggregate of
On July 21, 2020, the Company issued common shares upon exercise of warrants at an exercise price of $ for gross proceeds of $.
| National Warrants | K2 Warrant | |||||||
| Volatility | % | % | ||||||
| Risk free interest rate | % | % | ||||||
| Expected term in years | ||||||||
| Expected dividend yield | % | % | ||||||
| Fair value per warrant | $ | $ | ||||||
Activity related to the warrants is as follows:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance outstanding at December 31, 2019 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | $ | |||||
| Balance outstanding at September 30, 2020 | $ | |||||||
| 19 |
10. REVENUES AND DEFERRED REVENUE
Revenue is comprised of the following:
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Product revenues | $ | $ | $ | $ | ||||||||||||
| R&D service revenues | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2020:
| Total | Current portion to September
30, | Remaining portion thereafter | ||||||||||
| Product revenues | $ | $ | $ | |||||||||
| R&D service revenues | ||||||||||||
| Total | $ | $ | $ | |||||||||
The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2020:
| Balance at December 31, 2019 | $ | |||
| Amounts invoiced and revenue deferred | ||||
| Recognition of deferred revenue | ( | ) | ||
| Currency translation | ( | ) | ||
| Balance at September 30, 2020 | $ | |||
| Short Term | $ | |||
| Long Term | $ |
Collaboration and License Agreement – Brii Bio
On December 4, 2018, we entered into a Collaboration and License Agreement with Brii Bio (the “Collaboration and License Agreement”), whereby:
| ● | The Company and Brii Bio agreed to collaborate on the development of a hepatitis B recombinant protein-based immunotherapeutic in the licensed territory, which consists of China, Hong Kong, Taiwan, and Macau (collectively, the “Licensed Territory”), and to conduct a Phase Ib/IIa collaboration clinical trial for the purpose of comparing VBI-2601 (BRII-179), which is a recombinant protein-based immunotherapeutic developed by VBI for use in treating chronic hepatitis B, with a novel composition developed jointly with Brii Bio (either being the “Licensed Product”); and, | |
| ● | The Company granted Brii Bio an exclusive royalty-bearing license to perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the Licensed Product in the Licensed Territory and to commercialize the Licensed Product for the diagnosis and treatment of hepatitis B in the Licensed Territory. |
| 20 |
Pursuant to the Collaboration and License Agreement, the Company is responsible for the R&D services and Brii Bio is responsible for costs relating to the clinical trials for the Licensed Territory.
The
initial consideration of the Collaboration and License Agreement consisted of a $
In
addition, the Company is also eligible to receive an additional $
On
December 4, 2018, the Company recognized the VBI-2601 (BRII-179) license when it was granted as it was determined to be distinct
and Brii Bio was able to use and benefit from the license. The R&D Services will be satisfied over time as services are
rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer
of services based on the types of costs expected to be incurred. As of September 30, 2020, R&D services related to Brii Bio
that remain unsatisfied are $
Upon termination of the Collaboration and License Agreement prior to the end of the term, there is no obligation for refund and any amounts in deferred revenue related to unsatisfied performance obligations will be immediately recognized.
11. COLLABORATON ARRANGEMENTS
GlaxoSmithKline Biologicals S.A. (“GSK”)
On September 10, 2019, we entered into a Clinical Collaboration and Supported Study Agreement (“Collaboration Agreement”) pursuant to which we will investigate the use of GSK’s proprietary AS01B adjuvant system in our ongoing study of VBI-1901. As a result of the Collaboration Agreement, a second study arm was added to Part B of the ongoing Phase I/IIa clinical study to incorporate the AS01B adjuvant.
This
relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside
the scope of ASC Topic 606. Costs associated with the second study arm will be expensed as incurred in Research and Development
expenses; costs for the three and nine months ended September 30, 2020 are $
National Research Council of Canada (“NRC”)
On March 31, 2020, we announced a collaboration with the NRC, Canada’s largest federal research and development organization, to develop a pan-coronavirus vaccine candidate, targeting COVID-19, SARS, and MERS. The NRC and the Company are collaborating to evaluate and select promising coronavirus vaccine candidates. The collaboration combines the Company’s viral vaccine expertise, eVLP technology platform, and modified coronavirus antigens with the NRC’s proprietary SARS-CoV-2 antigens and assay development capabilities to select the most immunogenic vaccine candidate for further development.
This
relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside
the scope of ASC Topic 606. Costs associated with the collaboration will be expensed as incurred in Research and Development expenses;
costs for the three and nine months ended September 30, 2020 are $
Brii Biosciences Limited
On December 4, 2018, we entered into the Collaboration and License Agreement with Brii Bio, as described in Note 10.
12. INCOME TAXES
The Company operates in U.S., Israel, and Canadian tax jurisdictions. Its income is subject to varying rates of tax, and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another.
The
Company determines its annual effective tax rate at the end of each interim period based on the year to date period results. Since
the Company is incorporated in Canada, it is required to use Canada’s statutory tax rate of
The
Company’s effective tax rate on loss before tax for the three and nine months ended September 30, 2020 of
The Company maintains a valuation allowance on all of its deferred tax assets. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized.
| 21 |
13. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
On
September 13, 2018, two actions were brought in the District Court of the central district in Israel naming our subsidiary SciVac
as a defendant. In one claim, two minors, through their parents, allege among other things, defects in certain batches of Sci-B-Vac
discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing
its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers and that each child suffered side
effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of
SciVac believes these matters to be without merit and intends to defend these claims vigorously.
The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with a second preliminary hearing held on May 13, 2020 to discuss document disclosure. The next preliminary hearing is scheduled to be held on December 3, 2020.
Operating leases
The
Company has entered into various non-cancelable lease agreements for its office, lab, and manufacturing facilities, which are
classified as operating leases. The office facility lease agreement in the United States expires on
Effective
April 30, 2020,
Options to extend are not recognized as part of the lease liabilities or recognized as right to use assets. There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.
| Lease cost: | ||||
| Operating lease costs: | ||||
| Three months ended September 30, 2020 | $ | |||
| Nine months ended September 30, 2020 | ||||
| Other information: | ||||
| Weighted average remaining lease term | ||||
| Weighted average discount rate |
Operating lease costs are included in general and administrative (“G&A”) expenses in the statement of operation and comprehensive loss.
| 22 |
The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
| Year ending December 31 | ||||
| Remaining 2020 | $ | |||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| Total | $ | |||
| Effect of discounting | ( | ) | ||
| Total lease liability | $ | |||
| Less: current portion (to September 30, 2021) | ( | ) | ||
| Long term lease liability | $ | |||
14. SEGMENT INFORMATION
The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.
Revenues from external customers are attributed to geographic areas based on location of the contracting customers:
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Israel | $ | $ | $ | $ | ||||||||||||
| China / Hong Kong | ||||||||||||||||
| Europe | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
There
was
15. SUBSEQUENT EVENTS
Effective
as of September 4, 2020,
On October 21, 2020, the Company incorporated VBI Vaccines B.V. in the Netherlands.
On October 22, 2020, the Company issued options to an existing employee pursuant to the 2016 Plan.
During October 2020, the Company issued
| 23 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included in our 2019 10-K as filed with the SEC.
Except for share and per share amounts or as otherwise specified to be in millions, amounts presented are stated in thousands.
Overview
We are a commercial-stage, biopharmaceutical company developing a next generation of vaccines to address unmet needs in infectious disease and immuno-oncology. We are advancing the prevention and treatment of hepatitis B, with: (1) the only 3-antigen hepatitis B vaccine, Sci-B-Vac, which is approved for use and commercially available in Israel, and recently completed a pivotal Phase III program in the United States, Europe, and Canada; and (2) VBI-2601 (BRII-179), an immunotherapeutic candidate in development in collaboration with Brii Biosciences Limited (“Brii Bio”) for a functional cure for chronic hepatitis B. Our enveloped virus-like particle (“eVLP”) platform technology enables the development of eVLP vaccines that closely mimic the target virus to elicit a potent immune response. Our lead eVLP program candidates include VBI-1901, a glioblastoma (“GBM”) vaccine immunotherapeutic candidate, VBI-1501, our prophylactic cytomegalovirus (“CMV”) vaccine candidate, and VBI-2900, our prophylactic coronavirus vaccine program. Our coronavirus vaccine program includes both (1) VBI-2901, a trivalent pan-coronavirus vaccine candidate expressing the SARS-CoV-2 (COVID-19), SARS-CoV (SARS), and MERS-CoV (MERS) spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing the SARS-CoV-2 (COVID-19) spike protein. We are headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada. Our manufacturing site in Rehovot, Israel produces Sci-B-Vac and VBI-2601 while our eVLP vaccine candidates are manufactured using contract development and manufacturing organizations (“CDMO”) located in the United States and Canada.
Product Pipeline – Lead Program Candidates
| Program: Indication | Current Development Stage | ||
| Hepatitis B Portfolio: | |||
| ● | Sci-B-Vac: Prophylactic Hepatitis B | Phase III Completed | |
| ● | VBI-2601: Therapeutic Hepatitis B | Phase Ib/IIa | |
| eVLP Platform Portfolio: | |||
| ● | VBI-1901: Therapeutic CMV-Associated Cancers (GBM) | Phase I/IIa | |
| ● | VBI-2900: Prophylactic Coronavirus | Pre-clinical | |
| ● | VBI-1501: Prophylactic CMV | Phase I Completed | |
| 24 |
A summary of these programs and recent developments follows.
Hepatitis B Portfolio
Sci-B-Vac: 3-antigen Prophylactic Hepatitis B Vaccine
Sci-B-Vac is a 3-antigen prophylactic hepatitis B vaccine, which is approved for use and commercially available in Israel, and recently completed its pivotal Phase III program in the United States, Europe, and Canada. In contrast to other commercially available hepatitis B vaccines, which contain only one surface antigen (the S antigen) of hepatitis B, Sci-B-Vac contains all three of the hepatitis B surface antigens: the S antigen, the pre-S1 antigen, and the pre-S2 antigen. Published data demonstrate that T cell responses to the pre-S1 and pre-S2 antigens can further boost responses to the S antigen, resulting in a more immunogenic response. Moreover, Sci-B-Vac is distinguished from other commercially available hepatitis B vaccines because it is produced in mammalian cells (Chinese hamster ovary “CHO” cells) rather than in yeast.
Sci-B-Vac has not yet been approved for use by the United States Food and Drug Administration (“FDA”), European Medicines Agency (“EMA”), United Kingdom Medicines and Healthcare products, Regulatory Agency (“MHRA”); or Health Canada. The recently completed global Phase III clinical program was designed to support applications for FDA, EMA, MHRA, and Health Canada regulatory approvals for commercial sale of Sci-B-Vac in the United States, Europe, United Kingdom, and Canada, respectively. Our wholly-owned subsidiary, SciVac Ltd., in Rehovot, Israel, manufactures and sells Sci-B-Vac.
On June 17, 2019, we announced positive top-line results from the randomized, double-blind, controlled pivotal Phase III study, PROTECT, designed to evaluate the efficacy and safety of a 10µg dose of Sci-B-Vac compared with a 20µg dose of the standard of care vaccine, Engerix-B. The study, which enrolled a total of 1,607 adults, of which 81% were age ≥ 45 years, met both of its co-primary endpoints: (1) non-inferiority of seroprotection rate (“SPR”) of Sci-B-Vac (91.4%) vs. Engerix-B (76.5%) in all subjects age ≥ 18 years, 4 weeks after 3rd vaccination (SPR difference: 14.9%; 95% confidence interval (“CI”) [11.2%, 18.5%]); and (2) superiority of SPR of Sci-B-Vac (89.4%) vs. Engerix-B (73.1%) in subjects age ≥ 45 years, 4 weeks after 3rd vaccination (SPR difference: 16.4%; 95% CI [12.2%, 20.7%]). Moreover, the SPR of Sci-B-Vac compared to Engerix-B was higher in all key subgroup analyses of adults age ≥ 18 years, including by age, gender, body mass index (“BMI”), diabetic status, and smoking status, four weeks after 3rd vaccination.
On January 9, 2020 we reported positive top-line results from CONSTANT, the second pivotal Phase III study, designed to assess lot-to-lot manufacturing consistency of Sci-B-Vac, and to compare the safety and immunogenicity of Sci-B-Vac to Engerix-B. The CONSTANT Phase III study, which enrolled 2,838 adults, age 18-45 years, met both the primary and secondary endpoints. The primary endpoint of the CONSTANT study was assessing manufacturing consistency of Sci-B-Vac, the study evaluated the vaccine immune response, as measured by geometric mean concentration (“GMC”) of antibodies across three independent, consecutively-manufactured lots of Sci-B-Vac, four weeks after the third vaccination. A secondary endpoint of the CONSTANT study demonstrated non-inferiority of SPR of Sci-B-Vac (99.3%) vs. Engerix-B (94.8%), one month after completion of the full course of vaccination (SPR difference: 4.49%; 95% CI [2.90%, 6.63%] – up from 90.4% for Sci-B-Vac and 51.6% for Engerix-B at day 168, after only two vaccinations. In addition to demonstrating non-inferiority, the SPR achieved with Sci-B-Vac compared to Engerix-B was higher after both two and three vaccinations. Together with the positive safety and immunogenicity results from the PROTECT Phase III study, we expect these data to comprise the basis for the regulatory submissions in the United States, Europe, and Canada.
An exploratory analysis in CONSTANT also compared the SPR after two doses of Sci-B-Vac (90.4%) to the SPR after three doses of Engerix-B (94.8%) (SPR difference: -4.3%; 95% CI [-6.48%, -1.90%]). As per the commonly-used statistical margin of non-inferiority for hepatitis B vaccines, defined as the lower limit of the 95% CI being above -10%, this analysis demonstrated non-inferiority after two doses of Sci-B-Vac (at day 168) compared with three doses of Engerix-B (at day 196). Similarly, at these time points, preliminary data from the integrated immunogenicity analysis of both the PROTECT and CONSTANT studies in subjects age 18-45 years demonstrate a difference in SPR of -4.2%; 95% CI [-6.38%, -1.99%]. The two versus three dose comparison is not part of the regulatory approval process and will not be included in the expected indication we will seek, but we believe it contributes to the robust immunogenicity profile of Sci-B-Vac.
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The safety and tolerability seen in CONSTANT and PROTECT studies were consistent with the known safety profile of Sci-B-Vac. No new safety risks were identified, and no safety signals were observed in either study cohort. The integrated safety data analysis from both the PROTECT and CONSTANT studies is underway.
The completed Phase III studies are expected to support the Biologics License Application (“BLA”) to the FDA, the Marketing Authorization Application (“MAA”) to the EMA and the United Kingdom MHRA, and the New Drug Submission (“NDS”) to Health Canada. Based on pre-BLA discussions with the FDA and EMA that took place in the second and third quarters of 2020, respectively, we plan to submit applications for regulatory approvals in the United States, Europe, United Kingdom, and Canada beginning the fourth quarter of 2020.
VBI-2601: Hepatitis B Immunotherapeutic Candidate
VBI-2601 (BRII-179) is our novel, recombinant, protein-based immunotherapeutic candidate in development for the treatment of chronic hepatitis B infection, a disease that affects more than 250 million people worldwide. Chronic hepatitis B infection can lead to cirrhosis of the liver, hepatocellular cancer, and other liver disease, making it a life-threatening global health problem. VBI-2601 (BRII-179) is formulated to induce broad immunity against hepatitis B virus, including T-cell immunity which plays an important role in controlling hepatitis B infection.
On December 6, 2018, we announced that we had entered into a Collaboration and License Agreement (“License Agreement”) with Brii Bio, pursuant to which, among other things, subject to terms and conditions set forth in the License Agreement, we and Brii Bio agreed to collaborate on the development of a hepatitis B recombinant protein-based immunotherapeutic candidate in China, Hong Kong, Taiwan, and Macau (the “Licensed Territory”), and to conduct a Phase Ib/IIa collaboration clinical trial for the purpose of comparing VBI-2601 (BRII-179) with a novel composition developed jointly with Brii Bio.
On November 14, 2019, we announced initiation of enrollment in a Phase Ib/IIa Study of VBI-2601 (BRII-179) in patients with chronic hepatitis B infection. The Phase Ib/IIa clinical study of VBI-2601 (BRII-179) is a randomized, controlled study designed to assess the safety, tolerability, antiviral and immunological activity of VBI-2601 (BRII-179). The study is designed as a two-part dose-escalation study assessing different dose levels of VBI-2601 (BRII-179) with and without an immunomodulatory adjuvant and is expected to enroll up to 65 patients. Initial human proof-of-concept data from the clinical study is anticipated in the fourth quarter of 2020. The study is sponsored by Brii Bio and is being conducted at multiple study sites in New Zealand, Australia, Thailand, South Korea, Hong Kong SAR, and China.
eVLP Platform Portfolio
Our proprietary eVLP technology enables the synthetic manufacture of an “enveloped” virus-like particle, or “eVLP”. Many viruses are “enveloped” in that they are surrounded by a lipid bilayer membrane. Such viruses display antigenic proteins on the surface of their “envelope” which can be targets for vaccine development. The ability to synthetically manufacture an “enveloped” virus-like particle is different from previously developed VLP technologies, which did not include the lipid bilayer membrane, and thus these technologies were unable to express antigenic proteins within an “envelope” as they occur in nature.
VBI-1901: Cancer Vaccine Immunotherapeutic Candidate
Our cancer vaccine immunotherapeutic program, VBI-1901, targets CMV proteins present in tumor cells. CMV is associated with a number of solid tumors including GBM, breast cancer, and pediatric medulloblastoma. We initiated dosing in a multi-center Phase I/IIa clinical study evaluating VBI-1901, in combination with granulocyte-macrophage colony stimulating factor (“GM-CSF”), in patients with recurrent GBM in January 2018. Enrollment in Part A of the study was completed in December 2018. In April 2019, the independent data safety monitoring board completed reviews of all safety data from our fully-enrolled Part A portion of the Phase I/IIa trial in recurrent GBM subjects, which included 6 subjects in each of 3 different dose cohorts. The data safety monitoring board unanimously recommended the continuation of the study without modification and had no safety concerns about any of the 3 dose levels of VBI-1901. On April 23, 2019, we announced that, based on safety and immunogenicity data, the highest dose tested in Part A of the ongoing Phase I/IIa study in recurrent GBM patients, 10µg, was selected as the optimal dose level to test in Part B of the study. Where Part A was designed as a dose-escalation phase to assess safety, tolerability, and to define the optimal dose level of VBI-1901, Part B is a subsequent extension phase of the optimal dose level defined in Part A.
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On September 10, 2019, we entered into a Clinical Collaboration and Supported Study Agreement (“Collaboration Agreement”) with GlaxoSmithKline Biologicals S.A. (“GSK”) pursuant to which we will investigate the use of GSK’s proprietary AS01B adjuvant system in our ongoing study of VBI-1901. As a result of the Collaboration Agreement, a second study arm was added to Part B of the ongoing Phase I/IIa clinical study. Part B is now a two-arm open-label study, enrolling 20 first recurrent GBM patients to receive VBI-1901 in combination with either granulocyte-macrophage colony-stimulating factor (“GM-CSF”) or AS01B as immunomodulatory adjuvants. Enrollment of the 10 patients in the VBI-1901 with GM-CSF arm was completed in March 2020. Enrollment of the 10 patients in the VBI-1901 with AS01B was completed in October 2020.
In the high-dose cohort of Part A, vaccine response correlated with tumor response, with all three vaccine responders demonstrating stable disease for greater than 12 weeks. Two patients in the high-dose cohort of Part A experienced a 60% reduction in the size of primary tumor. VBI-1901 also induced and expanded robust T cell responses in these two patients. For patients who were vaccines responders, the 12-month overall survival (“OS”) rate was 83% (n = 5/6), compared to 33% (n = 3/9) for vaccine non-responders in Part A. Similarly, among patients evaluable for response and survival in Part A, vaccine responders saw a 6.25-month improvement in median OS (14.0 months) compared to vaccine non-responders (7.75 months).
On June 22, 2020 we announced additional emerging data from the ongoing Phase I/IIa study of VBI-1901 which suggests that patients with a normal baseline of CD4+/CD8+ T cell ratio may be more likely to experience delayed progression or tumor reduction, reflected as a tumor response. Five out of the six tumor responses seen to-date, including a recently confirmed partial response, defined as a tumor reduction of more than 50% per the Response Assessment in Neuro-Oncology criteria, suggest that the biomarker may predict patients most likely to respond to, and derive clinical benefit from, treatment with VBI-1901.
VBI-1901 continues to be safe and well tolerated at all doses tested, with no safety signals observed.
Based on the data seen to-date, VBI is exploring a randomized, controlled, registrational clinical study for the next phase of development, which, subject to approval from regulatory bodies, could begin in 2021. Immunologic and tumor data from the Phase I/IIa Part B study arm of VBI-1901 in combination with GSK’s AS01B adjuvant systems is expected in the fourth quarter of 2020.
VBI-2900: Prophylactic Coronavirus Vaccine Program
On March 31, 2020, we announced a collaboration with the National Research Council of Canada (“NRC”), Canada’s largest federal research and development organization, to develop a coronavirus vaccine candidate. The collaboration combines VBI’s viral vaccine expertise, eVLP technology platform, and coronavirus antigens with the NRC’s uniquely designed SARS-CoV-2 antigens and assay development capabilities to select the most immunogenic vaccine candidate for further development.
On August 5, 2020, we announced that we have been awarded up to a CAD$56 million contribution from the Strategic Innovation Fund (“SIF”), established by the Government of Canada, to support the Company’s coronavirus vaccine development program through Phase II clinical studies. This award is governed by the terms of a Contribution Agreement (the “Contribution Agreement”), dated September 16, 2020, with Her Majesty The Queen in Right of Canada, as represented by the Minister of Industry, pursuant to which our subsidiary, Variation Biotechnologies Inc., is obligated to develop a novel, broadly reactive coronavirus vaccine against COVID-19, SARS, and MERS, and/or a monovalent vaccine targeting only COVID-19 through Phase II studies. We agreed to complete such project in or before the first quarter of 2022, which will be conducted exclusively in Canada, except as permitted otherwise under certain circumstances.
On August 26, 2020, we announced data from the three preclinical studies conducted to enable selection of optimized clinical candidates for the Company’s coronavirus vaccine program. As a result of these studies, VBI has selected two vaccine candidates, with the potential to be one or two-dose vaccines, to take into adaptive Phase I/II human clinical studies: (1) VBI-2901, a trivalent pan-coronavirus vaccine candidate expressing the SARS-CoV-2 (COVID-19), SARS-CoV (SARS), and MERS-CoV (MERS) spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing the SARS-CoV-2 (COVID-19) spike protein. The initial clinical study of the first candidate (VBI-2902) is expected to begin around year-end 2020, subject to regulatory approval.
VBI-1501: Prophylactic CMV Vaccine Candidate
CMV may cause severe infections in newborn children (congenital CMV) and may also cause serious infections in people with weakened immune systems, such as solid organ or bone marrow transplant recipients. Our prophylactic CMV vaccine candidate uses the eVLP platform to express a modified form of the CMV glycoprotein B (“gB”) antigen and is adjuvanted with alum, an adjuvant used in FDA-approved products.
In May 2018, we announced positive top-line results from the randomized, placebo-controlled Phase I study of VBI-1501. The final Phase I study results demonstrated that VBI-1501 was safe and well-tolerated at all doses, with and without the adjuvant alum. The highest dose of VBI-1501, 2.0µg, with alum, elicited CMV-neutralizing antibodies against fibroblast cell infection in 100% of subjects after the third vaccination, up from 81% of subjects after the second vaccination, inducing titers comparable to those observed in patients protected as a result of natural infection. Neutralizing antibodies against epithelial cell infection were also seen in 31% of subjects after the third vaccination of VBI-1501 2.0µg with alum. The data also showed the formulation of the vaccine with alum enhanced antibody titers. The highest dose of VBI-1501 tested, 2.0µg with alum, contains approximately 10-fold less antigen content than that used in several other VLP-based vaccines or in previous CMV vaccine candidates developed by other companies.
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On December 20, 2018 we announced plans for a Phase II clinical study evaluating VBI-1501 following positive discussions with Health Canada. We received similarly positive guidance from the FDA in July 2019. The Phase II study is expected to assess the safety and immunogenicity of dosages of VBI-1501 up to 20µg with alum. We are currently evaluating the timing of the Phase II study.
We may also seek to in-license clinical-stage vaccines or vaccine-related technologies that we believe complement our product and pipeline portfolio, in addition to technologies that may supplement our therapeutic vaccination efforts in immuno-oncology.
At present, our operations are focused on:
| ● | preparing marketing authorization applications for Sci-B-Vac in the United States, Europe, and Canada; | |
| ● | preparing for commercialization of Sci-B-Vac in the United States, Europe, and Canada, where we may obtain regulatory approval; | |
| ● | conducting the Phase I/IIa clinical study of our GBM vaccine immunotherapeutic candidate, VBI-1901; | |
| ● | continuing our development and scaling up production processes for our two prophylactic coronavirus vaccine candidates VBI-2901 and VBI-2902 using a CDMO located in Canada; | |
| ● | seeking regulatory approval to conduct clinical trials of VBI-2901 and VBI-2902; | |
| ● | developing VBI-2601 (BRII-179), our protein-based immunotherapeutic candidate for treatment of chronic hepatitis B, in collaboration with Brii Bio; | |
| ● | ensuring our recently modernized manufacturing facility in Rehovot, Israel obtains all required regulatory approvals; | |
| ● | preparation for further development of VBI-1501, our preventative CMV vaccine candidate; | |
| ● | continuing the research and development (“R&D”) of our pipeline candidates, including the exploration and development of new pipeline candidates; | |
| ● | implementing operational, financial, and management information systems, including through third party partners, to support our commercialization activities; | |
| ● | maintaining, expanding, and protecting our intellectual property portfolio; and | |
| ● | developing our internal systems and processes for regulatory affairs and compliance. |
VBI’s revenue generating activities have been the sale of Sci-B-Vac product in markets where it is approved or on a named patient basis where it is not approved, though those markets have generated a limited number of sales to-date, various business development transactions, and R&D services generating fees. VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out planned clinical, regulatory, R&D, sales, and manufacturing activities with respect to the advancement of our Sci-B-Vac and new pipeline candidates. As of September 30, 2020, VBI had an accumulated deficit of approximately $293.3 million and stockholders’ equity of approximately $165.8 million. Our ability to maintain our status as an operating company and to realize our investment in our In-Process Research and Development (“IPR&D”) assets, which consist of our CMV and GBM programs, is dependent upon obtaining adequate cash and cash equivalents to finance our clinical development, manufacturing, our administrative overhead and our research and development activities, and ultimately to profitably monetize our IPR&D. We plan to finance near term future operations with existing cash and cash equivalents reserves. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, structured asset financings, government grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing, if required. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
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We have incurred operating losses since inception, have not generated significant product sales revenue and have not achieved profitable operations. We incurred net losses of $12,997 and $30,868 for the three and nine months ended September 30, 2020, respectively, and we expect to continue to incur substantial losses in future periods. We anticipate that we will continue to incur substantial operating expenses as we continue our research and development, clinical studies, and as we take steps to commercialize our product. These include expenses related to:
| ● | preparing marketing authorization applications for Sci-B-Vac in the United States, Europe, and Canada; | |
| ● | preparing for commercialization of Sci-B-Vac in the United States, Europe, and Canada, where we may obtain approval; | |
| ● | continuing the research and development of our pipeline candidates, including further development of VBI-1901, our cancer vaccine immunotherapeutic candidate, VBI-2601 (BRII-179), our hepatitis B immunotherapeutic candidate, VBI-2900, our coronavirus vaccine program, and VBI-1501, our prophylactic CMV vaccine candidate; | |
| ● | seeking regulatory approval to conduct clinical trials of VBI-2901 and VBI-2902; | |
| ● | developing and scaling up production processes for VBI-2901 and VBI-2902 to meet the supply requirements for clinical trials; | |
| ● | manufacturing Sci-B-Vac, obtaining, and maintaining required regulatory approvals at our recently modernized manufacturing facility in Rehovot, Israel; | |
| ● | maintaining, expanding, and protecting our intellectual property portfolio; | |
| ● | hiring additional clinical, manufacturing, and scientific personnel or contractors; | |
| ● | implementing operational, financial, and management information systems, and adding human resources support, including additional personnel, to support our product development; and | |
| ● | developing our internal systems and processes for regulatory affairs and compliance. |
In addition, we have incurred and will continue to incur significant expenses as a public company, which subjects us to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of the NASDAQ Capital Market, and the Canadian securities regulators.
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Long Term Debt
On May 22, 2020, we (along with our subsidiary VBI Cda) entered into a Loan and Guaranty Agreement (the “Loan Agreement”) with K2 HealthVentures LLC and any other lender from time to time party thereto (the “Lenders”) pursuant to which we received the first tranche secured term loan of $20 million (the “First Tranche Term Loan”). The Lenders agreed to make available the following additional tranches subject to the following conditions and upon the submission of a loan request by us: (1) up to $10 million available between January 1, 2021 and April 30, 2021 upon achievement of certain milestones (the “Second Tranche Term Loan”), (2) $10 million available between the closing date and December 31, 2021, subject to achievement of a certain U.S. FDA approval, (the “Third Tranche Term Loan”), and (3) a final tranche of up to $10 million that can be made available any time prior to June 30, 2022, subject to the advance of the Third Tranche Term Loan, satisfactory review by the administrative agent of our financial and operating plan, and approval by the Lenders’ investment committee (the “Fourth Tranche Term Loan”). Pursuant to the Loan Agreement, the Lenders have the ability to convert, at the Lenders’ option, up to $4 million of the secured term loan into common shares of the Company at a conversion price of $1.46 per share (“K2 conversion feature”).
In connection with the Loan Agreement, on May 22, 2020, we issued the Lenders a warrant to purchase up to 625,000 common shares (the “K2 Warrant”) at an exercise price of $1.12 (the “Warrant Price”). The number of common shares issuable pursuant to the K2 Warrant, at any given time, is determined by the aggregate principal amount of the loans advanced at that time pursuant to the Loan Agreement multiplied by 3.5% and divided by the Warrant Price. If the full $50 million available in all K2 tranches is advanced pursuant to the Loan Agreement, up to 1,562,500 common shares will be issuable pursuant to the K2 Warrant. The K2 Warrant may be exercised either for cash or on a cashless “net exercise” basis and expires on May 22, 2030.
As a result of the K2 Warrant and K2 conversion feature, the debt was issued at a discount of $3,758. We also incurred, in the quarter ended June 30, 2020, $1,021 of debt issuance costs and are required to make a final payment equal to 6.95% of the aggregate secured term loan principal outstanding on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Loan Agreement, resulting in an additional discount of $1,390. The total debt discount is $6,169.
The total principal amount of the loan under the Loan Agreement outstanding at September 30, 2020, including the $1,390 final payment discussed above, is $21,390. The principal amount of the loan made under the Loan Agreement accrues interest at an annual rate equal to the greater of (a) 8.25% or (b) prime rate plus 5.00%. The interest rate as of September 30, 2020 was 8.25%. We are required to pay only interest until July 1, 2022. If there is no Event of Default (as defined in the Loan Agreement), and a Third Tranche Term Loan of $10 million is made upon the achievement of a certain milestone then the interest only period is extended to January 1, 2023.
Upon receipt of additional funds under the Loan Agreement, additional common shares will be issuable pursuant to the K2 Warrant as determined by the principal amount of the additional funds advanced multiplied by 3.5% and divided by the Warrant Price, and the final payment will increase by 6.95% of the funds advanced.
Research and Development Services
Pursuant to an agreement with the Israel Innovation Authority (formerly the Office of the Chief Scientist of Israel), we are required to make services available for the biotechnology industry in Israel. These services include relevant activities for development and manufacturing of therapeutic proteins according to international standards and Good Manufacturing Practice (“GMP”) quality level suitable for toxicological studies in animals. Service activities include analytics/bio analytics methods for development and process development of therapeutic proteins starting with a candidate clone through manufacturing.
These R&D services are primarily marketed to the Israeli research community in academia and Israeli biotechnology companies in the life sciences lacking the infrastructure or experience in the development and production of therapeutic proteins to the standards and quality required for clinical trials for human use. In the first nine months of 2020, we provided services to biotechnology companies including analytical development.
In addition, pursuant to the License Agreement with Brii Bio we provide R&D services to Brii Bio as part of the development of VBI-2601 (BRII-179).
Modernization and Capacity Increases of Our Manufacturing Facility
In 2018, we temporarily closed our manufacturing facility in Rehovot, Israel, for modernization and capacity increase. We re-commenced operations in May 2019 and the review of the modernization and the capacity increase by the Israeli Ministry of Health (“IMoH”) occurred in December of 2019. We received our certificate of GMP compliance from the IMoH on January 27, 2020. In addition to the GMP compliance certification, the IMoH will also need to review and approve the process validation submission, and provide approval for us to sell Sci-B-Vac manufactured at the modernized facility. We increased the capacity of our manufacturing facility to be able to supply commercial quantities of Sci-B-Vac upon FDA, and/or EMA, and/or MHRA, and/or Health Canada approval, and to supply clinical supplies of VBI-2601 (BRII-179).
Third Party License and Assignment Agreements
We currently are dependent on licenses from third parties for certain of our key technologies, including the license granted pursuant to an agreement between Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004, as subsequently amended (the “Ferring License Agreement”) and a license from L’Universite Pierre et Marie Curie, now Sorbonne Université (“UPMC”), Institut National de la Santé et de la Recherche Médicale (“INSERM”) and L’école Normale Supérieure de Lyon. Under the Ferring License Agreement, we are committed to pay Ferring royalties equal to 7% of net sales (as defined therein) of HBsAg “Product” (as defined therein). Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd., dated February 14, 2012 (the “SciGen Assignment Agreement”), we are required to pay royalties to SciGen Ltd. equal to 5% of net sales (as defined in the Ferring License Agreement) of Product. Under the Ferring License Agreement and the SciGen Assignment Agreement, we originally were to pay royalties on a country-by-country basis until the date 10 years after the date of commencement of the first royalty year in respect of such country. In April 2019, we exercised our option to extend the Ferring License Agreement in respect of all the countries that still make up the territory for an additional 7 years by making a one-time payment to Ferring of $100. Royalties under the Ferring License Agreement and SciGen Assignment Agreement will continue to be payable for the duration of the extended license periods. Under our license agreement with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents that is expected to expire in the United States in 2022 and 2021 in other countries. Under this agreement, we are required to pay UPMC between 0.75% to 1.75% of net sales and certain lump-sum milestone payments. UPMC is also a co-owner of the patent family covering our VBI-1501 CMV vaccine and we are currently negotiating extension of our existing license to cover this patent family.
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Financial Overview
Overall Performance
We had net losses of approximately $12,997 and $16,162 for the three months ended September 30, 2020 and 2019, respectively, and $30,868 and $43,938 for the nine months ended September 30, 2020 and 2019 respectively. We had an accumulated deficit of $293,256 at September 30, 2020. We had $95,158 of cash and cash equivalents and $25,220 of short-term investments and net working capital of approximately $112,443 as of September 30, 2020.
Cost of revenues
Cost of revenues consist primarily of costs incurred for manufacturing the Sci-B-Vac vaccine, which includes cost of materials, consumables, supplies, contractors, and manufacturing salaries. Certain cost of revenues related to the temporary closure of the manufacturing facility, during the modernization and capacity increase, of approximately $348 was allocated to G&A expenses in the nine-months ended September 30, 2019. These costs were not present for the nine-months ended September 30, 2020.
Research and Development Expenses
R&D expenses consist primarily of costs incurred for the development of Sci-B-Vac; VBI-1901, our GBM vaccine immunotherapeutic candidate; VBI-1501, our CMV candidate; VBI-2601 (BRII-179); and VBI-2900 our coronavirus vaccine program, which include:
| ● | the cost of acquiring, developing and manufacturing clinical study materials, and other consumables and lab supplies used in our pre-clinical studies; | |
| ● | expenses incurred under agreements with contractors or CDMOs or Contract Research Organizations to advance the vaccines into and through completion of clinical studies; and | |
| ● | employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense. |
We expense R&D costs when we incur them.
General and Administrative Expenses
G&A expenses consist principally of salaries and related costs for executive and other administrative personnel and consultants, including stock-based compensation, impairment charges, and travel expenses. Other general and administrative expenses include professional fees for legal, patent protection, consulting and accounting services, commercialization costs, travel and conference fees, board of directors meeting costs, scientific and commercial advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies, information technology costs and expenses, insurance, and other general expenses. G&A expenses are expensed when incurred.
We expect that our general and administrative expenses will increase in the future as a result of adding employees and scaling our operations commensurate with advancing clinical candidates, commercializing products, and continuing to support a public company infrastructure. These increases will likely include increased costs for insurance, hiring of additional personnel, board committees, outside consultants, investor relations, lawyers, and accountants, among other expenses.
Interest Expense, net of interest income
Interest expense is associated with our long-term debt as discussed in Note 8 of the Notes to the Condensed Consolidated Financial Statements.
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Results of Operations
Three and nine Months Ended September 30, 2020 Compared to the Three and nine Months Ended September 30, 2019
All dollar amounts stated below are in thousands, unless otherwise indicated.
| Three months ending September 30 | ||||||||||||||||
| 2020 | 2019 | Change $ | Change % | |||||||||||||
| Revenues | $ | 298 | $ | 647 | $ | (349 | ) | (54 | )% | |||||||
| Expenses: | ||||||||||||||||
| Cost of revenues | 2,111 | 1,977 | 134 | 7 | % | |||||||||||
| Research and development | 4,478 | 5,401 | (923 | ) | (17 | )% | ||||||||||
| General and administrative | 5,562 | 9,412 | (3,850 | ) | (41 | )% | ||||||||||
| Total operating expenses | 12,151 | 16,790 | (4,639 | ) | (28 | )% | ||||||||||
| Loss from operations | (11,853 | ) | (16,143 | ) | 4,290 | (27 | )% | |||||||||
| Interest expense, net of interest income | (742 | ) | (626 | ) | (116 | ) | 19 | % | ||||||||
| Foreign exchange (loss) gain | (402 | ) | 607 | (1,009 | ) | (166 | )% | |||||||||
| Loss before income taxes | (12,997 | ) | (16,162 | ) | 3,165 | (20 | )% | |||||||||
| Income tax expense | - | - | - | - | ||||||||||||
| NET LOSS | $ | (12,997 | ) | $ | (16,162 | ) | $ | 3,165 | (20 | )% | ||||||
| Nine months ending September 30 | ||||||||||||||||
| 2020 | 2019 | Change $ | Change % | |||||||||||||
| Revenues | $ | 897 | $ | 1,647 | $ | (750 | ) | (46 | )% | |||||||
| Expenses: | ||||||||||||||||
| Cost of revenues | 6,747 | 5,319 | 1,428 | 27 | % | |||||||||||
| Research and development | 10,035 | 21,989 | (11,954 | ) | (54 | )% | ||||||||||
| General and administrative | 13,520 | 16,570 | (3,050 | ) | (18 | )% | ||||||||||
| Total operating expenses | 30,302 | 43,878 | (13,576 | ) | (31 | )% | ||||||||||
| Loss from operations | (29,405 | ) | (42,231 | ) | 12,826 | (30 | )% | |||||||||
| Interest expense, net of interest income | (2,006 | ) | (1,672 | ) | (334 | ) | 20 | % | ||||||||
| Foreign exchange gain (loss) | 543 | (35 | ) | 578 | (1,651 | )% | ||||||||||
| Loss before income taxes | (30,868 | ) | (43,938 | ) | 13,070 | (30 | )% | |||||||||
| Income tax expense | - | - | - | - | ||||||||||||
| NET LOSS | $ | (30,868 | ) | $ | (43,938 | ) | $ | 13,070 | (30 | )% | ||||||
Revenues
Revenues for the three months ended September 30, 2020 decreased by $349 or 54% due to a decrease in product revenue of Sci-B-Vac during the three months ended September 30, 2020 compared to three months ended September 30, 2019. In addition, we experienced a decrease in R&D services revenue for VBI-2601, our hepatitis B immunotherapeutic candidate, being developed in collaboration with Brii Bio, as fewer manufacturing and non-clinical research services were required in the three months ended September 30, 2020 compared to the three months ended September 30, 2019.
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Revenues for the nine months ended September 30, 2020 decreased by $750 or 46% primarily due to a decrease in R&D services revenue as discussed above.
Revenues by Geographic Region
| Three months ending September 30 | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Revenue in Israel | $ | 48 | $ | 134 | $ | (86 | ) | (64 | )% | |||||||
| Revenues in China / Hong Kong | 250 | 467 | (217 | ) | (46 | )% | ||||||||||
| Revenue in Europe | - | 46 | (46 | ) | (100 | )% | ||||||||||
| Total Revenues | $ | 298 | $ | 647 | $ | (349 | ) | (54 | )% | |||||||
| Nine months ending September 30 | ||||||||||||||||
| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Revenue in Israel | $ | 198 | $ | 287 | $ | (89 | ) | (31 | )% | |||||||
| Revenues in China / Hong Kong | 646 | 1,245 | (599 | ) | (48 | )% | ||||||||||
| Revenue in Europe | 53 | 115 | (62 | ) | (54 | )% | ||||||||||
| Total Revenues | $ | 897 | $ | 1,647 | $ | (750 | ) | (46 | )% | |||||||
Cost of Revenues
Cost of revenues for the three months ended September 30, 2020 was $2,111 as compared to $1,977 for the three months ended September 30, 2019. The increase in the cost of revenues of $134 or 7% is due to increased labor costs.
Cost of revenues for the nine months ended September 30, 2020 was $6,747 as compared to $5,319 for the nine months ended September 30, 2019. The increase in the cost of revenues of $1,428 or 27% is due to the re-commencement of manufacturing, subsequent to the temporary closure of our manufacturing facility in Rehovot, which occurred in May 2019, and increased labor costs as discussed above.
Research and Development Expenses
R&D expenses for the three months ended September 30, 2020 were $4,478 as compared to $5,401 for the three months ended September 30, 2019. The decrease in R&D expenses of $923 or 17% is mainly the result of the decrease in the costs related to the Sci-B-Vac Phase III clinical studies. During the three months ended September 30, 2020 both of the Sci-B-Vac Phase III clinical studies were complete whereas during the three months ended September 30, 2019 the PROTECT study topline data was released (mid- June 2019) and the CONSTANT study was nearing completion. The decrease in R&D expenses was offset by increased expenses related to analytical development and manufacturing associated with our vaccine candidates during the three months ended September 30, 2020 compared to the three months ended September 30, 2019.
R&D expenses for the nine months ended September 30, 2020 were $10,035 as compared to $21,989 for the nine months ended September 30, 2019. The decrease in R&D expenses of $11,954 or 54%, is mainly the result of the decrease in the costs related to the Sci-B-Vac Phase III clinical studies. During the nine months ended September 30, 2020, both of the Sci-B-Vac Phase III clinical studies were complete whereas during the nine months ended September 30, 2019 both studies were ongoing with the PROTECT topline data being released mid- June 2019. The decrease in R&D expenses was offset by increased analytical development and manufacturing associated with our vaccine candidates as discussed above.
General and Administrative Expenses
G&A expenses for the three months ended September 30, 2020 were $5,562 as compared to $9,412 for the three months ended September 30, 2019. The G&A expense decrease of $3,850 or 41% is a result of the impairment charge relating to goodwill incurred in the three months ended September 30, 2019 that did not re-occur in the three months ended September 30, 2020, offset by an increase in commercialization activities related to Sci-B-Vac and increased insurance costs during the three months ended September 30, 2020 compared to the three months ended September 30, 2019.
G&A expenses for the nine months ended September 30, 2020 were $13,520 as compared to $16,570 for the nine months ended September 30, 2019. The G&A expense decrease of $3,050 or 18% resulted from the items discussed above.
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Loss from Operations
The net loss from operations for the three months ended September 30, 2020 was $11,853 as compared to $16,143 for the three months ended September 30, 2019. The $4,290 decrease in the net loss from operations resulted from the items discussed above.
The net loss from operations for the nine months ended September 30, 2020 was $29,405 as compared to $42,231 for the nine months ended September 30, 2019. The $12,826 decrease in the net loss from operations resulted from the items discussed above.
Interest Expense, net of interest income
Interest expense, net of interest income has increased by $116 and $334 for the three and nine months ended September 30, 2020 compared to September 30, 2019, respectively. This is largely due to the amortization of the debt discount which increased as a result of the debt financing that occurred during the nine months ended September 30, 2020.
Foreign Exchange Gain (Loss)
The foreign exchange loss of $402 and gain of $543 for the three and nine months ended September 30, 2020, respectively, and the foreign exchange gain of $607 and foreign exchange loss of $35 for the three and nine months ended September 30, 2019, respectively, are a result of the changes in the foreign currency exchange rates (NIS and CAD) in which the foreign currency transactions were denominated for each of those periods.
Net Loss
Net loss of $12,997 and $30,868 for the three and nine months ended September 30, 2020, respectively compared to $16,162 and $43,938 for the three and nine months ended September 30, 2019, respectively resulted from the items discussed above.
Liquidity and Capital Resources
| September 30, 2020 | December 31, 2019 | $ Change | % Change | |||||||||||||
| Cash and cash equivalents | $ | 95,158 | $ | 44,213 | $ | 50,945 | 115 | % | ||||||||
| Current Assets | 126,393 | 46,963 | 79,430 | 169 | % | |||||||||||
| Current Liabilities | 13,950 | 29,757 | (15,807 | ) | (53 | )% | ||||||||||
| Working Capital | 112,443 | 17,206 | 95,237 | 554 | % | |||||||||||
| Accumulated Deficit | $ | (293,256 | ) | $ | (262,388 | ) | $ | (30,868 | ) | 12 | % | |||||
As of September 30, 2020, we had cash and cash equivalents of $95,158 as compared to $44,213 as of December 31, 2019. As of September 30, 2020, we had working capital of $112,443 as compared to working capital of $17,206 at December 31, 2019. Working capital is calculated by subtracting current liabilities from current assets.
The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2019 contains an explanatory paragraph regarding our ability to continue as a going concern. VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out our planned clinical, regulatory, R&D, sales, and manufacturing activities with respect to the advancement of our Sci-B-Vac and new pipeline candidates. As of September 30, 2020, VBI had an accumulated deficit of approximately $293.3 million and stockholders’ equity of approximately $165.8 million. Our ability to maintain our status as an operating company and to realize our investment in our IPR&D assets is dependent upon obtaining adequate cash and cash equivalents to finance our clinical development, manufacturing, our administrative overhead and our research and development activities. We plan to finance near term future operations with existing cash and cash equivalents reserves. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, structured asset financings, government grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing. The accompanying financial statements have been prepared assuming that we will continue as a going concern; however, the above conditions raise substantial doubt about our ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. Our long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of our products, to bring about their successful commercial release, to generate revenue, and, ultimately, to attain profitable operations, or, alternatively, to advance our products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.
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We will require additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch our products, and will need to secure additional financing in the future to support our operations and to realize our investment in our IPR&D assets. We base this belief on assumptions that are subject to change, and we may be required to use our available cash and cash equivalent resources sooner than we currently expect. Our actual future capital requirements will depend on many factors, including the progress and results of our ongoing clinical trials, the duration and cost of discovery and preclinical development, laboratory testing and clinical trials for our pipeline candidates, the timing and outcome of regulatory review of our products, obtaining regulatory approvals for our recently modernized manufacturing facility in Rehovot, Israel, product sales outside of Israel, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the number and development requirements of other pipeline candidates that we pursue, and the costs of commercialization activities, including product marketing, sales, and distribution.
We expect to finance our future cash needs through public or private equity offerings, potential additional proceeds from the long-term debt from the Lenders pursuant to the Loan Agreement, debt financings, government grants or subsidies, structured asset financings, or business development transactions. In addition to the First Tranche Term Loan, the Lenders agreed to make available subject to the conditions discussed above and upon the submission of a loan request by the Company, the Second Tranche Term Loan, the Third Tranche Term Loan, and the Fourth Tranche Term Loan. Pursuant to the Contribution Agreement, we will receive up to CAD $55,976 as government grant to support the development of the Company’s coronavirus vaccine program, though Phase II clinical studies. We may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate. We may also decide to raise additional funds even before we need them if the conditions for raising capital are favorable. Additional equity, debt, structured asset financing, government grants or subsidies, or business development transactions may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our R&D programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain pipeline candidates that we might otherwise seek to develop or commercialize independently.
To the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business, and other factors beyond our control. The ongoing COVID-19 pandemic has caused an unstable economic environment globally. Disruptions in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Current economic conditions have been, and continue to be, volatile. Continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business.
In April 2020, we closed an underwritten public offering of 52,272,726 common shares at a price of $1.10 per share for total gross proceeds of $57,500. We incurred $3,606 of share issuance costs related to the offering resulting in net cash proceeds of $53,894.
In May 2020, we refinanced our existing term loan facility with Perceptive Credit Holdings, LP and entered into the Loan Agreement with K2 HealthVentures LLC for net proceeds of $4.5 million.
On July 21, 2020, we issued 550,000 common shares upon exercise of warrants at an exercise price of $3.34 for gross proceeds of $1,837.
On July 31, 2020, we entered into an Open Market Sale AgreementSM with Jefferies LLC (“Jefferies”), pursuant to which we may offer and sell our common shares having an aggregate price of up to $125 million from time to time through Jefferies, acting as agent or principal (the “ATM Program”). Common shares are offered pursuant to a sales agreement prospectus included in our automatic shelf registration on Form S-3 filed with the SEC on July 31, 2020. During the third quarter of 2020, the Company issued 10,840,334 common shares under the ATM Program, for total gross proceeds of $48,769 at an average price of $4.4988. The Company incurred $1,606 of share issuance costs related to the common shares issued resulting in net proceeds of $47,163. As of September 30, 2020, approximately $76,231 of common shares remained available for issuance under the ATM Program.
Net cash used in Operating Activities
We incurred net losses of $30,868 and $43,938 in the nine months ended September 30, 2020 and 2019, respectively. We used $30,555 and $40,182 in cash for operating activities during the nine months ended September 30, 2020 and 2019, respectively. The decrease in cash outflows is largely as a result of the completion of the Sci-B-Vac Phase III clinical studies.
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Net cash used in Investing Activities
Cash flows used in investing activities increased from $3,487 for the nine months ended September 30, 2019 to $25,468 for the nine months ended September 30, 2020. We purchased short-term investments from the cash proceeds received from the issuance of common shares which occurred in April 2020.
Net cash provided by Financing Activities
Net cash provided by financing activities increased by $69,373 during the nine months ended September 30, 2020 due to proceeds received from the issuance of common shares and the term loan pursuant to the Loan Agreement, both offset by issuance costs and the repayment of the credit facility with Perceptive Credit Holdings, LP. Cash received from financing activities were $37,494 for the nine months ended September 30, 2019 which related to the issuance of common shares.
Our long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of its products, to bring about their successful commercial release, to generate revenue, and, ultimately, to attain profitable operations, or, alternatively, to advance our products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.
To date, we have 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.
Off-Balance Sheet Arrangements
As of September 30, 2020, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies and Estimates
There have been no changes to our critical accounting policies during the nine months ended September 30, 2020. Critical accounting policies and the significant accounting estimates made in accordance with such policies are regularly discussed with the Audit Committee of the Company’s board of directors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” included in Item 7, as well as in our consolidated financial statements and the footnotes thereto, included in our 2019 10-K.
Trends, Events and Uncertainties
As with other companies that are in the process of commercializing novel pharmaceutical products, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In addition, the impact of the ongoing COVID-19 pandemic and its resurgence is currently indeterminable and rapidly evolving, and has adversely affected and may continue to adversely affect our operations and the global economy. Furthermore, other than as discussed in this report, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.
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Other than as discussed above and elsewhere in this Form 10-Q, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
Recent Accounting Pronouncements
See Note 3 of Notes to the Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer and Head of Business Development (our principal financial and accounting officer), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer and Head of Business Development have concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer and Head of Business Development, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
On September 13, 2018, two actions were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege among other things, defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500,000 (not in thousands) ($546,207). The second claim is a civil action brought by two minors and their parents against SciVac and the Israel Ministry of Health alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.
SciVac believes these matters to be without merit and intends to defend these claims vigorously.
The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with a second preliminary hearing held on May 13, 2020 to discuss document disclosure. The next preliminary hearing is scheduled to be held on December 3, 2020.
Item 1A. Risk Factors
The following description of risk factors includes any material changes to risk factors associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on March 5, 2020. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, and stock price.
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.
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Risks Related to Our Product Development
Our pursuit of coronavirus vaccine candidates is at an early stage. We may be unable to produce a vaccine that successfully treats the virus in a timely manner, if at all.
In response to the global pandemic of coronavirus, on March 30, 2020, we entered into a Collaborative Research Agreement with the NRC pursuant to which we collaborated on certain activities to advance development of our trivalent pan-coronavirus vaccine candidate targeting COVID-19, SARS and MERS and monovalent coronavirus vaccine candidate targeting COVID-19. Our development of the vaccine candidates is in the pre-clinical stage, and we may be unable to develop a vaccine that successfully and safely protects against the viruses in a timely manner, if at all. Furthermore, even if we successfully develop a vaccine, we may encounter difficulties developing and scaling up manufacturing processes suitable for production of sufficient supply for our clinical trials or for commercialization. Due to the number of COVID-19 vaccine candidates in clinical trials, we may also encounter difficulty locating clinical sites with capacity to conduct clinical trials, and therefore, we may experience delays in initiating clinical trials of our vaccine candidate. We are also committing financial resources and personnel to the development of a coronavirus vaccine which may cause delays in or otherwise negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of coronavirus as a global health concern. Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable and could rapidly dissipate or against which our vaccine, if developed, may not be partially or fully effective. In addition, other parties may be successful in producing a more efficacious vaccine or other treatment for COVID-19 which will reduce or eliminate the commercial opportunity for our vaccine candidates and may also lead to the diversion of potential future governmental and quasi-governmental funding away from us and toward other companies, which could have a material adverse effect on our operations.
We rely on government grants or subsidies to contribute to our coronavirus vaccine development program. If we are unable to satisfy our contractual obligations or meet expected deadlines, the development of the coronavirus vaccine candidates may be extended, delayed, modified or terminated and we may be required to repay all or part of the grants or subsidies.
On September 16, 2020, we signed the Contribution Agreement with Her Majesty the Queen in Right of Canada, as represented by the Minister of Industry (“ISED”) whereby ISED agrees to contribute up to CAD $56 million from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). We agreed to complete the Project in or before the first quarter of 2022, which will be conducted exclusively in Canada, except as permitted otherwise under certain circumstances. In an event of default, subject to a rectification period available in certain circumstances, among other things, the Minister may (i) suspend or terminate its contribution to the Project, (ii) require repayment of all or part of the contribution paid by the Minster, together with interest from the day of demand at the interest rate set forth in the Contribution Agreement, (iii) terminate the Contribution Agreement and (iv) post a notice on a Government of Canada website disclosing such event of default. As a result, if we default on our obligations under the Contribution Agreement, we may not have sufficient funds available to continue the development of our coronavirus vaccine program, and we cannot be certain that we will be able to obtain additional capital to fund the program. In addition, we may be required to repay the grants made under the Contribution Agreement, which would harm our business, financial condition and results of operations.
Furthermore, in connection with execution of the Contribution Agreement, we obtained a consent of K2 HealthVentures LLC, as administrative agent for the lenders and a lender, pursuant to the Loan Agreement, dated May 22, 2020. Pursuant to such consent, certain events of default that result in contributions made under the Contribution Agreement in excess of $500,000 becoming due and payable could result in an event of default under the Loan Agreement.
Government involvement may limit the commercial success of our coronavirus vaccine candidates.
The coronavirus pandemic has been classified as a pandemic by public health authorities, and it is possible that one or more government entities may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities. In particular, the Government of Canada has announced that foreign investments into Canada will be subject to enhanced review under the Investment Canada Act, particularly foreign direct investments in Canadian businesses that are related to public health or involved in the supply of critical goods and services to Canadians or to the government. If we were to develop a coronavirus vaccine, the economic value of such a vaccine to us could be affected by these measures.
Various government entities, including the U.S., Israeli, and Canadian governments, are offering incentives, grants, and contracts to encourage additional investment by commercial organizations into preventative and therapeutic agents against coronavirus, which may have the effect of increasing the number of competitors and/or providing advantages to known competitors. Accordingly, there can be no assurance that we will be able to successfully establish a competitive market share, if any, for our coronavirus vaccine even if we succeed in developing one.
Furthermore, government grants and subsidies may limit our ability to develop and manufacture our coronavirus vaccine candidates in the most efficient way. For example, under the terms of the Contribution Agreement, we are required to conduct Phase II studies of our coronavirus vaccine program in Canada, unless permitted otherwise. As a result of such limitations, we may be unable to pursue the most efficient or profitable path in developing our coronavirus vaccine program.
The ongoing coronavirus pandemic has caused interruptions or delays of our business plan and may have a significant adverse effect on our business.
In December 2019, a strain of coronavirus, SARS-CoV-2, was reported to have surfaced in Wuhan, China, and on March 12, 2020, the World Health Organization declared COVID-19, disease caused by SARS-CoV-2, to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada, China, and Israel, have imposed unprecedented restrictions on travel, quarantines, and other public health safety measures. We and Brii Bio are conducting a Phase Ib/IIa clinical study of VBI-2601 (BRII-179) at multiple study sites located in New Zealand, Australia, Thailand, South Korea, Hong Kong SAR, and China, and we have an ongoing Phase I/IIa study for our GBM brain cancer vaccine immunotherapeutic program, VBI-1901, at various hospitals in the United States. In addition, we manufacture Sci-B-Vac and VBI-2601 at our manufacturing facility located in Israel, and we carry out research activities at our laboratories in Ottawa, Canada, which are operating in isolated groups to reduce exposure risk and with fewer employees on site due to the COVID-19 pandemic. Our manufacturing facility in Israel and CDMOs that we engage to manufacture our eVLP vaccine candidates are dependent on sourcing raw materials from third party suppliers. The COVID-19 pandemic has impacted lead times and availability of many raw materials, which may adversely impact our ability to manufacture products in a timely manner. The extent to which the pandemic will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted. The enrollment of patients at some of the clinical sites in our studies was suspended and may again be suspended, and enrollment of patients at other clinical sites may be suspended or delayed as hospitals and clinics where we are conducting clinical trials reallocate resources and limit access to or close clinical facilities due to the COVID-19 pandemic. Additionally, if our trial participants are unable to travel to or visit to our clinical study sites as a result of quarantines or other restrictions resulting from the COVID-19 pandemic, we will experience higher drop-out rates or delays in our clinical studies. Government-imposed quarantines and restrictions may also require us to temporarily close our clinical sites, research laboratories, or manufacturing facility. Furthermore, if we determine that our trial participants may suffer from exposure to COVID-19 as a result of their participation in our clinical trials, we may voluntarily close certain clinical sites as a safety measure until we reasonably believe that the likelihood of exposure has subsided. As a result, our expected development timelines for VBI-2601 (BRII-179), VBI-1901, our coronavirus candidates, and possibly our regulatory timelines for Sci-B-Vac, may be negatively impacted. We cannot predict the ultimate impact of the COVID-19 pandemic as consequences of such an event are highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical studies, our research programs, and our manufacturing; however, the ongoing COVID-19 pandemic may disrupt or delay our business operations, further divert the attention and efforts of the medical community to coping with COVID-19 and disrupt the marketplace in which we operate, which could have a material adverse effect on our operations.
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Moreover, the various precautionary measures taken by many governmental authorities around the world in order to limit the spread of the coronavirus has had, and may continue to have, an adverse effect on the global markets and global economy generally, including on the availability and cost of employees, resources, materials, manufacturing and delivery efforts, and other aspects of the global economy. There have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19. Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on the global economy as a whole. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. The COVID-19 pandemic could disrupt our business and operations, interrupt our sources of supply, hamper our ability to raise additional funds or sell our securities, and continue to slow down the global economy.
If a supplier of our raw materials and certain reagents fails to provide sufficient quantities to us, we may not be able to obtain an alternative supply on a timely or acceptable basis.
We rely on a single source for our supply of some of our raw materials and certain reagents required for the manufacture of Sci-B-Vac and VBI-2601. We do not have a written or oral agreement with these single sources of supply, as all orders are handled through individual purchase orders or on an order-by-order basis. Alternative sources from which we can obtain our supply of most of these materials exist. However, we may not be able to find alternative suppliers in a timely manner that would provide supplies of these raw materials or reagents at acceptable quantities and prices, if at all. Any interruption in the supply of these materials would disrupt our ability to manufacture Sci-B-Vac or VBI-2601 for further development, current and future clinical trials, and commercial manufacturing, and could have a material adverse effect on our business, commercialization of Sci-B-Vac and VBI-2601 and future profit margins, if any.
We do not manufacture any of our raw materials nor do we plan to develop any capacity to do so. Instead, we rely on multiple sources to supply our raw materials so that we can manufacture sufficient quantities of Sci-B-Vac and VBI-2601 at our manufacturing facility in Israel and sufficient quantities of our eVLP vaccine candidates at CDMOs. The COVID-19 pandemic has impacted lead times and availability of many raw materials, which may adversely impact our ability to manufacture products in a timely manner. Some of the countries of origin of our raw materials are not the same as our drug manufacturing location. Any disruption in supply of raw materials from a qualified supplier could result in significant delays with our manufacturing, clinical trials, BLA filing, BLA approval or commercial sale of the finished product due to contract delays, the need to manufacture new raw materials, out of specification raw materials, the need for import and export permits, and the failure of the newly sourced raw materials to perform to the standards of the previously sourced raw materials. These delays could have a material adverse effect on our business and future profit margins, if any.
If we are successful in producing a vaccine against COVID-19 and/or SARS and/or MERS, we may need to devote significant resources to its scale-up and development including for use by the Canadian or the U.S. government.
In the event that the preclinical and clinical trials for our coronavirus vaccine candidates are perceived to be successful, we may need to work toward the large scale technical development, manufacturing scale-up and larger scale deployment of this potential vaccine through a variety of U.S. government mechanisms such as an Expanded Access Program or an Emergency Use Authorization program or Canadian government programs. In this case we may need to divert significant resources to this program, which would require diversion of resources from our other programs. In addition, since the path to licensure of any vaccine against coronavirus is unclear, if use of the vaccine is mandated by the Canadian or the U.S. government, we may have a widely used vaccine in circulation in Canada, the United States or another country prior to our full validation of the overall long-term safety and efficacy profile of our vaccine platform and technology. Unexpected safety issues in these circumstances could lead to significant reputational damage for us and our technology platform going forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional financial resources. Also, under the Contribution Agreement, if we are unable to provide a sufficient Canada-sourced supply of the COVID-19 vaccine, the Minster may require us to grant a license on commercially reasonable terms to use our intellectual property to the extent necessary to ensure such supply. This provision may inhibit us from pursuing more profitable means of manufacturing and commercializing our COVID-19 vaccine.
Risks Related to Our Business
Our internal computer systems, or those of our third-party vendors, collaborators, or other contractors may be subject to various federal and state confidentiality and privacy laws in the United States and abroad and could sustain system failures, security breaches, or other disruptions, any of which could have a material adverse effect on our business.
Numerous international, national, federal, provincial and state laws, including state privacy laws (such as the California Consumer Privacy Act, or “CCPA”), state security breach notification and information security laws, and federal and state consumer protection laws govern the collection, use, and disclosure of personal information. In addition, most healthcare providers who may, in future, prescribe and dispense our products in the United States and research institutions in the United States with whom we collaborate for our sponsored clinical trials are “covered entities” subject to privacy and security requirements under Health Care Insurance and Accountability Act of 1996 (“HIPAA”). Among other things, the Health Information Technology for Economic and Clinical Health Act (“HITECH”) makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors, or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. Certain of our clinical sites or collaborators could be subject to a wide range of penalties and sanctions under HIPAA, including criminal penalties if they knowingly obtain or disclose individually identifiable health information maintained by a covered entity in a manner that is not authorized or permitted by HIPAA. Failure to comply with current and future privacy laws and regulations could result in governmental enforcement actions (including the imposition of significant penalties), criminal and civil liability, and/or adverse publicity that negatively affects our business.
Moreover, we rely on our internal and third-party provided information technology systems and applications to support our operations and to maintain and process company information including personal information, confidential business information and proprietary information. Furthermore, we generate intellectual property that is central to the future success of the business and transmit certain amounts of confidential information. Additionally, we collect, store and transmit confidential information of collaborators, employees or other third-party contractors. We have experienced in the past, and may experience in the future, cybersecurity incidents, threats and intrusions. Incidents, threats and intrusions may require remediation to protect sensitive information, including our intellectual property and personal information, and our overall business. The continually changing threat landscape of cybersecurity today makes our systems potentially vulnerable to service interruptions, system errors or to security breaches from inadvertent or intentional actions by our employees, partners, and vendors, and from attacks by malicious third parties, including supply chain attacks originating at our third-party partners. Such attacks are of ever-increasing levels of sophistication. Attacks may be made by individuals or groups that have varying levels of expertise, some of which are technologically advanced and well-funded including, without limitation, nation states, organized criminal groups and hacktivists organizations. A breach of cybersecurity, a disruption in availability, or the unauthorized alteration of systems or data could adversely affect our business, results of operations and financial condition, or lead to the loss, theft, destruction, corruption or compromise of our information or that of our collaborators, or third-party contractors, as applicable.
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While we have invested in cybersecurity and have implemented processes and procedural controls to maintain the confidentiality and integrity of such information, there can be no guarantee that our efforts will prevent all service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal and reputational harm to our business, including legal claims and proceedings, liability under laws that protect the privacy of personal information, government enforcement actions and regulatory penalties, as well as remediation costs. While we seek to protect our information technology systems from these types of incidents, the healthcare sector continues to see a high frequency of cyberattacks and increasingly sophisticated threat actors, and our systems and the information maintained within those systems remain potentially vulnerable to data security incidents. Moreover, losses from such events may not be completely covered by insurance coverage (or may not be covered at all by any of our insurance policies depending on the circumstances). Furthermore, this insurance may not be sufficient to cover the financial, legal or reputational losses that may result from an interruption or breach of our systems.
Any of the above-described cyber or other security-related incidents may trigger notification obligations to affected individuals and government agencies, legal claims or proceedings, and liability under foreign, federal, provincial and state laws that protect the privacy and security of personal information. Our proprietary and confidential information may also be accessed. Any one of these events could cause our business to be materially harmed and our results of operations may be adversely impacted. Finally, as cyber threats continue to evolve, and privacy and cybersecurity laws and regulations continue to develop, we may need to invest additional resources to implement new compliance measures, strengthen our information security posture, or respond to cyber threats and incidents.
Risks Related to Our Capital Requirements and Financings
Our financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to continue as a going concern.
In its report dated March 5, 2020, EisnerAmper LLP, our independent registered public accounting firm, expressed substantial doubt about our ability to continue as a going concern as we have suffered recurring losses from operations and have insufficient liquidity to fund our future operations. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge out liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment. As of December 31, 2019, we had $44.2 million of cash and cash equivalents, and as of September 30, 2020, we had approximately $95.2 million of cash and cash equivalents and $25.2 million of short-term investments. In order to have sufficient cash and cash equivalents to fund our operations in the future, we will need to raise additional equity or debt capital and cannot provide any assurance that we will be successful in doing so.
Risks Related to Our Common Shares
The price of our common shares has been, and may continue to be, volatile. The COVID-19 pandemic has resulted in significant financial market volatility, and its impact on the global economy remains uncertain. A continuation or worsening of the pandemic could have a material adverse impact on the market price of our common shares. This may affect the ability of our investors to sell their shares, and the value of an investment in our common shares may decline.
During the 12-month period ended October 30, 2020, our common shares traded as high as $6.93 per share and as low as $0.5311 per share. The market prices of our common shares may continue to be volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:
| ● | future announcements about us, our collaborators or competitors, including the results of testing, technological innovations, or new products and services; | |
| ● | clinical trial results; | |
| ● | depletion of cash and cash equivalents reserves; | |
| ● | additions or departures of key personnel; | |
| ● | operating results that fall below expectations; | |
| ● | announcements by us relating to any strategic relationship; | |
| ● | sales of equity securities or issuance of additional debt; | |
| ● | industry developments; | |
| ● | changes in state, provincial, or federal regulations affecting us and our industry; | |
| ● | the continued large fluctuations in major stock market indexes which causes investors to sell our common shares; | |
| ● | economic, political, and other external factors; and | |
| ● | period-to-period fluctuations in our financial results. |
Furthermore, the stock market in general and the market for biotechnology companies, in particular, have from time to time experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. The COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent months. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a) Sales of Unregistered Securities
There have been no unregistered sales of securities during the period covered by this Form 10-Q that have not been previously reported in a current report on Form 8-K. We have not made any purchases of our own securities during the time period covered by this Form 10-Q.
c) Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
See the Exhibit Index following the signature page to this Form 10-Q for a list of exhibits filed or furnished with this Form 10-Q, which Exhibit Index is incorporated herein by reference.
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EXHIBIT INDEX
* Filed herewith.
** Furnished herewith.
# Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon its request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 2, 2020 | VBI VACCINES INC. | |
| By: | /s/ Jeffrey Baxter | |
Jeffrey Baxter President & Chief Executive Officer (Principal Executive Officer) | ||
| By: | /s/ Christopher McNulty | |
| Christopher McNulty | ||
| Chief Financial Officer and Head of Business Development | ||
| (Principal Financial and Accounting Officer) | ||
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Exhibit 10.1
310 Hunt Club Road, Ottawa, Ontario
Lease
THIS LEASE made as of the 4th day of September, 2020.
BETWEEN:
310 Hunt club limited partnership,
by its general partner 310 hunt club gp
inc.
(hereinafter called the “Landlord”),
- and -
Variation biotechnologies Inc.
(hereinafter called the “Tenant”).
WHEREAS pursuant to a ground lease (the “Ground Lease”) made as of January 31, 1997 between Her Majesty the Queen in Right of Canada, as landlord, and the Ottawa Macdonald-Cartier International Airport Authority (“OMCIAA”), as tenant, the OMCIAA has leased, among other things, that certain parcel of land (the “Land”) more particularly described in Schedule A hereto and situated at the Ottawa Macdonald-Cartier International Airport, Gloucester, Ontario (the “Airport”), all upon the terms and conditions set forth in the Ground Lease;
AND WHEREAS pursuant to a lease (the “Head Lease”) dated July 22, 2005 between OMCIAA, as landlord, and Aeroterm Ottawa Corporate Centre Corporation (“Aeroterm”), as tenant, the OMCIAA leased to Aeroterm the Land and all the Leasehold Improvements (as defined therein) thereon, including the building located on the Land and municipally known as 310 Hunt Club Road, Ottawa, Ontario (the “Building”), all as more particularly described in the Ground Lease and all upon the terms and conditions set forth in the Ground Lease;
AND WHEREAS the Landlord has taken an assignment of the Head Lease effective August 2019;
AND WHEREAS the Landlord has agreed to lease to the Tenant office space on the second floor of the Building having a total current area of approximately 2,688 square feet (the “Rentable Area”), as more particularly described and identified on the plan attached hereto as Schedule B (the “Premises”), all on the terms contained in this Lease;
NOW THEREFORE in consideration of the mutual covenants contained herein, the sum of $2.00 now paid by each party to the other and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by the parties), the Landlord and the Tenant agree as follows:
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Article 1
INTERPRETATION
| 1.1 | Number, Gender, Liability |
The grammatical changes required to make the provisions of this Lease apply in the plural sense where the Tenant comprises more than one person and to corporations, firms, partnerships or individuals, male or female, will be assumed as though in each case fully expressed.
| 1.2 | Headings and Captions |
The Article numbers, Article headings, Section numbers and Section headings are inserted for convenience of reference only and are not to be considered when interpreting this Lease.
| 1.3 | Obligations as Covenants |
Each obligation or agreement of the Landlord or the Tenant expressed in this Lease shall be a covenant for all purposes.
| 1.4 | Governing Law |
This Lease shall be interpreted under and is governed by the laws of the Province of Ontario and all federal laws of Canada applicable therein.
| 1.5 | Currency |
All Rent and other amounts of money in this Lease are expressed in and refer to Canadian dollars and shall be paid in the lawful currency of Canada.
| 1.6 | Severability |
If any provision of this Lease is illegal or unenforceable, it shall be considered severable from the remaining provisions of this Lease, which shall remain in force.
| 1.7 | Successors and Assigns |
This Lease and everything herein contained shall benefit and bind the successors and assigns of the Landlord and the permitted successors and assigns of the Tenant.
| 1.8 | Schedules |
The Schedules shall form part of this Lease and are as follows:
| Schedule A | - | Description of Land |
| Schedule B | - | Premises |
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| 1.9 | Time of the Essence |
Time is of the essence of this Lease and every part thereof.
| 1.10 | Statutory References |
Any reference in this Lease to any act, statute or any other applicable laws or any section thereof shall be deemed to be a reference to such act, statute, other applicable laws or section as amended or re-enacted from time to time except as otherwise expressly provided herein or therein.
Article 2
GRANT OF LEASE
| 2.1 | Demise |
The Landlord hereby Leases the Premises to the Tenant, upon and subject to the provisions of this Lease, to have and to hold during the Term (as hereinafter defined). The Tenant hereby Leases the Premises from the Landlord for the Term and covenants to pay the Rent and to observe and perform all the covenants and obligations to be observed and performed by the Tenant pursuant to this Lease.
| 2.2 | Examination of Premises |
The Tenant acknowledges that: (i) it has examined the Premises and is accepting the Premises in their present condition on an “as is” basis, without reservation or qualification; and (ii) the Landlord shall have no obligations, express or implied, to perform any work in the Premises at any time before, during or after the term of the Lease. The Premises will be provided to the Tenant with all existing furnishings and partitions included, with the exception of the boardroom chairs and table that will be removed prior to the Commencement Date (as defined herein).
| 2.3 | End of Term Restoration |
The parties hereto agree that the Tenant shall not be required to restore the Premises to base building condition at the expiry or early termination of the Term. For greater certainty, no improvements existing in the Premises as of the Commencement Date (as hereinafter defined), will be required to be removed on expiration or early termination of the Term, as applicable, but any additional improvements made during the Term, including, without limitation, any dividing walls erected by the Tenant within the Premises, may be subject to removal on expiration or early termination of the Term, as applicable, on request by the Landlord.
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Article 3
TERM
| 3.1 | Lease Term |
The term of this Lease (the “Term”) shall commence on October 1, 2020 (the “Commencement Date”) and, shall end on April 30, 2023. In no event shall the Term extend beyond the date of the termination of the Head Lease. If the Head Lease is terminated in accordance with its terms (whether by expiry or other termination) this Lease shall be automatically terminated at the same time as the Head Lease is terminated.
Article 4
RENT
| 4.1 | Basic Rent |
Subject to Section 4.3 below, for the period beginning on the Commencement Date and ending on April 30, 2023, the Tenant shall pay to the Landlord, without any deduction, set-off or abatement whatsoever, except as may be otherwise provided herein, a basic rent (the “Basic Rent”) for the Premises in the following amounts
| Period | Basic Rent (psf) | |||
| October 1, 2020 – December 31, 2020 | $ | 14.22 | ||
| January 1, 2021 – December 31, 2021 | $ | 14.50 | ||
| January 1, 2022 – December 31, 2022 | $ | 14.79 | ||
| January 1, 2023 – April 30, 2023 | $ | 15.09 | ||
The Basic Rent shall be payable monthly in advance in equal, consecutive instalments, on the first day of each and every calendar month, from and after the Commencement Date, the first such payment to be made on the Commencement Date, together with all HST (as defined below) thereon. If any year of the Term commences on any day other than the first day, or ends on any day other than the last day, of a calendar month, all Rent and other sums payable by the Tenant for the fractions of a month at the commencement or expiration of the applicable year of the Term, as the case may be, shall be calculated on a per diem basis based on a period of three hundred and sixty-five (365) days.
| 4.2 | Additional Rent |
The Tenant shall also pay on a monthly basis to the Landlord as additional rent in respect of the Premises (“Additional Rent”), the Tenant’s share (the “Tenant’s Share”), based on the Rentable Area of the Premises as a proportion of the total leaseable area of the Building, of those costs, taxes and expenses defined as Additional Rent in the Tenant’s lease dated September 1, 2014, as amended and extended, for Suite 201 (the “Adjacent Lease”). The Additional Rent Cap of $20.50 shall apply to the Additional Rent throughout the Term.
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| 4.3 | Payments Generally |
Payments by the Tenant to the Landlord of whatsoever nature required or contemplated by this Lease shall:
| (a) | be made when due hereunder, without notice or demand therefor and without any abatement, set-off, compensation or deduction whatsoever except as may be otherwise provided herein at such place as the Landlord may designate from time to time to the Tenant; no event, act, circumstance, change of laws, political, constitutional or governmental change, or any other matter whatsoever, whether foreseen or unforeseen, ordinary or extraordinary, and whether or not within the contemplation of the parties at the commencement of the Term shall relieve the Tenant of the obligation to pay all Rent payable hereunder; without limiting the generality of the foregoing, the Tenant agrees that it shall not have any right of deduction, set-off or abatement whatsoever with respect to any claims that it may have against the Landlord pursuant to or in respect of any other agreement with the Landlord (unless Additional Rent has been overpaid in any calendar year, in which case the Landlord shall issue a credit note in favour of the Tenant to set-off the overpaid amount against the next Rent payment); | |
| (b) | be applied towards amounts then outstanding hereunder in such manner as the Landlord reasonably determines; and | |
| (c) | bear interest at the rate equal to that in the Adjacent Lease from the due date to the date of payment, calculated daily, before and after demand, default and judgment. |
For purposes of this Lease, “Rent” means Basic Rent, Additional Rent, and all other monies (save and except goods and services taxes) payable by the Tenant hereunder, whether to the Landlord or otherwise.
| 4.4 | Harmonized Sales Tax |
In addition to all amounts payable by the Tenant under this Lease as Rent, the Tenant shall pay, at the same time as the Basic Rent is payable hereunder, all harmonized sales taxes (“HST”) exigible under the Excise Tax Act (Canada) and any similar legislation calculated on or in respect of amounts payable by the Tenant as Rent under this Lease or otherwise payable as a result of this Lease or services or supplies provided hereunder. Notwithstanding any other provision of this Lease, any amounts payable by the Tenant in respect of HST shall not be deemed to be consideration for the supply of space under this Lease or for the provision of any other service by the Landlord. Notwithstanding that HST is not Rent under this Lease, the Landlord shall have the same rights and remedies for the recovery of such amounts payable as HST as it has for other amounts payable as Basic Rent under this Lease.
| -6- |
| 4.5 | Net Lease |
The Tenant acknowledges and agrees that it is intended that this Lease shall be a completely carefree and absolutely net lease for the Landlord, except as is otherwise expressly provided in this Lease, and that the Landlord shall not be responsible during the Term for any costs, charges, taxes (other than Landlord’s income taxes), levies, impositions, expenses or outlays of any nature whatsoever arising from or relating to the Premises, this Lease, the use of the Premises or any services or supplies provided by the Landlord hereunder, whether foreseen or unforeseen, ordinary or extraordinary and whether or not within the contemplation of the parties at the commencement of the Term, except as is otherwise expressly provided in this Lease. Any amount and any obligation relating to the Premises or this Lease which is not expressly declared in this Lease to be the responsibility of the Landlord shall be the responsibility of the Tenant to be paid or performed by or at the Tenant’s expense.
| 4.6 | Unavoidable Delay |
Whenever and to the extent that the Landlord or the Tenant shall be unable to fulfill or shall be delayed or restricted in the fulfilment of any obligation hereunder during the period of such unavoidable delay hereunder in respect of the supply or provision of any service or utility or the doing of any work or the making of any repairs by reason of being unable to obtain the material, goods, equipment, service or labour required to enable it to fulfil such obligation, or by reason of any statute or order-in-council or regulation or order passed or made pursuant thereto or by reason of the order or direction of any administrator, controller, board, governmental department or officer or other authority or by reason of not being able to obtain any permission or authority required thereby or by reason of any other cause beyond its control whether of the foregoing character or not, then either the Landlord or the Tenant, as the case may be, shall be deemed not to be in default in the performance of such covenant or obligation and any period for the performance of such obligation shall be extended accordingly and the other party to this Lease shall not be entitled to compensation for any loss, inconvenience, nuisance or discomfort thereby occasioned, provided that the foregoing shall in no event be construed so as to relieve the Tenant of its obligation to pay Rent as it becomes due.
Article 5
common areas, utilities and services
| 5.1 | Use of Common Areas and Facilities |
In connection with this Lease and the ongoing and continuous use and occupation by the Tenant of the Premises, but subject to the terms and conditions of the Head Lease and this Lease, the Tenant shall also be entitled to (and, accordingly, the Landlord shall provide and deliver to the Tenant) the non-exclusive access to and benefit and use of the Common Areas and Facilities, as such term is defined and conditioned in the Adjacent Lease.
| 5.2 | Parking |
Subject to the same obligations as set forth in the Adjacent Lease, the Tenant shall have the exclusive right at all times during the Term to use for itself and its officers, agents, employees, servants, contractors, customers, clients and invitees, any 11 additional parking spaces (i.e. in addition to the 36 parking spaces provided pursuant to the Adjacent Lease), determined on a first-come, first-served basis, in the parking area located on the Land outside of the Building, the whole free of any additional rent or charge. The Landlord agrees to be responsible for the maintenance of the Parking Spaces.
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| 5.3 | Utilities |
The Tenant hereby acknowledges and agrees that, if a significant increase in electricity consumption is identified as a result of the Tenant’s use of the Premises, the Landlord shall have the option, exercisable in its sole and absolute discretion by written notice to the Tenant, to install, at the Tenant’s sole cost and expense, separate meters or other measuring devices in the Premises or elsewhere to measure the Tenants electricity consumption (the “Electricity Consumption Measuring Work”). The Tenant agrees to use commercially reasonable efforts to cooperate with the Landlord to facilitate the Electricity Consumption Measuring Work and not interfere with such Electricity Consumption Measuring Work. The parties agree that, upon notice from the Landlord to the Tenant of the completion of the Electricity Consumption Measuring Work, the Additional Rent payable by the Tenant pursuant to Section 4.2 shall include the full cost of the electricity consumption measured by the meters or other measuring devices installed pursuant to the Electricity Consumption Measuring Work and shall exclude the Tenant’s Share of the general electricity cost for the Building.
| 5.4 | Hazardous Substances |
(a) The Tenant agrees to comply with the Head Lease, the Landlord’s protocols and procedures as the same may be amended from time to time, and all the applicable laws and regulatory requirements relating to fisheries, the preservation or protection of the environment and the manufacture, processing, distribution, use, treatment, storage, disposal, discharge, transport or handling of any substances, materials or waste regulated or prohibited by such laws or regulatory requirements, including pollutants, contaminants, deleterious substances, dangerous goods or hazardous wastes (collectively, “Hazardous Substances”) through, in or on the Land.
(b) The Landlord agrees to comply with the Head Lease, the Landlord’s protocols and procedures and all the applicable laws and regulatory requirements relating to fisheries, the preservation or protection of the environment and the manufacture, processing, distribution, use, treatment, storage, disposal, discharge, transport or handling of any Hazardous Substances through, in or on the Land.
(c) Without limiting Section 6.1(l) below, if the Tenant or those for whom it is at law responsible causes or permits a spill or other release of a Hazardous Substance on, in or under the Land, the Tenant shall be responsible, at its sole cost and expense, for the investigation and remediation of the affected area(s) and the Tenant agrees to indemnify and save harmless the Landlord, its officers, directors, employees and those for whom it is at law responsible, from any and all damages, losses, costs, orders, fines, charges, expenses, claims, demands, liabilities and obligations with respect to such spill or release of the Hazardous Substance, except as may be caused by or incurred due to the gross negligence or willful misconduct of the Landlord.
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Article 6
TENANT’S COVENANTS
| 6.1 | Tenant’s Covenants |
The Tenant covenants and agrees with the Landlord as follows:
| (a) | to pay the Rent hereby reserved including, without limitation, Basic Rent and Additional Rent, on the days and in the manner aforesaid, without deduction or set off, except as may be otherwise provided herein; | |
| (b) | to insure in respect of the Premises in the same manner as required under the Adjacent Lease; | |
| (c) | to observe and perform all of the covenants, provisos, conditions and agreements as required under the Adjacent Lease; | |
| (d) | not to assign, sublet or part with possession of all or any part of the Premises, including, without the prior written consent of the Landlord, which consent (i) shall not be unreasonably withheld or delayed, (ii) may be subject to the Landlord’s reasonable conditions of compliance by the assignee, or other transferee, as applicable, with the Head Lease and this Lease, and (iii) shall be further subject to obtaining the prior written consent of the OMCIAA; | |
| (e) | not to use the Premises for any purpose other than as laboratory and business offices and uses ancillary thereto permitted by Applicable Laws and the terms of the Head Lease; | |
| (f) | that the Premises shall only be occupied by the Tenant, its employees and others engaged in carrying on the business of the Tenant, including, without limitation, affiliates, partners and others operating pursuant to contractual terms with the Tenant; | |
| (g) | that all of the provisions of the Head Lease to the extent that they relate to the Premises are deemed to be incorporated into this Lease, mutatis mutandis, to the same extent as if all of the covenants to be observed and performed by the Landlord thereunder as they relate to the Premises (other than the covenants of the Landlord to pay Base Rent and Additional Rent), were contained in this Lease as covenants to be observed and performed by the Tenant for the benefit and advantage of the Landlord; | |
| (h) | not to make any improvements or modifications to the Premises except in accordance with the obligations and conditions contained in the Adjacent Lease; | |
| (i) | to leave the Premises at the end of the Term or the earlier expiry of this Lease in the condition required pursuant to the Adjacent Lease; |
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| (j) | that all of the remedies, rights and powers of the OMCIAA under the provisions of the Head Lease are deemed to be incorporated into this Lease, mutatis mutandis, and shall, for the purposes of this Lease, be the remedies, rights and powers of the Landlord in the event of any default or breach by the Tenant of its obligations under this Lease; and | |
| (k) | except with respect to any fraudulent, negligent or unlawful act or omission or wilful misconduct of the Landlord or those for whom it is at law responsible, to indemnify and save harmless the Landlord, its officers, directors, employees and those for whom it is at law responsible, from any and all damages, losses, costs, charges, expenses, claims, demands, liabilities and obligations, whether under the Head Lease or otherwise, with respect to its use of the Premises and the Common Areas and Facilities including, without limitation, as a result of a failure by the Tenant to observe and perform its obligations under this Lease. |
Article 7
LANDLORD’S COVENANTS
| 7.1 | Landlord’s Covenants |
Subject to the Tenant paying the Rent hereby reserved and observing and performing all of its obligations hereunder and subject to the terms of the Head Lease, the Landlord hereby covenants and agrees with the Tenant as follows:
| (a) | to pay to the OMCIAA the rent and other monies reserved by and in the manner provided for under the Head Lease; | |
| (b) | to observe and perform the obligations of the tenant under the Head Lease (except to the extent that the Tenant is required to observe and perform such obligations in respect of the Premises); | |
| (c) | to enforce its rights as tenant under the Head Lease in respect of all of the covenants, provisos, conditions and agreements which are to be observed and performed by the OMCIAA pursuant to the provisions of the Head Lease if the Tenant provides its written approval to such enforcement as same relates to the Premises, provided that the Tenant will pay to the Landlord on demand all of the Landlord’s reasonable costs, expenses and disbursements incurred in doing so as same relate to the Premises only; | |
| (d) | that upon the Tenant paying the Rent hereby reserved and observing and performing all of its obligations hereunder and subject to the terms of the Head Lease, the Tenant shall peacefully and quietly enjoy the Premises for the Term without any interruption, hindrance or disturbance by the Landlord or any other person or persons claiming under it; | |
| (e) | except with respect to any fraudulent, negligent or unlawful act or omission or wilful misconduct of the Tenant or those for whom it is at law responsible, to indemnify and save harmless the Tenant from and against all actions, proceedings, damages, losses, costs, charges, expenses, claims, demands, liabilities and obligations arising from any omission by the Landlord to pay when due the Landlord’s rent reserved under the Head Lease (unless the Tenant has failed to pay the Rent then due to the Landlord under this Lease) or arising from a breach of any of the Landlord’s covenants as tenant under the Head Lease (other than those required to be performed and observed by the Tenant with respect to the Premises pursuant to the terms of this Lease); and | |
| (f) | to promptly provide the Tenant with a copy of all notices received by the Landlord from the OMCIAAto the extent that such notices affect the Premises. |
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Article 8
HEAD Lease
The Tenant acknowledges and agrees that the Lease, demise and use and occupancy of the Premises by the Tenant are subject, and at all times subordinate, to the Head Lease between the Landlord, as tenant, and the OMCIAA, as landlord. The Tenant further acknowledges and agrees that it has no greater interest in the Lands or Building than that of the Landlord pursuant to the Head Lease and as such, if the Head Lease ends, so too will the Tenant’s rights, privileges and interest under this Lease. The Tenant shall not have any rights at law or otherwise to claim against the OMCIAA or any other person with a reversionary interest in and to the Lands or Building for occupancy of the Premises, nor any right to elect to stand in the same position as the Landlord vis-à-vis the OMCIAA. Any rights or privileges afforded by this Lease to the Landlord may be exercised by the OMCIAA or such person from which the OMCIAA derives its own rights and privileges. Further, the Tenant acknowledges that any consent or approval to be obtained by the Tenant hereunder may be subject to consent, approval and authorization under the Head Lease. The Landlord hereby represents and warrants to the Tenant that the Head Lease is in good standing and that, to its knowledge, it has not committed any default or breach thereunder.
Without limiting any other provision of this Lease, the Tenant acknowledges and agrees that the Lands are proximate to airports and as such the Tenant will not do any act or thing, or omit to do any act or thing that would constitute a breach of any rules, regulations and laws with respect to aviation or the operation of an airport.
Notwithstanding any other provision of this Lease, or any other agreement of the parties, the maximum term of this Lease and all renewals and extensions thereof, shall not exceed the maximum term of the Head Lease less one day.
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Article 9
NOTICES
| 9.1 | Notice |
(a) Any notice, demand, statement or request (in this Section referred to as “notice”) herein required or permitted to be given under this Lease shall be in writing and shall be deemed to have been sufficiently and effectually given if signed by or on behalf of the party giving the notice and delivered in person, transmitted by email or delivered by a major international courier company, for next day delivery with charges prepaid, addressed as follows:
| (i) | if to the Landlord: | |
| Suite 380, 18 Louisa Street | ||
| Ottawa, ON K1R 6Y6 | ||
| Attention: Ken Jennings | ||
| Email: kjennings@jenningsdevelopments.com | ||
| (ii) | if to the Tenant: | |
| at the Premises | ||
| Attention: Athena Kartsaklis | ||
| Email:Akartsaklis@vbivaccines.com |
(b) Any such notice, if delivered: (i) by email, shall be deemed to have been given on the day on which it was transmitted if transmitted on a business day prior to 5:00 p.m., Ottawa time, or, otherwise, on the next following business day; (ii) by personal delivery, shall be deemed to have been given when delivered in fact; or (iii) by courier, shall be deemed to have been given on the next business day following the date it was sent.
(c) Any party hereto may at any time change its address for service from time to time by giving notice to the other party in accordance with this Section 9.1.
Article 10
miscellaneous
| 10.1 | Registration of Lease |
Neither the Tenant nor anyone on the Tenant’s behalf or claiming under the Tenant shall register this Lease or any other instrument or notice pertaining to this Lease against the Land without the prior consent of the Landlord.
| 10.2 | Waiver |
If either the Landlord or Tenant excuses or condones any default of the other of any obligation under this Lease, no waiver of such obligation shall be implied as a result of any continuing or subsequent default.
| 10.3 | Partial Payment of Rent |
Acceptance by the Landlord of a lesser amount than the monthly payment of Rent herein stipulated and any endorsement or statement on any cheque or documentation accompanying any payment of Rent shall not be deemed an acknowledgement of full payment or an accord and satisfaction, and the Landlord may accept such payment without prejudice to the Landlord’s right to recover the balance of such Rent or to pursue any other remedy provided in this Lease.
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| 10.4 | Brokers |
Each party shall be responsible for the payment of any and all brokerage fees, consulting fees, commissions or finder’s fees due to any broker or agent that has been retained by it in connection with this Lease, each pursuant to such party’s agreement with its respective broker or agent, and hereby agrees to save harmless the other party in connection therewith.
| 10.5 | Power and Authority |
The Landlord represents and warrants that the Landlord has full power and authority to enter into and grant this Lease.
| 10.6 | No Partnership |
Notwithstanding any provisions of this Lease, nothing in this Lease shall be construed as constituting any partnership, joint venture or any other relationship other than the relationship of Landlord and Tenant.
| 10.7 | Entire Agreement |
This Lease, and the provisions of the Head Lease incorporated herein, contain all the terms and conditions of the agreement between the Landlord and the Tenant relating to the matters herein provided and supersede all previous agreements or representations of any kind made by either party in reference thereto.
| 10.8 | Counterparts |
This Lease may be executed in two counterparts and delivered by email transmission of a copy of an originally or electronically executed document, each of which shall be deemed to be an original, and such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Lease as of the date first written above.
310 Hunt Club Limited Partnership, by its General Partner, 310 Hunt Club GP Inc. | ||
| By | /s/ Christian Jennings | |
| Name: | Christian Jennings | |
| Title: | Director | |
| I have authority to bind the Corporation | ||
| variation biotechnologies inc. | ||
| By | /s/ Jeff Baxter | |
| Name: | Jeff Baxter | |
| Title: | CEO | |
| I have authority to bind the Corporation | ||
Schedule A
DESCRIPTION OF LAND
Schedule B
PREMISES
Exhibit 10.2
PLEASE NOTE: CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
STRATEGIC INNOVATION FUND
VBI COVID-19 Project
This Agreement made
Between:
HER MAJESTY THE QUEEN IN RIGHT OF CANADA (“Her Majesty”)
as represented by the Minister of Industry
(the “Minister”)
| And: |
Variation Biotechnologies Inc., a corporation duly incorporated under the laws of Canada, having its head office located at 310 Hunt Club Road Suite 201, Ottawa, Ontario K1V 1C1
(the “Recipient”)
| And: |
VBI Vaccines Inc., a corporation duly incorporated under the laws of British Columbia having its head office located at 222 Third Street, Suite 2241 Cambridge, Massachusetts 02142 and an office located at 310 Hunt Club Road Suite 201, Ottawa, Ontario K1V 1C1
(the “Guarantor”)
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RECITALS
WHEREAS
| I- | The Strategic Innovation Fund (“SIF”) is designed to encourage research and development, and accelerate the technology transfer and commercialization of innovative products, services, and processes; facilitate the growth and expansion of firms; secure economically significant mandates within or to Canada; and, advance industrial research and technology demonstration activities through collaboration; | |
| II- | Neither the entering into this Agreement nor the provision by the Minister of the Contribution is contingent upon export performance on the part of the Recipient; |
| III- | the Project involves: | ||
| ● | activities related to the creation or deployment of medical countermeasures (MCMs), or any activity related to the response to COVID-19; | ||
| ● | activities related to Canada’s long-term emergency preparedness; and | ||
| ● | obtaining an R&D and/or production mandate which was previously held outside of Canada or is being established for the first time in relation to Canada’s emergency preparedness. | ||
| IV- | The Minister has agreed to make a non-repayable contribution to the Recipient in support of the Recipient’s Eligible Supported Costs (as defined herein) of the Project with total Project costs of seventy-four million, six hundred and thirty-six thousand dollars ($74,636,000); | ||
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NOW, THEREFORE in accordance with the mutual covenants and agreements herein, Her Majesty and the Recipient agree as follows:
| 1. | Purpose of the Agreement |
The purpose of this Agreement is to set out respective obligations and the terms and conditions under which the Minister will provide funding in support of the Project (as defined herein).
| 2. | Interpretation |
2.1 Definitions.
In this Agreement, a capitalized term has the meaning given to it in this section, unless otherwise specified:
“Acquisition or Divestiture” means an acquisition of a business, the sale of a business or a merger or amalgamation.
“Activity” means a significant task that must take place in order to complete the Project. It has duration, during which time the work of that task is performed, and may have resources and costs associated with that task as set out in Form C1- PROJECT COSTS BREAKDOWN of Schedule 1 - Statement of Work.
“Agreement” means this contribution agreement including all the schedules attached hereto, as such may be amended, restated or supplemented, from time to time.
“Affiliated Person” means an affiliated person as defined in the Income Tax Act, as amended.
“Background Intellectual Property” means Intellectual Property that is not Project Intellectual Property and that is required for the carrying out of the Project or the exploitation of the Project Intellectual Property.
“Background Intellectual Property Rights” means the Intellectual Property Rights in Background Intellectual Property.
“Benefits Commitments” means those activities described in Subsection 6.3 of this Agreement that will generate benefits to Canada.
“Benefits Phase” means the period from the Project Completion Date to and including the last day of the Term.
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“Change in Control” of the Recipient means:
| (a) | if the Recipient is a public company, the acquisition by an individual or company (or two or more of them acting in concert) that results in its or their direct or indirect beneficial ownership of 20% or more of outstanding shares of voting stock of the Recipient; or |
| (b) | if the Recipient is a private company, the acquisition by an individual or company (or two or more of them acting in concert) that results in its or their direct or indirect beneficial ownership of 50% or more of the voting stock in the Recipient; or |
| (c) | if the Recipient enters into a binding obligation to sell, sells or otherwise disposes of all or substantially all of its assets. |
“Claim Period” means the following quarters of a calendar year: January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31.
“Collaboration” means the Recipient’s association with one or more Collaboration Partners for the purpose of research and development.
“Collaboration Partner” means, other than the Recipient and sub-contractors, any small and medium-sized Canadian based enterprise, any Canadian research institute, any licensed or accredited academic, post-secondary institution in Canada that is/are involved in the Collaboration.
“Contribution” means the funding, in Canadian dollars, made available by the Minister under this Agreement.
“CO-OP Term” means a four (4) month full-time position.
“Dispose” means, as regards a Project Asset, the transferring outside Canada, by the Recipient, selling, leasing or otherwise disposing including, in the case of a prototype or pilot plant, the transfer to commercial production, but in any event, shall not include abandoning the Project Asset for legitimate business reasons, such as the disposal of obsolete or disused equipment or materials.
“Eligibility Date” means ***.
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“Eligible Costs” means the costs associated with work performed in Canada, or outside of Canada to the extent explicitly permitted in this Agreement that are incurred and paid by the Recipient in respect of the Project, and in accordance with Schedule 3 - Cost Principles, excluding any costs prohibited or deemed ineligible elsewhere in this Agreement.
“Eligible Not-Supported Costs” any costs that are specifically identified in Schedule 1 - Statement of Work as not being supported including those Eligible Costs that are in excess of limits imposed on indirect (overhead) costs under Schedule 3 – Cost Principles of this Agreement.
“Eligible Supported Costs” means any Eligible Costs, excluding Eligible Not-Supported Costs.
“Event of Default” means the events of default listed in Subsection 14.1 of this Agreement.
“Execution Date” means the date of the last signature to this Agreement such that the Agreement is signed and dated by all Parties.
“Fair Market Value” means the price that would be agreed to in an open and unrestricted market between knowledgeable and willing parties dealing at arm’s length, who are fully informed and not under any compulsion to transact.
“Force Majeure” means any cause which is unavoidable or beyond the reasonable control of the Recipient, including war, riot, insurrection, strikes, or any act of God or other similar circumstance and which could not have been reasonably circumvented by the Recipient without incurring unreasonable cost.
“FTE” or “Full Time Equivalent” means each employee or, where applicable, intern, who works for the Recipient on a full-time basis (i.e. they are responsible to work at least 2,000 hours for the Recipient when calculated on an annual basis) and, in the case of hourly paid employees or interns who are responsible to work for the Recipient less than on a full-time basis, each equivalent to such a full-time worker, where the number of such equivalents is calculated by dividing (a) by (b) where (a) = the aggregate of all hours worked by such individuals for the Recipient including hours taken by them as paid vacation, sick leave, and for other similar reasons, calculated on an annual basis, and (b) = 2,000 hours.
“Government Fiscal Year” means the period from April 1 of one year to March 31 of the following year.
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“Highly Skilled” means an employee that requires specialized training in order to operate, manage or participate in the Project. This may include scientists, engineers, managers and specialized trades.
“Intellectual Property” means all inventions, whether or not patented or patentable, all technical information, whether or not constituting trade secrets, and all copyrightable works, industrial designs, integrated circuit topographies, and distinguishing marks or guises, whether or not registered or registrable.
“Intellectual Property Rights” means all rights recognized by law in or to Intellectual Property, including but not limited to Intellectual Property rights protected through legislation. These shall include patents, copyrights, industrial design rights, integrated circuit topography rights, rights in trademarks and trade names, all rights in applications and registrations for any of the foregoing, and all rights in trade secrets and confidential information.
“Interest Rate” means the Bank Rate, as defined in the Interest and Administrative Charges Regulations, in effect on the due date, plus 300 basis points, compounded monthly. The Interest Rate for a given month can be found at:
http://www.tpsgc-pwgsc.gc.ca/recgen/txt/taux-rates-eng.html
“Master Schedule” means a summary-level Project schedule that identifies the major Activities and work breakdown structure components and Milestones as reflected in Form A – MASTER SCHEDULE (Gantt Chart) of Schedule 1 - Statement of Work.
“Material Change” is a significant change in the scope, objectives, outcomes or benefits of the Project including without limitation, the following:
| (a) | The Project is not completed or not expected to be completed by the Project Completion Date; |
| (b) | the estimated Total Eligible Costs set out in Form C2 – ESTIMATED COST BREAKDOWN BY FISCAL YEAR of Schedule 1 – Statement of Work are expected to be reduced or are expected to be exceeded by twenty percent (20%) or more; |
| (c) | a change in the locations where the Project is to be performed as identified in Form D – PROJECT LOCATION AND COSTS of Schedule 1 – Statement of Work. |
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“Milestone” means a significant point or event in the Project as set forth in Form B - MILESTONES of Schedule 1 - Statement of Work.
“Party” means the Minister, or the Recipient or any Guarantor, and “Parties” means all of them.
“Project” means the project as described in Schedule 1 - Statement of Work.
“Project Asset” means an asset which, in whole or in part, has been acquired, created, developed, advanced and/or contributed to by the Contribution.
“Project Completion Date” means March 31, 2022.
“Project Intellectual Property” means all Intellectual Property conceived, produced, developed or reduced to practice in carrying out the Project by the Recipient and/or any Affiliated Persons of the Recipient, or any of their employees, agents, contractors (with respect to contractors only, to the extent such Intellectual Property relates specifically to the Project or Resulting Products) or assigns.
“Project Intellectual Property Rights” means the Intellectual Property Rights in the Project Intellectual Property.
“Public Office Holder” means a public office holder as defined in the Lobbying Act, as amended.
“Resulting Products” means all products, services or processes that:
| a. | are produced using the Project Intellectual Property; | |
| b. | incorporate any of the Project Intellectual Property; or | |
| c. | result from or are used to carry out the Project in response to COVID-19. |
“Recipient Fiscal Year” means the period for which the Recipient’s accounts in respect of its business or property are prepared for purposes of assessment under the Income Tax Act, as amended.
“Schedule” means a schedule to this Agreement, including any amendments or supplements.
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“Similar Goods” means goods or services that closely resemble the goods or services being transferred, in respect of their component materials, form, function and characteristics, and are capable of performing an equivalent function as, and of being commercially interchangeable with, the goods being transferred.
“Technology Readiness Level” or “TRL” means technology readiness according to the Technology Readiness Level scale described below.
| Technology Readiness Level | Description | |
| TRL 1—Basic principles observed and reported | Lowest level of technology readiness. Scientific research begins to be translated into applied research and development (R&D). Examples might include paper studies of a technology’s basic properties. | |
| TRL 2—Technology concept and/or application formulated | Invention begins. Once basic principles are observed, practical applications can be invented. Applications are speculative, and there may be no proof or detailed analysis to support the assumptions. | |
| TRL 3—Analytical and experimental critical function and/or characteristic proof of concept | Active R&D is initiated. This includes analytical studies and laboratory studies to physically validate the analytical predictions of separate elements of the technology. | |
| TRL 4—Product and/or process validation in laboratory environment | Basic technological products and/or processes are tested to establish that they will work. | |
| TRL 5—Product and/or process validation in relevant environment | Reliability of product and/or process innovation increases significantly. The basic products and/or processes are integrated so they can be tested in a simulated environment. |
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| Technology Readiness Level | Description | |
| TRL 6—Product and/or process prototype demonstration in a relevant environment | Prototypes are tested in a relevant environment. Represents a major step up in a technology’s demonstrated readiness. Examples include testing a prototype in a simulated operational environment. | |
| TRL 7—Product and/or process prototype demonstration in an operational environment | Prototype near or at planned operational system and requires demonstration of an actual prototype in an operational environment (e.g. in a vehicle). | |
| TRL 8—Actual product and/or process completed and qualified through test and demonstration | Innovation has been proven to work in its final form and under expected conditions. In almost all cases, this TRL represents the end of true system development. | |
| TRL 9—Actual product and/or process proven successful | Actual application of the product and/or process innovation in its final form or function. |
“Term” means the duration of this Agreement as set out in Subsection 3.2 of this Agreement.
“Work Phase” means the period of time from the Eligibility Date to and including the Project Completion Date.
2.2 Singular/Plural. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural.
2.3 Entire Agreement. Unless amended in writing by the Parties, this Agreement comprises the entire agreement between the Parties in relation to the Project. No prior document, negotiation, provision, undertaking or agreement in relation to the subject matter of this Agreement has legal effect. No representation or warranty, whether express, implied or otherwise, has been made by the Minister to the Recipient, except as expressly set out in this Agreement.
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2.4 Inconsistency. In case of inconsistency or conflict between a provision contained in the part of the Agreement preceding the signatures and a provision contained in any of the Schedules to this Agreement, the provision contained in the part of the Agreement preceding the signatures will prevail unless expressly stated otherwise in the applicable Schedule.
2.5 Schedules. This Agreement contains the following Schedules as described below, which form an integral part of this Agreement:
| Schedule 1 - Statement of Work | |
| Schedule 2 - Communications Obligations | |
| Schedule 3 - Cost Principles | |
| Schedule 4 - Reporting Requirements | |
| Schedule 5 - Resolution Process |
| 3. | Duration of Agreement |
3.1 Execution. This Agreement must be signed by the Recipient and received by the Minister within thirty (30) days of its signature by the Minister, failing which it will be null and void.
3.2 Duration of Agreement. This Agreement will commence on the Execution Date and will expire, subject to Subsection 3.3, no earlier than *** years following the Project Completion Date unless terminated earlier in accordance with the terms of this Agreement.
3.3 Survival Period. Notwithstanding the provisions of Subsection 3.2 above, the rights and obligations described in the following Sections or Subsections will survive for a period of three (3) years beyond the Term or early termination of the Agreement:
| Section 7 - Government Funding | |
| Subsection 8.5 - Overpayment by Minister | |
| Section 9 - Reporting, Monitoring, Audit and Evaluation | |
| Subsection 10.2(d) - Disposal of Assets | |
| Subsection 13.1 - Indemnification | |
| Subsection 13.2 - Limitation of Liability |
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| Section 14 - Default and Remedies | |
| Subsection 17.2 - Interest | |
| Subsection 17.3 - Set-off Rights of Minister | |
| Subsection 17.8 - Applicable Law |
| 4. | The Contribution |
4.1 Contribution. Subject to the terms and conditions of this Agreement, the Minister agrees to make a non-repayable Contribution to the Recipient in respect of the Project in an amount not exceeding the lesser of (a) and (b) as follows:
| (a) | seventy-five percent (75%) of the Eligible Supported Costs; and | ||
| (b) | fifty-five million, nine hundred and seventy-six thousand dollars | ($55,976,000). |
4.2 Funding Period. The Minister will not contribute to any Eligible Supported Costs incurred by the Recipient prior to the Eligibility Date or after the Project Completion Date. In no event will Eligible Supported Costs incurred prior to the Execution Date exceed *** percent (***%) of the “estimated Total Eligible Supported Costs” set out in Form C2 - ESTIMATED COST BREAKDOWN BY FISCAL YEAR of Schedule 1 - Statement of Work.
4.3 Fiscal Year. The payment of the Contribution per Government Fiscal Year is estimated at amounts specified in Form C2 - ESTIMATED COST BREAKDOWN BY FISCAL YEAR of Schedule 1 - Statement of Work. The Minister will have no obligation to pay any amounts in any Government Fiscal Year other than those specified in Form C2 - ESTIMATED COST BREAKDOWN BY FISCAL YEAR of Schedule 1 - Statement of Work. If, for a given Government Fiscal Year, the Recipient claims an amount less than the estimated Contribution for that Government Fiscal Year specified in Form C2 - ESTIMATED COST BREAKDOWN BY FISCAL YEAR of Schedule 1 - Statement of Work, the Minister may consider any request to reprofile the excess funds to future Government Fiscal Years before the Project Completion Date.
4.4 Overruns. The Recipient shall be responsible for all costs of the Project, including cost overruns, if any.
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4.5 Holdbacks. Notwithstanding any other provisions of this Agreement, the Minister may, at the Minister’s sole discretion, withhold up to ten percent (10%) of the Contribution until:
| (a) | the Project is completed to the satisfaction of the Minister; | |
| (b) | the final report described in Subsection 8.3(c) has been submitted to the satisfaction of the Minister; | |
| (c) | the Minister has approved the final claim described in Subsection 8.3. |
| 5. | Recipient’s Obligations |
5.1 Project Completion Date. The Recipient agrees to carry out the Project in a diligent and professional manner using qualified personnel, and complete same on or before the Project Completion Date.
5.2 Project Location. Except as otherwise permitted in Subsection 6.4 below, the Recipient agrees to carry out the Project exclusively in Canada located in Ottawa, Ontario and in other locations across Canada.
5.3 Benefits Commitments. The Recipient agrees to conduct Benefits Commitments exclusively in Canada, as per Subsection 6.3.
5.4 Compliance. The Recipient agrees to satisfy and comply with all other terms, conditions and obligations contained in this Agreement.
| 6. | Special Conditions |
6.1 Pre-Disbursement
The Recipient covenants and agrees to the following:
| 6.1.1 | First Claim. Upon submission of the first claim, the Recipient shall provide evidence to the Minister, to the Minister’s satisfaction, that it has available funds to carry out the Project and continue operating for the remainder of the Government Fiscal Year in which the claim is received by the Minister, or for a period of six months from the day the claim is received by the Minister, whichever is greater. No disbursement of the Contribution shall be made prior to the Recipient providing such satisfactory evidence. If the Recipient fails to satisfy such condition within one hundred and twenty (120) days of the receipt of the first claim, the Minister may, at his/her discretion, terminate the Agreement upon written notice. |
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| 6.1.2 | Annual Pre-Disbursement. As a condition precedent to the first disbursement of the Contribution in each Government Fiscal Year, the Recipient shall provide evidence to the Minister, to the Minister’s satisfaction, that it has available funds to carry out the Project and continue operating for that Government Fiscal Year. No disbursement of the Contribution shall be made prior to the Recipient providing such satisfactory evidence. If the Recipient fails to satisfy such condition within one hundred and twenty (120) days of the beginning of each Government Fiscal Year, the Minister may, at his discretion, terminate the Agreement upon written notice. |
| 6.1.3 | *** and *** Strategy. Prior to the first disbursement of the Contribution, the Recipient shall submit, to the satisfaction of the Minister, a *** and *** plan that will outline all efforts undertaken by the Recipient to *** and *** related to the Project. This plan shall also include *** educational awareness training for employees. The Recipient agrees to report annually on any material changes to this plan during the Term. |
6.2 Guarantor
| 6.2.1 | Guarantee. In consideration of the Minister providing the Contribution, the Guarantor guarantees the complete performance and fulfillment of every obligation of the Recipient under this Agreement, including without limitation, the completion of the Project in accordance with this Agreement. If the Recipient fails to perform or otherwise satisfy any of its obligations related to the Agreement, immediately after receiving a written demand from the Minister, the Guarantor must perform or satisfy, or arrange for the performance or satisfaction of, all outstanding obligations of the Recipient. The Guarantor’s obligations under this Guarantee are as a primary obligor and not only as a surety. The Minister is not required to resort to or exhaust any recourse that it may have against the Recipient or any other person before being entitled to make claim against the Guarantor. As a result of the forgoing, the Guarantor or the Recipient may be compelled separately to perform any obligation contained in this Agreement. |
| 6.2.2 | Taxes. Any payment to be made by the Guarantor in respect of this Agreement shall be made free and clear of and without deduction or withholding for or on account of any present and future taxes, levies, imposts, stamp taxes, duties, charges, fees deductions, withholdings, penalties or interest (collectively, “Taxes”) provided that if the Guarantor is required to withhold or deduct any taxes from such payments, the sum payable shall be increased as necessary so that after making all required withholdings or deductions, the Minister receives an amount equal to the sum he/she would have received had no such withholding or deduction been made. |
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| 6.2.3 | Costs. The Guarantor agrees to reimburse the costs and expenses incurred by the Minister in enforcing the guarantee under Paragraph 6.2(a). |
| 6.2.4 | Representations. The Guarantor represents to the Minister that it has the power and authority, and has met all legal requirements to grant the guarantee under Paragraph 6.2(a) and that such guarantee is enforceable against it in accordance with its terms. |
6.3 Benefits Commitments
The Recipient covenants and agrees to the following:
| 6.3.1 | Strengthen Canada’s capability to respond to COVID-19 and future pandemics. |
| (a) | to work with *** to ensure that any vaccine developed within the scope of this Project will be accessible and available for the Canadian population on a timely basis. | |
| (b) | to make *** to ensure that, once commercially available, the vaccines will be made available globally. | |
| (c) | to work with the Government of Canada and other parties, in good faith and using ***, to increase domestic and global affordability and access to Resulting Products, in accordance with relevant guidance and policies published by the World Health Organization and the United Nations. |
| 6.3.2 | Regulatory Approval for Clinical Trials |
| (a) | to demonstrate that it is securing regulatory approval to undertake clinical trials, as outlined within Schedule 1 - Statement of Work, for its vaccine as the Project progresses by providing, to the Minister, to the Minister’s satisfaction, a copy of the following documents issued by Health Canada within thirty (30) days of receipt by the Recipient: |
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| i. | Clinical Trials Phase 1: No Objection Letter (NOL) from Health Canada: This NOL will be provided to the Minister no later than thirty (30) days following the Completion Date for Activity 1. For clarity, Phase I trials include the initial safety studies on a new drug, including first administration of the drugs into humans, usually conducted in healthy volunteers. | |
| ii. | Clinical Trials Phase 2: No Objection Letter (NOL) from Health Canada: This NOL, or Clinical Trial Authorization, will be provided to the Minister no later than the Completion Date for Activity 2. For clarity, Phase II trials include clinical trials to evaluate the potency of the drug in at risk subjects with medical conditions to be prevented and to determine the side effects and risks associated with the drug. |
| (b) | If at any time the Recipient receives a Not Satisfactory Notice (NSN) from Health Canada related to the Project, the Recipient will immediately inform the Minister and the Minister may, at his discretion, terminate the Agreement. Any Project Costs incurred by the Recipient after the date of the NSN will not be eligible for reimbursement by the Minister. |
| 6.3.3 | Monitoring Progress of Clinical Trials |
| (a) | to provide, upon request by the Minister, copies of the pre-clinical and clinical documents submitted to Health Canada within the: | |
| i. | Clinical Trial Application (CTA) for Phase 1; and | |
| ii. | Clinical Trial Application (CTA) for Phase 2. | |
| (b) | that the Minister may share, at his/her discretion, share any of the documentation listed above with governmental experts from the Public Health Agency of Canada, the National Research Council, Health Canada and the Canadian Institutes of Health Research for the purpose of validating progress related to the Project. | |
| 6.3.4 | Employment in Canada |
| (a) | to maintain twenty-five (25) FTEs in Canada and create an additional five (5) FTEs in Canada by ***. | |
| (b) | to maintain thirty (30) FTEs in Canada until ***. | |
| (c) | to employ a minimum of *** total CO-OP Terms in Canada within ***. |
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| 6.3.5 | *** and *** |
| (a) | to implement and submit to the Minister a *** and *** plan within *** of the Execution Date, which will stipulate measurable goals and outcomes, including baseline data, relating to this *** initiative. The Recipient will report to the Minister annually on progress achieved for the Term. | |
| (b) | to work to increase *** and training in Canada, and report annually to the Minister on progress achieved for the Term. | |
| (c) | in addition to increasing annual spending on training and corporate initiatives, to additional skills training per employee, per year, for the Term. |
| 6.3.6 | Facilities Closure Mandatory Repayment |
In the event of a closure of the Recipient’s Ottawa-based research facility during the Term, all remedies available to the Minister as set out in the Agreement may be exercised.
6.4 Work Outside of Canada
In consideration of the Minister providing the Contribution, subject to the costs to be incurred as specified below, the Recipient may incur up to *** percent (***%) of Eligible Supported Costs outside of Canada to ***. Any costs above this threshold will be considered ineligible and will not be subject to claim.
The Recipient will make best efforts to conduct all clinical trials in Canada unless ***.
The Parties acknowledge *** and the Recipient’s preferred solution to have the work conducted by Therapure Biopharma, a Canadian manufacturer as outlined in Schedule 1 – Statement of Work. In the event that ***, the Recipient has developed ***. All *** or *** taking place outside of Canada must be clearly identified within Schedule 1 - Statement of Work. Any change to the Statement of Work is subject to Ministerial consent, as per Subsection 6.6, which will not be unreasonably withheld.
6.5 Annual Benefits Reporting
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| (a) | In addition to Schedule 4 - Reporting Requirements, on an annual basis and for the Term, the Recipient shall provide information identifying the Project’s achievements relative to planned outcomes and benefits, including: | ||
| i. | Number of FTEs created and maintained with average and range of salary levels; | ||
| ii. | Market share secured or captured; | ||
| iii. | Composition of workforce, including diversity and gender representation; | ||
| iv. | Dollars spent on gross Canadian R&D and gross global R&D; | ||
| v. | Productivity improvement levels; | ||
| vi. | Number and details of post-secondary institution collaborations; | ||
| vii. | Number and activities of CO-OP positions; and | ||
| viii. | Training activities of the workforce. | ||
| (b) | In addition to Schedule 4 - Reporting Requirements, on an annual basis and for the Term, the Recipient shall provide information on the Project derived benefits but not limited to information on: | ||
| i. | Impact to the growth of the Canadian supply chain; | ||
| ii. | New intellectual property generated; | ||
| iii. | Licenses granted under Subsection 11.4.2; | ||
| iv. | R&D and product development levels as a function of revenue; | ||
| v. | Details of increased collaborations, including associated costs and activities; | ||
| vi. | Efforts to reduce environmental footprint; | ||
| vii. | Efforts to create opportunities for *** to scale and enter the *** ecosystem; | ||
| viii. | Details of internal Artificial Intelligence (AI) and Machine Learning (ML) applications and processes; and | ||
| ix. | Productivity improvement levels. | ||
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| 6.6 | Amendment. The Recipient shall provide written notice to the Minister of any changes which may have an impact on Schedule 1 – Statement of Work or on the Benefits Commitments in accordance with 6.3 of this Agreement. The Recipient shall provide to the satisfaction of the Minister sufficient written reasons to justify modifications to the Agreement. At the Minister’s sole discretion, the Minister may request a formal amendment to be executed by the Parties. The Parties agree to negotiate in good faith such amendments. If, after following the process in Schedule 5 – Resolution Process, failure to agree will result in the Minister declaring an Event of Default in accordance with 14.1 of this Agreement. |
| 6.7 | *** Termination. In the event the Recipient does not ***, the Parties agree to discuss alternatives or to discuss *** termination of the Agreement. |
| 7. | Government Funding |
7.1 The Recipient represents that the list below states all funding from federal, provincial, territorial or municipal governments in Canada (“Government Funding”), requested or received by the Recipient or that the Recipient currently expects to request or receive to cover any of the Eligible Supported Costs as of the date of this Agreement. The list below excludes provincial and federal investment tax credits.
| Federal | $ 55,976,000 (SIF) | |||
| $ | 1,000,000 (Industrial Research Assistance Program) | |||
| Provincial | $ | 0 | ||
| Territorial | $ | 0 | ||
| Municipal | $ | 0 | ||
| Total | $ | 56,976,000 | ||
7.2 The Recipient shall inform the Minister of any change to the amount of Government Funding identified in Subsection 7.1. The Recipient shall also inform the Minister of any provincial and federal investment tax credits, received or expected to be received by the Recipient for the Eligible Supported Costs. Such notice must be made promptly in writing, and in any case not later than thirty (30) days following any change. In the event of additional Government Funding, which results in a total amount of Government Funding in excess of the Total Eligible Supported Costs, the Minister will have the right to either reduce the Contribution to the extent that the Government Funding received by the Recipient exceeds the Total Eligible Supported Costs or require the Recipient to repay the Contribution hereunder equal to the amount that the Government Funding received by the Recipient exceeds the Total Eligible Supported Costs in accordance with Subsection 8.5.
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7.3 In no instance will the total Government Funding (including SIF funding, provincial and federal investment tax credits) towards Eligible Supported Costs of the Project be allowed to exceed *** percent (***%) of total Eligible Supported Costs.
| 8. | Claims and Payments |
8.1 Separate Records. The Recipient shall maintain accounting records that account for the Contribution paid to the Recipient and the related Project costs, separate and distinct from any other sources of funding.
8.2 Claims Procedures. The Minister will reimburse claims for Eligible Supported Costs submitted for a Claim Period, provided there is no Event of Default and the claims are:
| (a) | submitted for each Claim Period, except for the first claim which will start on the Eligibility Date; | ||
| (b) | submitted within forty-five (45) days of the end of each Claim Period; | ||
| (c) | accompanied with details of all costs being claimed according to Schedule 3 – Cost Principles, which have been incurred by the Recipient and which will be substantiated by such documents as may be required by the Minister and presented in accordance with the Activities and the Milestones contained in Schedule 1 - Statement of Work; | ||
| (d) | certified, in a form satisfactory to the Minister, by the chief financial officer of the Recipient or such other person considered satisfactory to the Minister; | ||
| (e) | adjusted, if necessary, by including a deduction for expenses included in a previous claim which were not eligible expenses according to the Eligible Supported Costs definition in this Agreement or which were not paid by the Recipient; | ||
| (f) | accompanied by a report containing: | ||
| (i) | the Recipient’s revised projections of the Project cash flows for the current Government Fiscal Year; | ||
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| (ii) | an identification of any planned or completed transfer to commercial production, transfer outside of Canada, sale, lease or other disposal of equipment funded in whole or in part by the Contribution; | ||
| (iii) | an itemized list of foreign sub-contracting costs, if any; | ||
| (iv) | the foreign exchange rates used in the claim; | ||
| (v) | progress report as specified in Subsection 1.2 of Schedule 4 - Reporting Requirements; and | ||
| (vi) | such other information as the Minister may request from time to time. | ||
| (g) | accompanied by a statement from the Recipient repeating and confirming the representations set out in Section 10 of this Agreement as required by Subsection 10.3, and a certification that there are no Events of Defaults (and no state of facts exist which, with the giving of notice or the passing of time, or both, would constitute an Event of Default); | ||
| (h) | substantially (± 20 percent (20%)) consistent with the cost estimates of Schedule 1 - Statement of Work; and | ||
| (i) | accompanied by the Recipient’s travel policy (first claim only). | ||
8.3 Final Claim Procedures. The Recipient shall submit, within forty-five (45) days after the Project Completion Date, the final claim along with:
| (a) | an itemized statement certified by the Recipient’s Senior Vice President of Finance, or such other person considered satisfactory to the Minister, attesting to the total Eligible Supported Costs for the Project incurred and paid; | |
| (b) | a statement of the total Government Funding (federal, provincial and municipal funding as well as tax credits) received or requested to cover the Eligible Supported Costs of the Project; and | |
| (c) | a final progress report on the Project, as more fully described in Subsection 1.3 of Schedule 4 - Reporting Requirements. |
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| 8.4 | Payment Procedures. |
| (a) | The Minister shall review and approve the documentation submitted by the Recipient following the receipt of the Recipient’s claim and in the event of any deficiency in the documentation, the Minister will notify the Recipient and the Recipient shall immediately take action to address and rectify the deficiency. | |
| (b) | Subject to the maximum Contribution amounts set forth in Subsection 4.1 and all other conditions contained in this Agreement, the Minister shall pay to the Recipient a percentage of the Eligible Supported Costs set forth in the Recipient’s claim based on the sharing ratio identified in Paragraph 4.1 (a), in accordance with the Minister’s customary practices. | |
| (c) | The Minister may request at any time that the Recipient provide satisfactory evidence to demonstrate that all Eligible Costs claimed have been paid. | |
| (d) | The Minister may provide an advance payment to the Recipient, which will only be provided if the need for the advance payment has been properly justified by the Recipient, to the Minister’s satisfaction, and once the Pre-Disbursement Conditions are met, as per Subsection 6.1. |
| (i) | The Minister shall review and approve the documentation submitted by the Recipient with the request for advance payment. In the event of any deficiency in the documentation, the Minister shall notify the Recipient and the Recipient shall immediately take action to address and rectify the deficiency. | |
| (ii) | Advance payments will need to be reconciled, and adjustments to subsequent disbursements may be made as necessary. Under no circumstance, will three consecutive advance payments be made to the Recipient without the submission of an advance reconciliation to demonstrate the expenditures paid for using funds received through the advance payment. For greater clarity, a third consecutive payment will not be made until a reconciliation has been approved for the first advance payment. |
8.5 Overpayment by Minister. Where the Minister determines that the amount of the Contribution disbursed exceeds the amount to which the Recipient is entitled, the Recipient shall repay to the Minister, promptly and no later than thirty (30) days from notice from the Minister, the amount of the overpayment together with interest at the Interest Rate from the date of the notice to the day of payment to the Minister in full. Any such amount is a debt due to Her Majesty and is recoverable as such.
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| 9. | Reporting, Monitoring, Audit and Evaluation |
9.1 Reports. The Recipient agrees to provide the Minister with the reports as described in Schedule 4 - Reporting Requirements, to the Minister’s satisfaction.
9.2 Additional Information. Upon request of the Minister and at no cost to the Minister, the Recipient shall promptly elaborate upon any report submitted or provide such additional information as may be requested.
9.3 Minister’s Right to Audit Accounts and Records. The Recipient shall, at its own expense, and until the end of the Recipient Fiscal Year that ends seven (7) years after the fiscal year of the date on which they were created, maintain and preserve in Canada and make available for audit and examination by the Minister or the Minister’s representatives all books, accounts and records, *** and all other documentation relating to this Agreement or the Project held by the Recipient and ***, and of the information necessary to ensure compliance with the terms and conditions of this Agreement, including repayment to the Minister. The Minister will have the right to conduct such audits at the Minister’s expense as may be considered necessary.
9.4 Auditor General Rights. The Recipient recognizes, acknowledges and accepts that the Auditor General of Canada may, at the Auditor General’s cost, after consultation with the Recipient, conduct an inquiry under the authority of subsection 7.1 (1) of the Auditor General Act in relation to any funding agreement (as defined in subsection 42 (4) of the Financial Administration Act) with respect to the use of the Contribution received.
For the purposes of any such inquiry undertaken by the Auditor General, the Recipient shall provide, upon request and in a timely manner, to the Auditor General or anyone acting on behalf of the Auditor General,
| (a) | all records held by the Recipient, its Affiliated Persons, agents or contractors relating to this Agreement and the use of the Contribution provided under this Agreement; and | |
| (b) | such further information and explanations as the Auditor General, or anyone acting on behalf of the Auditor General, may request relating to this Agreement or the use of the Contribution. |
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9.5 Access to Records. The Recipient shall ensure that its agents, employees, assigns, contractors, and Affiliated Persons provide to the Minister or the Auditor General or their authorized representatives records and other information that are in possession of those agents, employees, assigns, contractors, and Affiliated Persons and that relate to this Agreement or to the use of the Contribution, ***. Upon request of the Minister, the Recipient shall provide the Minister with copies of documentation received from agents and contractors relating to this Agreement or to the use of the Contribution.
9.6 Access to Premises. The Recipient and its Affiliated Persons shall, upon reasonable notice, provide the representatives of the Minister reasonable access to premises to inspect and assess the progress of the Project or any element thereof and supply promptly on request such data relating to the Project as the Minister may reasonably require for statistical or Project evaluation purposes.
9.7 Evaluation. The Recipient shall, at its own expense, participate in the preparation of case studies reporting on the outcomes of the Project, to be completed by the Minister or the Minister’s agents, in order to assist in the Minister’s preparation of an overall evaluation of the value and effectiveness of SIF.
| 10. | Representations, Warranties and Covenants |
| 10.1 | Representations. The Recipient represents and warrants that: |
| (a) | it is duly incorporated under Canadian law and validly existing and in good standing and has the power and authority to carry on its business, to hold property and to enter into this Agreement and undertakes to take all necessary action to maintain itself in good standing, to preserve its legal capacity and to remain incorporated in a Canadian jurisdiction; | |
| (b) | signatories to the Agreement have been duly authorized to execute and deliver this Agreement; | |
| (c) | the execution, delivery and performance of this Agreement have been duly and validly authorized and that when executed and delivered, the Agreement will constitute a legal, valid and binding obligation enforceable in accordance with its terms; | |
| (d) | it is under no obligation or prohibition, nor is it subject to or threatened by any actions, suits or proceedings that could or would prevent compliance with the Agreement. The Recipient shall inform the Minister forthwith of any such occurrence; |
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| (e) | the execution and delivery of this Agreement and the performance by the Recipient of its obligations hereunder will not, with or without the giving of notice or the passage of time or both: |
| (i) | violate the provisions of the Recipient’s by-laws, any other corporate governance document subscribed to by the Recipient or any resolution of the Recipient; | |
| (ii) | violate any judgment, decree, order or award of any court, government agency, regulatory authority or arbitrator; or | |
| (iii) | conflict with or result in the breach or termination of any material term or provision of, or constitute a default under, or cause any acceleration under, any license, permit, concession, franchise, indenture, mortgage, lease, equipment lease, contract, deed of trust or any other instrument or agreement by which it is bound; |
| (f) | it has obtained or will obtain all necessary licences and permits in relation to the Project, which satisfy the requirements of all regulating bodies of appropriate jurisdiction; | |
| (g) | it owns or holds sufficient rights in any Intellectual Property required to carry out the Project; and, | |
| (h) | the description of the Project in Schedule 1 - Statement of Work is complete and accurate. |
| 10.2 | Covenants. The Recipient covenants and agrees that: |
| (a) | it is solely responsible for providing or obtaining the funding, in addition to the Contribution, required to carry out the Project and the fulfilment of the Recipient’s other obligations under this Agreement; | |
| (b) | no Material Change within the control of the Recipient will be made without the prior written consent of the Minister. In the event that the Minister does not consent to such a Material Change, the Minister may exercise the remedies set out in Subsection 14.3; | |
| (c) | no Change in Control will be made without the prior written consent of the Minister. |
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| (i) In the case where the Recipient is a private company, the Recipient shall notify the Minister, in writing, no later than thirty (30) days prior to the date from which the Recipient expects to have a Change in Control, and the Minister will confirm no later than thirty (30) days after receiving notification from the Recipient if it consents to the Change in Control. Subject to subsection 17.13, consent will not be unreasonably withheld. | ||
| (ii) In the case where the Recipient is a public company, the Recipient shall notify the Minister, in writing, of any Change in Control no later than thirty (30) days following any Change in Control. | ||
| (iii) Prior to providing consent, the Minister may, as a result of notification of the Change in Control, require additional due diligence to determine the impacts of the Change in Control, such as the following, but not be limited to: the legal status of the Recipient pursuant to the Strategic Innovation Fund’s program terms and conditions; the impact on the recipient’s finances and the Project to ensure that the Recipient is able to complete the Project; and, any other considerations that may emerge. The purpose of the due diligence is to ensure that the Minister can fully evaluate any additional considerations that were not identified at the time of authorizing the funding. In the event that the Minister does not consent to such a Change in Control, the Minister may exercise the remedies set out in Subsection 14.3; | ||
| (d) | it shall retain possession and control of all Project Assets the cost of which has been contributed to by the Minister under the Agreement, and the Recipient shall not, except to the extent permitted in Section 11, Dispose of the same without the prior written consent of the Minister, other than in the ordinary course of business where the aggregate book value of such Project Assets for each occurrence is no greater than *** dollars ($***); | |
| (e) | it shall, in advance and in writing, and subject to Paragraphs 10.2 (c) and (d) of this Agreement, notify the Minister in the event of any Acquisition or Divestiture. In the case where the Recipient is a public company, the Recipient shall notify the Minister in writing of any Acquisition or Divestiture contemporaneously with any press release, or filing of a public regulatory notice in respect of such Acquisition or Divestiture; | |
| (f) | that it shall not make any dividend payments or other shareholder distributions that would prevent it from implementing the Project or satisfying any other of the Recipient’s obligations under this Agreement, including, without limitation, the making of repayments to the Minister hereunder; | |
| (g) | it shall comply with the federal visibility requirements set out in Schedule 2 - Communications Obligations; and | |
| (h) | it shall comply with all laws and regulations applicable to it. |
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10.3 Renewal of Representations. It is a condition precedent to any disbursement under this Agreement that the representations, warranties and covenants contained in this Agreement are true at the time of payment and that the Recipient is not in default of compliance with any terms of this Agreement.
| 11. | Intellectual Property |
11.1 Background Intellectual Property. The Recipient must own the Background Intellectual Property or hold sufficient Background Intellectual Property Rights to permit the Project to be carried out.
11.2 Project Intellectual Property and Improvements. For the Term, the Recipient must exclusively own, and retain ownership thereof in Canada, the Project Intellectual Property, the Project Intellectual Property Rights and its improvements to products, processes and equipment as a result of the Project, unless otherwise agreed to by the Minister.
11.3 Exploitation of Project Intellectual Property. Unless otherwise agreed to by the Minister, the Recipient must own or have sufficient Intellectual Property Rights to use the Project Intellectual Property and to make, construct, cause the construction, sell and cause the sale of the Resulting Products.
11.4 License of Project Intellectual Property and Background Intellectual Property.
11.4.1 Restriction on Licenses. Except as provided in Subsection 11.4.2 and Subsection 11.4.4, the Recipient agrees not to grant any right or license to any of the Project Intellectual Property or Background Intellectual Property without the prior written consent of the Minister, which will not be unreasonably withheld.
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11.4.2 Permitted Licenses Without Consent. If all the requirements in Subsection 11.4.3 are satisfied, the Recipient may grant a right or license to any of the Project Intellectual Property or Background Intellectual Property provided that one or more of the following conditions is met:
| (a) | the right or license is non-exclusive and for the purpose of ***; | |
| (b) | the right or license is non-exclusive to a licensee that is an entity that ***; | |
| (c) | the right or license is a non-exclusive or end-user license in conjunction with ***; and | |
| (d) | the right or license is non-exclusive and results in the manufacturing of Resulting Products in a jurisdiction *** |
11.4.3 Requirements For Licenses Without Consent. The requirements (for the purposes of Subsection 11.4.2) are:
| (a) | the right or license cannot prevent the Recipient from fulfilling its obligations in this Agreement; and | |
| (b) | the right or license cannot restrict access, in any way, to vaccines in response to COVID-19 or Resulting Products in Canada or by Canadians. |
11.4.4 Clarification Regarding Background Intellectual Property. Notwithstanding Subsections 11.4.1, 11.4.2 and 11.4.3, the parties acknowledge that the Background Intellectual Property includes Intellectual Property which is used by Recipient in programs other than the Project and nothing herein shall limit the Recipient’s ability to use, commercialize and/or exploit the Background Intellectual Property, including licensing it to third parties, outside of and separate from the Project in a manner that would not restrict the development, commercialization or exploitation of the Project Intellectual Property or making, constructing or selling Resulting Products by the Recipient.
11.5 Protection of Project Intellectual Property. The Recipient shall take appropriate steps to protect and enforce the Project Intellectual Property. The Recipient shall provide information to the Minister in that regard, upon request.
11.6 Crown Ownership of Intellectual Property. The Crown will not have an ownership interest in the Project Intellectual Property nor will the Crown acquire new rights in Background Intellectual Property by virtue solely of having provided the Contribution. Rights attributed to the Crown in any other way including under the Public Servants Inventions Act are not in any way affected by this Agreement.
11.7 Intellectual Property Strategy. The Recipient will develop an Intellectual Property (IP) strategy that will be shared with the Minister within six (6) months of the execution date of the Agreement. This strategy will support the creation and retention of Intellectual Property ownership in Canada; include training for employees that increases Intellectual Property educational awareness and identify any planned Intellectual Property training activities; include a plan to commercialize vaccines domestically, including Intellectual Property commercialization activities, such as licensing, and anticipated collaboration activities, if any; and include a current list of Background Intellectual Property. The Recipient agrees to report annually on any changes to this strategy during ***and for a period of *** years thereafter.
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11.8 Project Intellectual Property Use in Response to COVID-19. The Minister may require the Recipient to grant a license on commercially reasonable terms to use the (i) Project Intellectual Property and Project Intellectual Property Rights; and (ii) Background Intellectual Property and Background Intellectual Property Rights owned by the Recipient or, licensed by the Recipient with the *** upon written request from the Minister, but only to the extent necessary to ensure a sufficient domestically-sourced supply of vaccines in response to COVID-19 should the Recipient be unable to ensure such a supply.
| 12. | Environmental and Other Requirements |
12.1 The Recipient represents that the Project is not a “designated project” or is not a “project” under the applicable federal environmental and impact legislation.
12.2 The Recipient shall, in respect of the Project, comply with all federal, provincial, territorial, municipal and other applicable laws, including but not limited to, statutes, regulations, by-laws, rules, orders, ordinances and decrees governing the Recipient or the Project, or both, relating to environmental protection and the successful implementation of and adherence to any mitigation measures, monitoring or follow-up program that may be prescribed by the Minister or other federal, provincial, territorial, municipal tribunals or bodies, and certifies to the Minister that it has done so to date.
12.3 The Recipient will provide the Minister with reasonable access to any Project site for the purpose of ensuring that the terms and conditions of any environmental approval are met, and that any mitigation, monitoring or follow-up measure required has been carried out.
12.4 If as a result of changes to the Project or otherwise, an environmental or impact assessment or a subsequent determination is required for the Project, the Minister and the Recipient agree that the Minister’s obligations under this Agreement will be suspended from the moment that the Minister informs the Recipient, until (i) a decision statement has been issued to the Recipient or, if applicable, the Minister has decided that the Project is not likely to cause significant adverse environmental effects or the Governor in Council has decided that the significant adverse environmental effects are justified in the circumstances, and (ii) if required, an amendment to this Agreement has been signed, setting out any conditions included in the decision statement.
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12.5 Aboriginal consultation. The Recipient acknowledges that the Minister’s obligation to pay the Contribution is conditional upon Her Majesty satisfying any obligation that Her Majesty may have to consult with or to accommodate any Aboriginal groups, which may be affected by the terms of this Agreement.
12.6 Official Languages. The Recipient agrees that any public acknowledgement of the Minister’s public support for the Project will be expressed in both official languages.
| 13. | Indemnification and Limitation of Liability |
13.1 Indemnification. Except for any claims arising from the gross negligence of, or willful misconduct by, the Minister’s employees, officers, agents or servants, the Recipient agrees, at all times, to indemnify and save harmless, the Minister and any of his officers, servants, employees or agents from all and against all claims and demands, actions, suits or other proceedings (and all losses, costs and damages relating thereto) by whomsoever made, brought or prosecuted (all of the foregoing collectively, the “Claims”), where such Claims are asserted or arise from the Minister being a Party to this Agreement and exercising his rights and performing his obligations under this Agreement, to the extent such Claims result from:
| (a) | the Project, its operation, conduct or any other aspect thereof; | |
| (b) | the performance or non-performance of this Agreement, or the breach or failure to comply with any term, condition, representation or warranty of this Agreement by the Recipient, its Affiliated Persons, its officers, employees and agents, or by a third party retained by the Recipient for the purpose of carrying out the Project ***; | |
| (c) | the design, construction, operation, maintenance and repair of any part of the Project; or, | |
| (d) | any omission or other wilful or negligent act or delay of the Recipient, its Affiliated Person or a third party retained by the Recipient for the purpose of carrying out the Project ***. |
13.2 Limitation of Liability. Notwithstanding anything to the contrary contained herein, the Minister shall not be liable for any direct, indirect, special or consequential damages of the Recipient nor for the loss of revenues or profits arising from, based upon, occasioned by or attributable to the execution of this Agreement, regardless of whether such a liability arises in tort (including negligence), contract, fundamental breach or breach of a fundamental term, misrepresentation, breach of warranty, breach of fiduciary duty, indemnification or otherwise.
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13.3 Her Majesty, her agents, employees and servants will not be held liable in the event the Recipient enters into a loan, a capital or operating lease or other long-term obligation in relation to the Project for which the Contribution is provided.
| 14. | Default and Remedies |
| 14.1 | Event of Default. The Minister may declare that an Event of Default has occurred if: |
| (a) | the Recipient has failed or neglected to pay Her Majesty any amount due in accordance with this Agreement; | |
| (b) | the Project is not completed in accordance with Schedule 1 – Statement of Work to the Minister’s satisfaction by the Project Completion Date or the Project is abandoned in whole or in part; | |
| (c) | the Recipient has not, in the opinion of the Minister, met or satisfied a term, covenant or condition of this Agreement; | |
| (d) | the Recipient becomes bankrupt or insolvent, goes into receivership, or takes the benefit of any statute, from time to time in force, relating to bankrupt or insolvent debtors; | |
| (e) | an order is made or the Recipient has passed a resolution for the winding up or dissolution of the Recipient, or the Recipient is dissolved or wound up; | |
| (f) | the Recipient has, in the opinion of the Minister, ceased to carry on business or has sold all or substantially all of its assets or enters into a letter of intent or binding obligation to sell all or substantially all of its assets; | |
| (g) | the Recipient has not met or satisfied a term or condition under any other contribution agreement or agreement of any kind with Her Majesty; | |
| (h) | the Recipient fails to fulfill any of the contractual obligations set out in this Agreement; |
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| (i) | a representation, covenant, warranty or statement contained herein or in any document, report or certificate delivered to the Minister hereunder or in connection therewith is false or misleading at the time it was made; and | |
| (j) | the Recipient fails to comply with the obligations regarding audit and evaluation, as set out in Section 9. |
14.2 Notice and Rectification Period. Except in the case of an Event of Default under paragraphs (d), (e) and (f) of Subsection 14.1 above, the Minister will not declare that an Event of Default has occurred unless the Parties have attempted to resolve the issue in accordance with Schedule 5 – Resolution Process. If the Parties are unable to resolve this issue, the Minister may give written notice to the Recipient of the occurrence which, in the Minister’s opinion, constitutes an Event of Default and the Recipient fails, within thirty (30) days of receipt of the notice, either to correct the condition or event or demonstrate, to the satisfaction of the Minister that it has taken such steps as are necessary to correct the condition, failing which the Minister may declare that an Event of Default has occurred.
14.3 Remedies on Default. If, after following the process in Schedule 5 – Resolution Process, the Minister declares that an Event of Default has occurred, the Minister may immediately exercise one or more of the following remedies, in addition to any remedy available at law:
| (a) | suspend or terminate any obligation by the Minister to contribute or continue to contribute to the Eligible Supported Costs including any obligation to pay any amount owing prior to the date of such suspension; | |
| (b) | require the Recipient to repay to the Minister all or part of the Contribution paid by the Minister, together with interest from the day of demand at the Interest Rate; | |
| (c) | require the Recipient to pay the Minister the total of all amounts required to be repaid pursuant to this Agreement less any amount already repaid to the Minister together with interest from the day of demand at the Interest Rate; | |
| (d) | terminate the Agreement; and | |
| (e) | post a notice on a Government of Canada website disclosing that the Recipient has committed an Event of Default under the provisions of this Agreement and describing generally the remedies, if any, that the Minister has accordingly exercised. |
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14.4 The Recipient acknowledges the policy objectives served by the Minister’s agreement to make the Contribution, that the Contribution comes from the public monies, and that the amount of damages sustained by Her Majesty in an Event of Default is difficult to ascertain and therefore, that it is fair and reasonable that the Minister be entitled to exercise any or all of the remedies provided for in this Agreement and to do so in the manner provided for in this Agreement, if an Event of Default occurs.
| 15. | Miscellaneous |
| 15.1 | Compliance with Lobbying Act. The Recipient warrants and represents: |
| (a) | that it has filed all Lobbying Act returns required to be filed in respect of persons employed by the Recipient who communicate and/or arrange meetings with Public Office Holders as part of their employment duties, and that it will continue to do so; | |
| (b) | that it has not contracted with any person to communicate and/or arrange meetings with Public Office Holders for remuneration that is or would be contingent in any way upon the success of such person arranging meetings with Public Office Holders, or upon the approval of the Recipient’s application for SIF funding, or upon the amount of SIF funding paid or payable to the Recipient under this Agreement; | |
| (c) | that it will not contract with any person to communicate and/or arrange meetings with Public Office Holders for remuneration that is or would be contingent upon the success of such person arranging meetings with Public Office Holders, or upon the amount of SIF funding paid or payable to the Recipient under this Agreement; | |
| (d) | all persons who are or have been contracted by the Recipient to communicate and/or arrange meetings with Public Office Holders in respect of this Agreement are in full compliance with the registration and other requirements of the Lobbying Act; and | |
| (e) | it shall at all times ensure that any persons contracted to communicate and/or arrange meetings with Public Office Holders in respect of the Agreement are in full compliance with the requirements of the Lobbying Act. |
| 32 |
15.2 Members of Parliament. The Recipient represents and warrants that no member of the House of Commons will be admitted to any share or part of this Agreement or to any benefit to arise therefrom. No person who is a member of the Senate will, directly or indirectly, be a party to or be concerned in this Agreement.
15.3 Compliance with Post-Employment Provisions. The Recipient confirms that no current or former public servant or public office holder to whom the Values and Ethics Code for the Public Service, the Values and Ethics Code for the Public Sector, the Policy on Conflict of Interest and Post-Employment or the Conflict of Interest Act apply, will derive a direct benefit from this Agreement unless the provision or receipt of such benefits is in compliance with such legislation and codes.
15.4 The Recipient acknowledges that the representations and warranties in this section are fundamental terms of this Agreement. In the event of breach of these, the Minister may exercise the remedies set out in Subsection 14.3.
| 16. | Confidentiality |
16.1 Consent Required. Subject to Schedule 2 - Communications Obligations, the Access to Information Act, the Privacy Act and the Library and Archives Act of Canada, each Party shall keep confidential and shall not without the consent of the other Party disclose the contents of the Agreement and the documents pertaining thereto, whether provided before or after the Agreement was entered into, or of the transactions contemplated herein.
16.2 International Dispute. Notwithstanding Subsection 16.1 of this Agreement, the Recipient waives any confidentiality rights to the extent such rights would impede Her Majesty from fulfilling her notification obligations to a world trade panel for the purposes of the conduct of a dispute, in which Her Majesty is a party or a third party intervener. The Minister is authorized to disclose the contents of this Agreement and any documents pertaining thereto, whether predating or subsequent to this Agreement, or of the transactions contemplated herein, where in the opinion of the Minister, such disclosure is necessary to the defence of Her Majesty’s interests in the course of a trade remedy investigation conducted by a foreign investigative authority, and is protected from public dissemination by the foreign investigative authority. The Minister shall notify the Recipient of such disclosure.
| 33 |
16.3 Financing, Licensing and Subcontracting. Notwithstanding Subsection 16.1 of this Agreement, the Minister hereby consents to the Recipient disclosing this Agreement, and any portion or summary thereof, for any of the following purposes:
| (a) | securing additional financing or complying with laws or regulations governing the Recipient or the Guarantor or the requirements of any stock exchange on which the shares of the Guarantor are traded; | |
| (b) | licensing for commercial exploitation; or | |
| (c) | confirming to agents, contractors and subcontractors of the Recipient that all agents, contractors and subcontractors must agree to provide the Minister and the Auditor-General with access to their records and premises, provided that any person to whom this Agreement or any portion or summary thereof is disclosed shall execute a non-disclosure agreement prior to such disclosure. |
16.4 Repayments. Notwithstanding Subsection 16.1 of this Agreement, the Minister may disclose any information relating to the amount of each repayment made by the Recipient whether due or paid.
| 17. | General |
17.1 Debt due to Canada. Any amount owed to Her Majesty under this Agreement shall constitute a debt due to Her Majesty and shall be recoverable as such. Unless otherwise specified herein, the Recipient agrees to make payment of any such debt forthwith on demand.
17.2 Interest. Debts due to Her Majesty will accrue interest in accordance with the Interest and Administrative Charges Regulations, in effect on the due date, compounded monthly on overdue balances payable, from the date on which the payment is due, until payment in full is received by Her Majesty. Any such amount is a debt due to Her Majesty and is recoverable as such.
17.3 Set-off Rights of Minister. Without limiting the scope of the set-off rights provided for under the Financial Administration Act, it is understood that the Minister may set off against the Contribution any amounts owed by the Recipient to the Minister under legislation or contribution agreements and the Recipient shall declare to the Minister all amounts outstanding in that regard when making a claim under this Agreement.
17.4 No Assignment of Agreement. No Party shall assign the Agreement or any part thereof without the prior written consent of the Minister. Any attempt by a Party to assign this Agreement or any part thereof, without the express written consent of the Minister, is void.
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17.5 Annual Appropriation. Any payment by the Minister under this Agreement is subject to there being an appropriation for the Government Fiscal Year in which the payment is to be made; and to cancellation or reduction in the event that departmental funding levels are changed by Parliament. If the Minister is prevented from disbursing the full amount of the Contribution due to a lack or reduction of appropriation or departmental funding levels, the Minister and the Recipient agree to review the effects of such a shortfall in the Contribution on the implementation of this Agreement.
17.6 Successors and Assigns. This Agreement is binding upon the Recipient, its successors and permitted assigns.
17.7 Event of Force Majeure. The Recipient will not be in default by reason only of any failure in the performance of the Project in accordance with Schedule 1 – Statement of Work if such failure arises without the fault or negligence of the Recipient and is caused by any event of Force Majeure.
17.8 Applicable Law. This Agreement will be interpreted in accordance with the laws of the province of Ontario and federal laws of Canada applicable therein. The word “law” used herein has the same meaning as in the Interpretation Act, as amended.
17.9 Dispute Resolution. If a dispute arises concerning the application or interpretation of this Agreement, the Parties will attempt to resolve the matter through good faith negotiation, and may, if necessary and the Parties consent in writing, resolve the matter through mediation or arbitration by a mutually acceptable mediator or by arbitration in accordance with the Commercial Arbitration Code set out in the schedule to the Commercial Arbitration Act (Canada), as amended, and all regulations made pursuant to that Act.
17.10 No Amendment. No amendment to this Agreement shall be effective unless it is made in writing and signed by the Parties hereto.
17.11 Contribution Agreement Only. This Agreement is a contribution agreement only, not a contract for services or a contract of service or employment, and nothing in this Agreement, the Parties relationship or actions is intended to create, or be construed as creating, a partnership, employment or agency relationship between them. The Recipient is not in any way authorized to make a promise, agreement or contract and to incur any liability on behalf of Her Majesty or to represent itself as an agent, employee or partner of Her Majesty, including in any agreement with a third party, nor shall the Recipient make a promise, agreement or contract and incur any liability on behalf of Her Majesty, and the Recipient shall be solely responsible for all deductions and remittances required by law in relation to its employees.
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17.12 No Waiver. The rights and remedies of the Minister under this Agreement shall be cumulative and not exclusive of any right or remedy that he or she would otherwise have. The fact that the Minister refrains from exercising a remedy he or she is entitled to exercise under this Agreement will not constitute a waiver of such right and any partial exercise of a right will not prevent the Minister in any way from later exercising any other right or remedy under this Agreement or other applicable law.
17.13 Consent of the Minister. Whenever this Agreement provides for the Minister to render a decision or for the Recipient to obtain the consent or agreement of the Minister, such decision shall be reasonable on the facts and circumstance and such consent or agreement will not be unreasonably withheld but the Minister may make the issuance of such consent or agreement subject to reasonable conditions.
17.14 No conflict of interest. The Recipient and its Affiliated Persons, consultants and any of their respective advisors, partners, directors, officers, shareholders, employees, agents and volunteers shall not engage in any activity where such activity creates a real, apparent or potential conflict of interest in the sole opinion of the Minister, with the carrying out of the Project. For greater certainty, and without limiting the generality of the foregoing, a conflict of interest includes a situation where anyone associated with the Recipient owns or has an interest in an organization that is carrying out work related to the Project.
17.15 Disclose potential conflict of interest. The Recipient shall disclose to the Minister without delay any actual or potential situation that may be reasonably interpreted as either a conflict of interest or a potential conflict of interest.
17.16 Severability. Any provision of this Agreement which is prohibited by law or otherwise deemed ineffective will be ineffective only to the extent of such prohibition or ineffectiveness and will be severable without invalidating or otherwise affecting the remaining provisions of the Agreement.
17.17 Signature in Counterparts. This Agreement may be signed in counterparts and such counterparts may be delivered by acceptable electronic transmission, including portable document format (PDF), each of which when executed and delivered is deemed to be an original, and when taken together, will constitute one and the same Agreement.
17.18 Currency. Unless otherwise indicated, all dollar amounts referred to in this Agreement are to the currency of Canada.
17.19 Tax. The Recipient acknowledges that financial funding from government programs may have tax implications for its organization and that advice should be obtained from a qualified tax professional.
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| 18. | Contact Information & Notices |
18.1 Form and Timing of Notice. Any notice or other communication under this Agreement shall be made in writing. The Minister or the Recipient may send any written notice by any pre-paid method, including regular or registered mail, courier or email. Notice will be considered as received upon delivery by the courier, upon the Party confirming receipt of the email or one (1) day after the email is sent, whichever the sooner or five (5) calendar days after being mailed.
18.2 Any notices to the Minister in fulfillment of obligations such as claims, reporting, and any other documents stipulated under this Agreement, will be addressed to:
Strategic Innovation Fund
Attn: Senior Director
8th Floor
235 Queen Street
Ottawa, Ontario K1A 0H5
Fax No: (613) 954-5649
Email address: to be provided by SIF upon request from the Recipient.
Notwithstanding the foregoing, claims forms will not be sent by email unless otherwise agreed to in writing by the Minister.
| 18.3 | Any notices to the Recipient will be addressed to: |
Variation Biotechnologies Inc.
Attn: Senior Vice President, Business Development
Address: 310 Hunt Club Road #201
Ottawa, Ontario
K1V 1C1
Email address: to be provided by the Recipient to SIF.
Any notices to the Guarantor will be addressed to:
VBI Vaccines Inc.
Attn: Chief Executive Office
Address: 222 Third Street, Suite 2241
Cambridge, Massachusetts
02142
Email address: to be provided by the Recipient to SIF.
18.4 Change of Contact Information. Each of the Parties may change the address, which they have stipulated in this Agreement by notifying in writing the other Party of the new address, and such change shall be deemed to take effect fifteen (15) calendar days after receipt of such notice.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the Parties hereto have executed this Agreement through duly authorized representatives.
HER MAJESTY THE QUEEN IN RIGHT OF CANADA
as represented by the Minister of Industry
| Per: | /s/ Colette Kaminsky |
September 15, 2020 | ||
| Date | ||||
| Strategic Innovation Fund | ||||
| Colette Kaminsky, Director General |
Variation Biotechnologies Inc.
| Per: | /s/ Adam Buckley | September 16, 2020 | ||
| Date | ||||
| Adam Buckley, Senior Vice President, Business Development | ||||
| I have the authority to bind the Corporation. | ||||
VBI Vaccines Inc.
| Per: | /s/ Jeff Baxter | September 16, 2020 | ||
| Date | ||||
| Jeff Baxter, Chief Executive Officer | ||||
| I have the authority to bind the Corporation. |
| 38 |
SCHEDULE 1 - STATEMENT OF WORK (SOW)
[Omitted]
| 39 |
SIF AGREEMENT NO. 812-815774
SCHEDULE 2 - COMMUNICATIONS OBLIGATIONS
[Omitted]
| 40 |
SIF AGREEMENT NO. 812-815774
SCHEDULE 3 - COST PRINCIPLES
[Omitted]
| 41 |
SIF AGREEMENT NO. 812-815774
SCHEDULE 4 - REPORTING REQUIREMENTS
[Omitted]
| 42 |
SIF AGREEMENT NO. 812-815774
SCHEDULE 5 – RESOLUTION PROCESS
[Omitted]
| 43 |
Exhibit 31.1
CERTIFICATION
I, Jeffrey 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-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(s) 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 2, 2020 | |
| /s/ Jeffrey Baxter | |
| Jeffrey Baxter | |
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Christopher McNulty, 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-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(s) 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 2, 2020 | |
| /s/ Christopher McNulty | |
| Christopher McNulty | |
| Chief Financial Officer and Head of Business Development | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION
In connection with the quarterly report of VBI Vaccines Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), I, Jeffrey Baxter, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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 results of operations of the Company at the dates and for the periods indicated.
| Date: November 2, 2020 | |
| /s/ Jeffrey Baxter | |
| Jeffrey Baxter | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION
In connection with the quarterly report of VBI Vaccines Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), I, Christopher McNulty, Chief Financial Officer and Head of Business Development (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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 results of operations of the Company at the dates and for the periods indicated.
| Date: November 2, 2020 | |
| /s/ Christopher McNulty | |
| Christopher McNulty | |
| Chief Financial Officer and Head of Business Development | |
| (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
| Statement of Financial Position [Abstract] | ||
| Common stock, unlimited authorized | Unlimited | Unlimited |
| Common stock, no par value | $ 0 | $ 0 |
| Common stock, shares issued | 242,039,480 | 178,257,199 |
| Common stock, shares outstanding | 242,039,480 | 178,257,199 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 298 | $ 647 | $ 897 | $ 1,647 |
| Operating expenses: | ||||
| Cost of revenues | 2,111 | 1,977 | 6,747 | 5,319 |
| Research and development | 4,478 | 5,401 | 10,035 | 21,989 |
| General and administrative | 5,562 | 9,412 | 13,520 | 16,570 |
| Total operating expenses | 12,151 | 16,790 | 30,302 | 43,878 |
| Loss from operations | (11,853) | (16,143) | (29,405) | (42,231) |
| Interest expense, net of interest income (including related party - see Note 8) | (742) | (626) | (2,006) | (1,672) |
| Foreign exchange (loss) gain | (402) | 607 | 543 | (35) |
| Loss before income taxes | (12,997) | (16,162) | (30,868) | (43,938) |
| Income tax expense | ||||
| NET LOSS | (12,997) | (16,162) | (30,868) | (43,938) |
| Other comprehensive income (loss) | 1,696 | (1,165) | (1,988) | 2,308 |
| COMPREHENSIVE LOSS | $ (11,301) | $ (17,327) | $ (32,856) | $ (41,630) |
| Net loss per share of common shares, basic and diluted | $ (0.06) | $ (0.15) | $ (0.15) | $ (0.44) |
| Weighted-average number of common shares outstanding, basic and diluted | 234,709,403 | 105,742,073 | 210,044,126 | 99,627,345 |
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
AOCI Attributable to Parent [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|
| Beginning balance, value at Dec. 31, 2018 | $ 246,417 | $ 63,449 | $ (4,158) | $ (207,575) | $ 98,133 |
| Balance, shares at Dec. 31, 2018 | 97,343,777 | ||||
| Stock-based compensation | $ 431 | 831 | 1,262 | ||
| Stock-based compensation, shares | 318,110 | ||||
| Common shares issued upon exercise of warrants, shares | |||||
| Net loss | (14,606) | (14,606) | |||
| Warrant modification in connection with debt amendment | 179 | 179 | |||
| Currency translation adjustments | 1,727 | 1,727 | |||
| Ending balance, value at Mar. 31, 2019 | $ 246,848 | 64,459 | (2,431) | (222,181) | 86,695 |
| Balance, shares at Mar. 31, 2019 | 97,661,887 | ||||
| Stock-based compensation | $ 428 | 554 | 982 | ||
| Stock-based compensation, shares | 95,312 | ||||
| Net loss | (13,170) | (13,170) | |||
| Currency translation adjustments | 1,746 | 1,746 | |||
| Ending balance, value at Jun. 30, 2019 | $ 247,276 | 65,013 | (685) | (235,351) | 76,253 |
| Balance, shares at Jun. 30, 2019 | 97,757,199 | ||||
| Stock-based compensation | $ 201 | 675 | 876 | ||
| Stock-based compensation, shares | |||||
| Net loss | (16,162) | (16,162) | |||
| Common shares issued in financing transaction | $ 37,415 | 37,415 | |||
| Common shares issued in financing transaction, shares | 80,500,000 | ||||
| Currency translation adjustments | (1,165) | (1,165) | |||
| Ending balance, value at Sep. 30, 2019 | $ 284,892 | 65,688 | (1,850) | (251,513) | 97,217 |
| Balance, shares at Sep. 30, 2019 | 178,257,199 | ||||
| Beginning balance, value at Dec. 31, 2019 | $ 284,965 | 66,430 | (752) | (262,388) | 88,255 |
| Balance, shares at Dec. 31, 2019 | 178,257,199 | ||||
| Stock-based compensation | $ 131 | 1,056 | 1,187 | ||
| Stock-based compensation, shares | 118,471 | ||||
| Common shares issued in financing transaction, net of issuance costs | |||||
| Common shares issued in financing transaction, net of issuance costs, shares | |||||
| Warrants issued in connection with financing transactions | |||||
| Warrants issued in connection with financing transactions, shares | |||||
| Conversion feature issued in debt financing transaction | |||||
| Common shares issued upon exercise of warrants | |||||
| Common shares issued up on exercise of options | |||||
| Common shares issued up on exercise of options, shares | |||||
| Net loss | (8,358) | (8,358) | |||
| Unrealized holding gains on short-term investments | |||||
| Warrant modification in connection with debt amendment | |||||
| Common shares issued in financing transaction | |||||
| Common shares issued in financing transaction, shares | |||||
| Currency translation adjustments | (6,653) | (6,653) | |||
| Ending balance, value at Mar. 31, 2020 | $ 285,096 | 67,486 | (7,405) | (270,746) | 74,431 |
| Balance, shares at Mar. 31, 2020 | 178,375,670 | ||||
| Beginning balance, value at Dec. 31, 2019 | $ 284,965 | 66,430 | (752) | (262,388) | 88,255 |
| Balance, shares at Dec. 31, 2019 | 178,257,199 | ||||
| Ending balance, value at Sep. 30, 2020 | $ 387,718 | 74,084 | (2,740) | (293,256) | 165,806 |
| Balance, shares at Sep. 30, 2020 | 242,039,480 | ||||
| Beginning balance, value at Mar. 31, 2020 | $ 285,096 | 67,486 | (7,405) | (270,746) | 74,431 |
| Balance, shares at Mar. 31, 2020 | 178,375,670 | ||||
| Stock-based compensation | $ 91 | 983 | 1,074 | ||
| Stock-based compensation, shares | |||||
| Common shares issued in financing transaction, net of issuance costs | $ 53,894 | 53,894 | |||
| Common shares issued in financing transaction, net of issuance costs, shares | 52,272,726 | ||||
| Warrants issued in connection with financing transactions | $ (453) | 1,634 | 1,181 | ||
| Warrants issued in connection with financing transactions, shares | |||||
| Conversion feature issued in debt financing transaction | 2,577 | 2,577 | |||
| Net loss | (9,513) | (9,513) | |||
| Currency translation adjustments | 2,969 | 2,969 | |||
| Ending balance, value at Jun. 30, 2020 | $ 338,628 | 72,680 | (4,436) | (280,259) | 126,613 |
| Balance, shares at Jun. 30, 2020 | 230,648,396 | ||||
| Stock-based compensation | $ 89 | 1,404 | 1,493 | ||
| Stock-based compensation, shares | |||||
| Common shares issued in financing transaction, net of issuance costs | $ 47,163 | 47,163 | |||
| Common shares issued in financing transaction, net of issuance costs, shares | 10,840,334 | ||||
| Common shares issued upon exercise of warrants | $ 1,837 | 1,837 | |||
| Common shares issued upon exercise of warrants, shares | 550,000 | ||||
| Common shares issued up on exercise of options | $ 1 | 1 | |||
| Common shares issued up on exercise of options, shares | 750 | ||||
| Net loss | (12,997) | (12,997) | |||
| Unrealized holding gains on short-term investments | 125 | 125 | |||
| Currency translation adjustments | 1,571 | 1,571 | |||
| Ending balance, value at Sep. 30, 2020 | $ 387,718 | $ 74,084 | $ (2,740) | $ (293,256) | $ 165,806 |
| Balance, shares at Sep. 30, 2020 | 242,039,480 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net loss | $ (30,868) | $ (43,938) |
| Adjustments to reconcile net loss to cash and cash equivalents used in operating activities: | ||
| Depreciation and amortization | 1,218 | 798 |
| Stock-based compensation | 3,754 | 3,120 |
| Amortization of debt discount | 1,102 | 753 |
| Impairment of goodwill | 6,292 | |
| Interest accrued on short-term investments | (95) | |
| Net change in operating working capital items: | ||
| Change in accounts receivable | 173 | (127) |
| Change in inventory | (458) | (427) |
| Change in prepaid expenses | (1,267) | (175) |
| Change in other current assets | (1,676) | (510) |
| Change in other long-term assets | (3) | 6 |
| Change in operating right of use assets | 724 | 768 |
| Change in accounts payable | 2,167 | (3,129) |
| Change in deferred revenues | (646) | (1,300) |
| Change in other current liabilities | (3,962) | (1,545) |
| Payments made on operating lease liabilities | (718) | (768) |
| Net cash flows used in operating activities | (30,555) | (40,182) |
| INVESTING ACTIVITIES | ||
| Purchase of short-term investments | (25,000) | |
| Purchase of property and equipment | (468) | (3,487) |
| Net cash flows used in investing activities | (25,468) | (3,487) |
| FINANCING ACTIVITIES | ||
| Proceeds from issuance of common shares for cash | 106,269 | 40,250 |
| Share issuance costs | (4,919) | (2,756) |
| Proceeds from issuance of common shares for cash, upon exercise of warrants | 1,837 | |
| Proceeds from issuance of common shares for cash, upon exercise of stock options | 1 | |
| Proceeds from debt financing | 20,000 | |
| Debt issuance costs | (1,021) | |
| Repayment of long-term debt | (15,300) | |
| Net cash flows provided by financing activities | 106,867 | 37,494 |
| Effect of exchange rates on cash and cash equivalents | 101 | (79) |
| CHANGE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD | 50,945 | (6,254) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 44,213 | 59,270 |
| CASH AND CASH EQUIVALENTS, END OF PERIOD | 95,158 | 53,016 |
| Supplementary information: | ||
| Interest paid | 1,187 | 1,539 |
| Non-cash investing and financing activities: | ||
| Warrant modification in connection with debt amendment | 179 | |
| Warrants issued in connection with financing activities | 1,634 | |
| K2 conversion feature in connection with financing activities | 2,577 | |
| Capital expenditures included in accounts payable and other current liabilities | (86) | (132) |
| Share issuance costs included in other current liabilities | (293) | (79) |
| Unrealized holding gains on short term investment | $ (125) | |
NATURE OF BUSINESS AND CONTINUATION OF BUSINESS |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| NATURE OF BUSINESS AND CONTINUATION OF BUSINESS | 1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS
Corporate Overview
VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.
The Company and its wholly-owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly-owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies Inc. a Canadian company and a wholly-owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd. an Israeli company (“SciVac”), and SciVac Hong Kong Limited (“SciVac HK”) are collectively referred to as the “Company,” “we,” “us,” “our,” or “VBI”.
The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 222 Third Street, Suite 2241, Cambridge, MA 02142.
Principal Operations
VBI is a commercial-stage, biopharmaceutical company developing a next generation of vaccines to address unmet needs in infectious disease and immuno-oncology. We are advancing the prevention and treatment of hepatitis B, with: (1) the only 3-antigen hepatitis B vaccine, Sci-B-Vac, which is approved for use and commercially available in Israel, and recently completed a pivotal Phase III program in the United States, Europe, and Canada; and (2) VBI-2601 (BRII-179), an immunotherapeutic candidate in development in collaboration with Brii Biosciences Limited (“Brii Bio”) for a functional cure for chronic hepatitis B. Our enveloped virus-like particle (“eVLP”) platform technology enables the development of eVLP vaccines that closely mimic the target virus to elicit a potent immune response. Our lead eVLP program candidates include VBI-1901, a glioblastoma (“GBM”) vaccine immunotherapeutic candidate, VBI-1501, our prophylactic cytomegalovirus (“CMV”) vaccine candidate, and VBI-2900, our prophylactic coronavirus vaccine program. Our coronavirus vaccine program includes both (1) VBI-2901, a trivalent pan-coronavirus vaccine candidate expressing the SARS-CoV-2 (COVID-19), SARS-CoV (SARS), and MERS-CoV (MERS) spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing the SARS-CoV-2 (COVID-19) spike protein. We are headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada. Our manufacturing site in Rehovot, Israel produces Sci-B-Vac and VBI-2601 while our eVLP vaccine candidates are manufactured using contract development and manufacturing organizations located in the United States and Canada.
The ongoing COVID-19 pandemic has materially negatively affected and continues to affect the global economy, and there is continued severe uncertainty about the duration and intensity of the impacts of the pandemic. As a result, the Company’s business and results of operations have also been adversely affected and could continue to be adversely affected by COVID-19 which has necessitated restricting the number of personnel in the Company’s research laboratories and manufacturing facility at any given point in time, and has slowed recruitment to clinical trials. The extent to which the COVID-19 pandemic will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted. We do not yet know the full extent of potential delays or impacts on our business, our clinical studies, our research programs, the recoverability of our assets, and our manufacturing; however, the COVID-19 pandemic may disrupt or delay our business operations, including with respect to efforts relating to potential business development transactions, and it could disrupt the marketplace which could have an adverse effect on our operations.
Liquidity and Going Concern
The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development of its products.
The Company had an accumulated deficit of $293,256 as of September 30, 2020 and cash outflows from operating activities of $30,555 for the nine months ended September 30, 2020.
The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products. The Company plans to finance near term future operations with existing cash and cash equivalents reserves. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, structured asset financings, government grants or other subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In April 2020, the Company closed an underwritten public offering of common shares at a price of $ per share for total gross proceeds of $57,500. The Company incurred $3,606 of share issuance costs related to the offering resulting in net cash proceeds of $53,894 and costs related to the issuance of warrants to purchase 705,000 common shares to National Securities Inc. (“National”) or its designees as consideration for National providing financial advisory services in connection with the offering. The warrants issued to National or its designees (“National Warrants”) are exercisable immediately upon issuance and terminate three years following issuance and have an exercise price of $1.50 per share.
In May 2020, the Company refinanced its existing term loan facility with Perceptive Credit Holdings, LP and entered into a Loan and Guaranty Agreement (the “Loan Agreement”) with K2 HealthVentures LLC for net proceeds of $4.5 million. The refinanced long-term debt has a maturity date of June 1, 2024. See Note 8 for more details.
On July 21, 2020, we issued 550,000 common shares upon exercise of warrants at an exercise price of $3.34 for gross proceeds of $1,837.
On July 31, 2020, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC (“Jefferies”), pursuant to which the Company may offer and sell its common shares having an aggregate price of up to $125 million from time to time through Jefferies, acting as agent or principal (the “ATM Program”). Common shares are offered pursuant to a sales agreement prospectus included in the Company’s automatic shelf registration on Form S-3 filed with the United States Securities and Exchange Commission (“SEC”) on July 31, 2020. During the third quarter of 2020, the Company issued common shares under the ATM Program, for total gross proceeds of $48,769 at an average price of $. The Company incurred $1,606 of shares issuance costs related to the common shares issued resulting in net proceeds of $47,163. As of September 30, 2020, approximately $ of common shares remained available for issuance under the ATM Program.
On July 3, 2020, the Company and the National Research Council of Canada (“NRC”) signed a contribution agreement as represented by its Industrial Research Assistance Program (“IRAP”) whereby the NRC agrees to contribute up to CAD $1,000 for the transfer and scale-up of the technical production process for our prophylactic coronavirus vaccine program. Grants of CAD $235 are recognized in the statement of operations and comprehensive loss for the three and nine months ended September 30, 2020.
On September 16, 2020, the Company and Her Majesty the Queen in Right of Canada as represented by the Minister of Industry (“ISED”) signed a contribution agreement (the “Contribution Agreement”) for a contribution from the Strategic Innovation Fund (“SIF”) whereby ISED agrees to contribute up to CAD $55,976 to support the development of the Company’s coronavirus vaccine program, through Phase II clinical studies, for a period commencing on April 15, 2020 and ending in or before the first quarter of 2022. Grants of CAD $731 are recognized in the statement of operations and comprehensive loss for the three and nine months ended September 30, 2020. In connection with execution of the Contribution Agreement, the Company obtained a consent of K2 HealthVentures LLC, as administrative agent for the lenders and a lender, pursuant to the Loan Agreement. Pursuant to the consent, certain events of default that result in contributions made under the Contribution Agreement in excess of $500 becoming due and payable could result in an event of default under the Loan Agreement. See Note 8 for more details on the Loan Agreement.
Financial instruments recognized in the condensed consolidated balance sheet consist of cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
The carrying amounts of the Company’s long-term assets approximate their respective fair values.
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SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
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Sep. 30, 2020 | |
| Accounting Policies [Abstract] | |
| SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2019 consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form 10-Q”) does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 10-K”), as filed with the SEC on March 5, 2020.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, and SciVac HK. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements.
In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.
Significant Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2019 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2020, other than the polices discussed below.
Cash and cash equivalents
Cash and cash equivalents include cash investments in interest-bearing accounts and term deposits which can readily be redeemed for cash or are issued for terms of three months or less from the date of acquisition.
Short-term investments
Short-term investments consist of redeemable short-term investments held with Schedule 1 Canadian banks for maturity terms greater than 3 months but less than a year from the date of acquisition. Short-term investments were initially classified as available for sale and were measured at fair value whereby unrealized holding gains or losses on these investments are reported in other comprehensive income or loss and accrued interest income was recognized in interest expense, net of interest income in the condensed consolidated statement of operations and comprehensive loss.
On September 30, 2020 we re-assessed the classification of our short-term investment and we determined that the short-term investment shall be classified as held to maturity. The transfer on September 30, 2020 occurred at fair value with the unrealized holding gains remaining in other comprehensive income or loss. The unrealized holding gains will be amortized over the remaining life of the security until April 2021.
Our short-term investments are considered level 2 in the fair value hierarchy. The fair value of the short-term investment was determined using the market approach method and the inputs include comparable market interest rates at September 30, 2020.
Government Grants
Government grants are recognized in the statement of operations and comprehensive loss in the same period as the relevant expenses, in compliance with the agreement, as a reduction in the related expense or reduce the carrying value of the asset being acquired.
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NEW ACCOUNTING PRONOUNCEMENTS |
9 Months Ended |
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Sep. 30, 2020 | |
| Accounting Changes and Error Corrections [Abstract] | |
| NEW ACCOUNTING PRONOUNCEMENTS | 3. NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
Intangibles – Goodwill and Other, Internal-Use Software
In August 2018, the FASB issued ASU 2018-15: Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, the amendments require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Our adoption of this ASU, effective January 1, 2020, was applied prospectively and did not have a material impact on our condensed consolidated financial statements and the related footnote disclosures.
Recently Issued Accounting Standards, not yet Adopted
None
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INVENTORY, NET |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY, NET | 4. INVENTORY, NET
Inventory is stated at the lower of cost or market and consists of the following:
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INTANGIBLE ASSETS AND GOODWILL |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS AND GOODWILL | 5. INTANGIBLE ASSETS AND GOODWILL
The Company’s intangible assets determined to have indefinite useful lives including In-Process Research and Development (“IPR&D”) and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. Such circumstances could include but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company has established August 31st as the date for its annual impairment test of IPR&D and goodwill.
The costs of rights to IPR&D projects acquired in an asset acquisition are expensed in the consolidated statements of operations unless the project has an alternative future use. These costs include initial payments incurred prior to regulatory approval in connection with research and development agreements that provide rights to develop, manufacture, market and/or sell pharmaceutical products.
The IPR&D assets, which consist of the CMV and GBM programs, were acquired in a business combination, capitalized as an intangible asset and are tested for impairment at least annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. The impairment test compares the carrying amount of the IPR&D asset to its fair value. If the carrying amount exceeds the fair value of the asset, such excess is recorded as an impairment loss. There was no IPR&D impairment determined as a result of the Company’s annual testing on August 31, 2020. The fair value of the IPR&D assets included in the impairment test was determined using the income approach method and is considered Level 3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value of IPR&D assets include the amount and timing of costs to develop the IPR&D into viable products, the amount and timing of future cash inflows, the discount rate and the probability of technical and regulatory success applied to the cash flows. The discount rate used was 11% and the cumulative probability of technical and regulatory success to achieve approval to market the products ranged from approximately 6% to 17%.
The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives.
The change in carrying value for IPR&D assets from December 31, 2019 relates to currency translation adjustments which decreased by $1,541 for the nine-month period ended September 30, 2020.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary, after step zero), if the carrying value of a reporting unit exceeded its fair value an impairment would be recorded. We would perform our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. There was no goodwill impairment determined as a result of the Company’s annual testing on August 31, 2020. The fair value of the Company, which consists of a single reporting unit, included in the impairment test was determined using the closing market stock price of VBI as of August 31, 2020.
The change in carrying value for goodwill from December 31, 2019 relates to currency translation adjustments which decreased by $56 for the nine-month period ended September 30, 2020.
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OTHER CURRENT LIABILITIES |
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| Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER CURRENT LIABILITIES | 6. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
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LOSS PER SHARE OF COMMON SHARES |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE OF COMMON SHARES |
Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 9, Stockholders’ Equity and Additional Paid-in Capital.
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LONG-TERM DEBT |
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| LONG-TERM DEBT | 8. LONG-TERM DEBT
As of September 30, 2020, and December 31, 2019, the long-term debt is as follows:
On May 22, 2020, the Company (along with its subsidiary VBI Cda) entered into the Loan Agreement with K2 HealthVentures LLC and any other lender from time to time party thereto (the “Lenders”) pursuant to which we received the first tranche secured term loan of $20 million (the “First Tranche Term Loan”). The Lenders agreed to make available the following additional tranches subject to the following conditions and upon the submission of a loan request by the Company: (1) up to $10 million available between January 1, 2021 and April 30, 2021 upon achievement of certain milestones (the “Second Tranche Term Loan”), (2) $10 million available between the closing date and December 31, 2021, subject to achievement of a certain U.S. Food and Drug Administration approval (the “Third Tranche Term Loan”), and (3) a final tranche of up to $10 million that can be made available any time prior to June 30, 2022, subject to the advance of the Third Tranche Term Loan, satisfactory review by the administrative agent of our financial and operating plan, and approval by the Lenders’ investment committee (the “Fourth Tranche Term Loan”). Pursuant to the Loan Agreement, the Lenders have the ability to convert, at the Lenders’ option, up to $4 million of the secured term loan into common shares of the Company at a conversion price of $1.46 per share (“K2 conversion feature”).
In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 625,000 common shares (the “K2 Warrant”) at an exercise price of $1.12 (the “Warrant Price”). The number of common shares issuable pursuant to the K2 Warrant, at any given time, is determined by the aggregate principal amount of the loans advanced at that time pursuant to the Loan Agreement multiplied by 3.5% and divided by the Warrant Price. If the full $50 million available in all K2 tranches is advanced pursuant to the Loan Agreement, up to 1,562,500 common shares will be issuable pursuant to the K2 Warrant. The K2 Warrant may be exercised either for cash or on a cashless “net exercise” basis and expires on May 22, 2030.
The total proceeds attributed to the K2 Warrant was $1,181 based on the relative fair value of the K2 Warrant as compared to the sum of the fair values of the K2 Warrant, K2 conversion feature and debt. The effective conversion price of the K2 conversion feature of $1.52 was determined to be less than the fair value of the underlying common stock at the date of commitment, resulting in a beneficial conversion feature (“BCF”) at that date. The intrinsic value of the BCF was $2,577 and recorded to additional paid-in capital. The K2 warrant and the K2 conversion feature resulted in the debt being issued at a discount. The Company also incurred $1,021 of debt issuance costs and is required to make a final payment equal to 6.95% of the aggregate secured term loan principal outstanding on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Loan Agreement, resulting in an additional discount of $1,390. The total debt discount is $6,169. See Note 9 for more detail on assumptions used in the valuation of the K2 Warrant.
Upon receipt of additional funds under the Loan Agreement, additional common shares will be issuable pursuant to the K2 Warrant as determined by the principal amount of the additional funds advanced multiplied by 3.5% and divided by the Warrant Price, and the final payment will increase by 6.95% of the funds advanced.
The total principal amount of the loan under the Loan Agreement outstanding at September 30, 2020, including the $1,390 final payment discussed above, is $21,390. The principal amount of the loan made under the Loan Agreement accrues interest at an annual rate equal to the greater of (a) 8.25% or (b) prime rate plus 5.00%. The interest rate as of September 30, 2020 was 8.25%. The Company is required to pay only interest until July 1, 2022. If there is no Event of Default (as defined in the Loan Agreement) and a Third Tranche Term Loan of $10 million is made upon the achievement of a certain milestone then the interest only period is extended to January 1, 2023.
Upon the occurrence of an Event of Default, and during the continuance of an Event of Default, the applicable rate of interest, described above, will be increased by 5.00% per annum. The secured term loan maturity date is June 1, 2024, and the Loan Agreement includes both financial and non-financial covenants. The Company was in compliance with these covenants as of September 30, 2020.
The obligations under the Loan Agreement are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries other than intellectual property. The subsidiaries of the Company, other than VBI Cda and SciVac HK, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.
Approximately $14.5 million of the proceeds received were used to repay the Company’s existing loan facility with Perceptive Credit Holdings, LP, a related party (“Perceptive”), which was due on June 30, 2020. The early repayment resulted in a loss on extinguishment of debt of $84, which is included in interest expense, net of interest income on the condensed consolidated statement of operations and comprehensive loss.
On May 6, 2016, the Company through VBI US assumed a term loan facility with Perceptive in the amount of $6,000 (the “Facility”). On December 6, 2016, the Company amended the Facility (the “Amended Credit Facility”) and raised Perceptive commitment amount to $13,200, which was combined with the remaining balance from the Facility of $1,800. In connection with the Amended Credit Facility, on December 6, 2016, the Company issued to Perceptive two warrants; the first warrant to purchase 363,771 shares of the Company’s common shares at an exercise price of $4.13, and the second warrant to purchase 1,341,282 shares of the Company’s common shares at an exercise price of $3.355. The total proceeds attributed to the warrants was $2,793 based on the relative fair value of the warrants as compared to the sum of the fair values of the warrants and debt. This resulted in the debt being issued at a discount. The Company incurred $360 of debt issuance costs and was required to pay an exit fee of $300 upon full repayment of the debt resulting in additional debt discount. Following the Amended Credit Facility and the warrant issuance, the total debt discount was $3,453.
On July 17, 2018, the Company amended the Amended Credit Facility (the “Second Amendment”) to extend the period the Company was required to pay only the interest on the loan from May 31, 2018 to December 31, 2018 and to extend the expiration date of certain warrants to purchase 363,771 common shares issued to Perceptive with an original expiration date of . The Company accounted for this as a debt modification, and as a result of the extension of the warrant expiration date in connection with the Second Amendment, the debt discount was increased by $386. This amount represents the incremental fair value of the modified warrants.
On January 31, 2019, the Company further amended the Amended Credit Facility (the “Third Amendment”) to i) extend the period the Company was required to pay only the interest on the loan from December 31, 2018 to January 31, 2020, ii) extend the maturity of the term loan to June 30, 2020, and iii) reduce the exercise price on certain warrants to purchase common shares issued to Perceptive to $2.75 from $4.13 for 363,771 warrants issued on July 25, 2014, and for 363,771 warrants issued on December 6, 2016, and from $3.355 for 1,341,282 warrants issued on December 6, 2016. The Company has accounted for this as a debt modification, and as a result of the amendment to the exercise price in connection with the Third Amendment, the debt discount was increased by $179. This amount represents the incremental fair value of the modified warrants.
The total debt discount related to the Loan Agreement of $6,169 is being charged to interest expense using the effective interest method over the term of the debt.
At September 30, 2020 and December 31, 2019, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be approximately $17,644 and $15,272, respectively.
Interest expense, net of interest income recorded in the three and nine months ended September 30, 2020 and 2019 was as follows:
Interest expense and amortization of debt discount for the three months ended September 30, 2020 does not include any amounts incurred to a related party.
Interest expense and amortization of debt discount for the nine months ended September 30, 2020 includes $723 and $461, respectively, incurred to a related party.
Interest expense and amortization of debt discount for the three and nine months ended September 2019 was fully incurred to a related party.
The following table summarizes the future principal payments due under long-term debt:
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STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL |
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| STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL | 9. STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL
Stock option plans
The Company’s stock option plans are approved by and administered by the Company’s Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price, and vesting period of the new options.
2006 VBI US Stock Option Plan
No further options will be issued under the 2006 VBI US Stock Option Plan (the “2006 Plan”). As of September 30, 2020, there were options outstanding under the 2006 Plan.
2013 Equity Incentive Plan
No further options will be issued under the 2013 Equity Incentive Plan (the “2013 Plan”). As of September 30, 2020, there were options outstanding under the 2013 Plan.
2014 Equity Incentive Plan
No further options will be issued under the 2014 Equity Incentive Plan (the “2014 Plan”). As of September 30, 2020, there were options outstanding under the 2014 Plan.
2016 VBI Incentive Plan
The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of % of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 10% maximum is inclusive of options granted under all equity incentive plans. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer incentives and to attract, motivate, retain, and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”), performance share units (“PSUs”), shares of restricted stock or other such award as may be permitted under the 2016 Plan. As of September 30, 2020, there were options and stock awards outstanding under the 2016 Plan.
The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan total at September 30, 2020.
Information relating to RSUs is as follow:
Warrants
In April 2020, the Company engaged National to provide financial advisory services in connection with the offering. As consideration for such services, the Company issued to National or its designees warrants to purchase up to an aggregate of 705,000 common shares, subject to the terms and conditions set forth in the form of warrant agreement. The National Warrants are exercisable immediately upon issuance and terminate three years following issuance and have an exercise price of $1.50 per share.
On May 22, 2020, in connection with the Loan Agreement, as described in Note 8, the Company issued a warrant, the K2 Warrant, to purchase up to an aggregate of 625,000 common shares, subject to terms and conditions set forth in the form of warrant agreement. The K2 Warrant expires on May 22, 2030 and has an exercise price of $1.12 per share.
On July 21, 2020, the Company issued common shares upon exercise of warrants at an exercise price of $ for gross proceeds of $.
Activity related to the warrants is as follows:
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REVENUES AND DEFERRED REVENUE |
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| REVENUES AND DEFERRED REVENUE | 10. REVENUES AND DEFERRED REVENUE
Revenue is comprised of the following:
The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2020:
The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2020:
Collaboration and License Agreement – Brii Bio
On December 4, 2018, we entered into a Collaboration and License Agreement with Brii Bio (the “Collaboration and License Agreement”), whereby:
Pursuant to the Collaboration and License Agreement, the Company is responsible for the R&D services and Brii Bio is responsible for costs relating to the clinical trials for the Licensed Territory.
The initial consideration of the Collaboration and License Agreement consisted of a $11 million non-refundable upfront payment. As part of the Collaboration and License Agreement, the Company and Brii Bio entered into a stock purchase agreement. Under the terms of the stock purchase agreement, the Company issued to Brii Bio shares of its common stock valued at $3.6 million (based on the Company’s common stock price on December 4, 2018). The remaining $7.4 million, deemed to be the initial transaction price, was allocated to two performance obligations: i) the VBI-2601 (BRII-179) license, and ii) R&D services. The R&D services were allocated $4.8 million of the transaction price using an estimated selling price based on an expected cost plus a margin approach and the remaining transaction price of $2.6 million was allocated to the VBI-2601 (BRII-179) license using the residual method.
In addition, the Company is also eligible to receive an additional $117.5 million in potential regulatory and sales milestone payments, along with royalties on commercial sales in the Licensed Territory. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts have been recognized to date.
On December 4, 2018, the Company recognized the VBI-2601 (BRII-179) license when it was granted as it was determined to be distinct and Brii Bio was able to use and benefit from the license. The R&D Services will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred. As of September 30, 2020, R&D services related to Brii Bio that remain unsatisfied are $2.4 million, out of the $ 3.1 million total deferred revenue.
Upon termination of the Collaboration and License Agreement prior to the end of the term, there is no obligation for refund and any amounts in deferred revenue related to unsatisfied performance obligations will be immediately recognized.
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COLLABORATON ARRANGEMENTS |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| COLLABORATON ARRANGEMENTS | 11. COLLABORATON ARRANGEMENTS
GlaxoSmithKline Biologicals S.A. (“GSK”)
On September 10, 2019, we entered into a Clinical Collaboration and Supported Study Agreement (“Collaboration Agreement”) pursuant to which we will investigate the use of GSK’s proprietary AS01B adjuvant system in our ongoing study of VBI-1901. As a result of the Collaboration Agreement, a second study arm was added to Part B of the ongoing Phase I/IIa clinical study to incorporate the AS01B adjuvant.
This relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic 606. Costs associated with the second study arm will be expensed as incurred in Research and Development expenses; costs for the three and nine months ended September 30, 2020 are $149 and $485 respectively. Costs for the three and nine months ended September 30, 2019 were de-minimis.
National Research Council of Canada (“NRC”)
On March 31, 2020, we announced a collaboration with the NRC, Canada’s largest federal research and development organization, to develop a pan-coronavirus vaccine candidate, targeting COVID-19, SARS, and MERS. The NRC and the Company are collaborating to evaluate and select promising coronavirus vaccine candidates. The collaboration combines the Company’s viral vaccine expertise, eVLP technology platform, and modified coronavirus antigens with the NRC’s proprietary SARS-CoV-2 antigens and assay development capabilities to select the most immunogenic vaccine candidate for further development.
This relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic 606. Costs associated with the collaboration will be expensed as incurred in Research and Development expenses; costs for the three and nine months ended September 30, 2020 are $131 and $395 respectively.
Brii Biosciences Limited
On December 4, 2018, we entered into the Collaboration and License Agreement with Brii Bio, as described in Note 10.
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INCOME TAXES |
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| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | 12. INCOME TAXES
The Company operates in U.S., Israel, and Canadian tax jurisdictions. Its income is subject to varying rates of tax, and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another.
The Company determines its annual effective tax rate at the end of each interim period based on the year to date period results. Since the Company is incorporated in Canada, it is required to use Canada’s statutory tax rate of 26.50% in the determination of the estimated annual effective tax rate.
The Company’s effective tax rate on loss before tax for the three and nine months ended September 30, 2020 of 0.0% (0.0% for the three and nine months ended September 30, 2019) differs from the Canadian statutory rate of 26.50% primarily due to recording a valuation allowance on the Canadian deferred tax assets in excess of the remaining Canadian deferred tax liability and the effect of recording a valuation allowance against deferred tax assets in all other jurisdictions.
The Company maintains a valuation allowance on all of its deferred tax assets. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized.
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COMMITMENTS AND CONTINGENCIES |
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| COMMITMENTS AND CONTINGENCIES | 13. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
On September 13, 2018, two actions were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege among other things, defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500,000 (not in thousands) ($546,207). The second claim is a civil action brought by two minors and their parents against SciVac and the Israel Ministry of Health alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.
SciVac believes these matters to be without merit and intends to defend these claims vigorously.
The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with a second preliminary hearing held on May 13, 2020 to discuss document disclosure. The next preliminary hearing is scheduled to be held on December 3, 2020.
Operating leases
The Company has entered into various non-cancelable lease agreements for its office, lab, and manufacturing facilities, which are classified as operating leases. The office facility lease agreement in the United States expires on April 30, 2023, with no option to extend. Our manufacturing facility lease agreement expires on January 31, 2022, which includes one five-year option to extend until January 31, 2027. The lease agreement for our research facility in Canada, which comprises office and laboratory space, had an initial term ending on December 31, 2019 with the option to extend the term for two periods of three years. Effective September 5, 2019, the term of the lease was extended until December 31, 2022, with an option to extend the lease for one additional period of three years.
Effective April 30, 2020, the Company entered into the seventh amendment to the lease agreement for the office facilities in Cambridge, Massachusetts, which extends the lease for a term of three years expiring on April 30, 2023 with no option to extend, and for a base rent of $25 per month, subject to a 3% annual increase. The Company recognized a right of use asset of $769.
Options to extend are not recognized as part of the lease liabilities or recognized as right to use assets. There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.
Operating lease costs are included in general and administrative (“G&A”) expenses in the statement of operation and comprehensive loss.
The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
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SEGMENT INFORMATION |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT INFORMATION | 14. SEGMENT INFORMATION
The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.
Revenues from external customers are attributed to geographic areas based on location of the contracting customers:
There was no revenue attributed to our country of domicile, Canada, for the three and nine months ended September 30, 2020 and 2019.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUBSEQUENT EVENTS |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 15. SUBSEQUENT EVENTS
Effective as of September 4, 2020, the Company entered into a further lease agreement for additional office space at its research facility in Canada, the term of which will commence on October 1, 2020 until April 30, 2023. The Company will recognize a right of use asset and lease liability of approximately $66 on October 1, 2020.
On October 21, 2020, the Company incorporated VBI Vaccines B.V. in the Netherlands.
On October 22, 2020, the Company issued options to an existing employee pursuant to the 2016 Plan. Twenty-five percent of the granted options vest and become exercisable on the one-year anniversary of grant date, with the remaining % vesting and becoming exercisable on a monthly basis over 24 months. The granted options expire on .
During October 2020, the Company issued 13,246 common shares upon exercise of warrants at an exercise price of $1.50 for gross proceeds of $20.
|
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation and Consolidation | Basis of Presentation and Consolidation
The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2019 consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form 10-Q”) does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 10-K”), as filed with the SEC on March 5, 2020.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, and SciVac HK. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements.
In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.
|
| Significant Accounting Policies | Significant Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2019 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2020, other than the polices discussed below.
|
| Cash and cash equivalents | Cash and cash equivalents
Cash and cash equivalents include cash investments in interest-bearing accounts and term deposits which can readily be redeemed for cash or are issued for terms of three months or less from the date of acquisition.
|
| Short-term investments | Short-term investments
Short-term investments consist of redeemable short-term investments held with Schedule 1 Canadian banks for maturity terms greater than 3 months but less than a year from the date of acquisition. Short-term investments were initially classified as available for sale and were measured at fair value whereby unrealized holding gains or losses on these investments are reported in other comprehensive income or loss and accrued interest income was recognized in interest expense, net of interest income in the condensed consolidated statement of operations and comprehensive loss.
On September 30, 2020 we re-assessed the classification of our short-term investment and we determined that the short-term investment shall be classified as held to maturity. The transfer on September 30, 2020 occurred at fair value with the unrealized holding gains remaining in other comprehensive income or loss. The unrealized holding gains will be amortized over the remaining life of the security until April 2021.
Our short-term investments are considered level 2 in the fair value hierarchy. The fair value of the short-term investment was determined using the market approach method and the inputs include comparable market interest rates at September 30, 2020.
|
| Government Grants | Government Grants
Government grants are recognized in the statement of operations and comprehensive loss in the same period as the relevant expenses, in compliance with the agreement, as a reduction in the related expense or reduce the carrying value of the asset being acquired.
|
INVENTORY, NET (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INVENTORY | Inventory is stated at the lower of cost or market and consists of the following:
|
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INTANGIBLE ASSETS AND GOODWILL (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CUMULATIVE CURRENCY TRANSLATION |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF GOODWILL |
|
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OTHER CURRENT LIABILITIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OTHER CURRENT LIABILITIES | Other current liabilities consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOSS PER SHARE OF COMMON SHARES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ANTIDILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING |
|
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LONG-TERM DEBT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-term Debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LONG-TERM DEBT | As of September 30, 2020, and December 31, 2019, the long-term debt is as follows:
|
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| SCHEDULE OF INTEREST EXPENSE | Interest expense, net of interest income recorded in the three and nine months ended September 30, 2020 and 2019 was as follows:
|
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| SCHEDULE OF FUTURE PRINCIPAL OF LONG-TERM DEBT | The following table summarizes the future principal payments due under long-term debt:
|
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STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK OPTIONS ACTIVITY |
|
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| SCHEDULE OF RESTRICTED STOCK UNITS | Information relating to RSUs is as follow:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK-SCHOLES OPTION PRICING ASSUMPTIONS |
|
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| SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE |
|
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| SCHEDULE OF FAIR VALUE OF WARRANTS GRANTED BY USING BLACK-SCHOLES OPTION PRICING ASSUMPTIONS |
|
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| SCHEDULE OF WARRANT ACTIVITY | Activity related to the warrants is as follows:
|
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REVENUES AND DEFERRED REVENUE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF REVENUE COMPRISED | Revenue is comprised of the following:
|
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| SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS | The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2020:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF CHANGES IN DEFERRED REVENUE | The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2020:
|
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COMMITMENTS AND CONTINGENCIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LEASE COST AND OTHER INFORMATION | Options to extend are not recognized as part of the lease liabilities or recognized as right to use assets. There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.
|
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| SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES | The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
|
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SEGMENT INFORMATION (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS | Revenues from external customers are attributed to geographic areas based on location of the contracting customers:
|
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NATURE OF BUSINESS AND CONTINUATION OF BUSINESS (Details Narrative) $ / shares in Units, $ in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 16, 2020
USD ($)
|
Sep. 16, 2020
CAD ($)
|
Jul. 31, 2020
USD ($)
|
Jul. 21, 2020
USD ($)
$ / shares
shares
|
Jul. 03, 2020
CAD ($)
|
May 31, 2020
USD ($)
|
Apr. 30, 2020
USD ($)
$ / shares
shares
|
Sep. 30, 2020
USD ($)
$ / shares
shares
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2020
CAD ($)
|
Sep. 30, 2019
USD ($)
|
Oct. 31, 2020
$ / shares
|
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| [custom:RetainedEarningAccumulatedDeficit-0] | $ 293,256 | $ 293,256 | ||||||||||
| Net Cash Provided by (Used in) Operating Activities | 30,555 | $ 40,182 | ||||||||||
| Common shares issued in public offering | shares | 52,272,726 | |||||||||||
| Share issuance costs related to offering | 4,919 | 2,756 | ||||||||||
| Warrant exercise price | $ / shares | $ 20,000 | |||||||||||
| Proceeds from Issuance of Common Stock | $ 106,269 | $ 40,250 | ||||||||||
| Warrant [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Warrant to purchase common stock | shares | 550,000 | |||||||||||
| Warrant exercise price | $ / shares | $ 3.34 | |||||||||||
| Proceeds from warrants | $ 1,837 | |||||||||||
| Loan and Guaranty Agreement [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Debt Instrument, Maturity Date | Jun. 01, 2024 | Jun. 01, 2024 | ||||||||||
| Open Market Sale Agreement [Member] | Jefferies LLC [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Open market sale agreement sales cost | $ 125,000 | |||||||||||
| ATM Program [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Share issuance costs related to offering | 1,606 | |||||||||||
| Proceeds from stock issuance cost | $ 47,163 | |||||||||||
| Stock Issued During Period, Shares, New Issues | shares | 10,840,334 | |||||||||||
| Proceeds from Issuance of Common Stock | $ 48,769 | |||||||||||
| Average price per share | $ / shares | $ 4.4988 | |||||||||||
| Available share value | $ 76,231 | $ 76,231 | ||||||||||
| Industrial Research Assistance Program [Member] | CAD [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| [custom:ResearchAndDevelopmentExpenses] | $ 1,000 | |||||||||||
| Additional grants | $ 235 | |||||||||||
| Contribution Agreement [Member] | CAD [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| [custom:ResearchAndDevelopmentExpenses] | $ 55,976 | |||||||||||
| Additional grants | $ 731 | |||||||||||
| Loan Agreement [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Excess of contribution amount | $ 500 | |||||||||||
| National Securities Inc [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Warrant to purchase common stock | shares | 705,000 | |||||||||||
| Warrant exercise price | $ / shares | $ 1.50 | |||||||||||
| K 2 Heathventures L L C [Member] | Loan and Guaranty Agreement [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Proceeds from Issuance of Long-term Debt | $ 4,500 | |||||||||||
| Debt Instrument, Maturity Date | Jun. 01, 2024 | Jun. 01, 2024 | ||||||||||
| Public Offering [Member] | ||||||||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||||
| Shares issued price per share | $ / shares | $ 1.10 | |||||||||||
| Gross proceeds from public offering | $ 57,500 | |||||||||||
| Share issuance costs related to offering | 3,606 | |||||||||||
| Proceeds from stock issuance cost | $ 53,894 | |||||||||||
SCHEDULE OF INVENTORY (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Finished goods | $ 58 | |
| Work-in-process | 374 | 237 |
| Raw materials | 1,168 | 780 |
| Inventory, net | $ 1,542 | $ 1,075 |
SCHEDULE OF INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CUMULATIVE CURRENCY TRANSLATION (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible Assets, Gross | $ 62,169 | $ 62,169 |
| Accumulated Amortization | (569) | (521) |
| Cumulative Impairment Charge | (300) | (300) |
| Cumulative Currency Translation | (2,132) | (592) |
| Intangible assets, Net | 59,168 | 60,756 |
| Patents [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible Assets, Gross | 669 | 669 |
| Accumulated Amortization | (569) | (521) |
| Cumulative Impairment Charge | ||
| Cumulative Currency Translation | 31 | 30 |
| Intangible assets, Net | 131 | 178 |
| Inprocess Research And Development Assets [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible Assets, Gross | 61,500 | 61,500 |
| Accumulated Amortization | ||
| Cumulative Impairment Charge | (300) | (300) |
| Cumulative Currency Translation | (2,163) | (622) |
| Intangible assets, Net | $ 59,037 | $ 60,578 |
SCHEDULE OF GOODWILL (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Goodwill, Gross Carrying Amount | $ 8,714 | $ 8,714 |
| Goodwill, Cumulative Impairment Charge | (6,292) | (6,292) |
| Goodwill, Cumulative Currency Translation | (270) | (214) |
| Goodwill, Net Book Value | $ 2,152 | $ 2,208 |
INTANGIBLE ASSETS AND GOODWILL (Details Narrative) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2020
USD ($)
| |
| Finite-Lived Intangible Assets [Line Items] | |
| In process research and development fair value assumptions, description | The discount rate used was 11% and the cumulative probability of technical and regulatory success to achieve approval to market the products ranged from approximately 6% to 17% |
| Goodwill [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Decrease in Foreign currency translation adjustment | $ 56 |
| Inprocess Research And Development Assets [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Decrease in Foreign currency translation adjustment | $ 1,541 |
SCHEDULE OF OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Other Liabilities Disclosure [Abstract] | ||
| Accrued research and development expenses (including clinical trial accrued expenses) | $ 6,377 | $ 9,247 |
| Accrued professional fees | 958 | 446 |
| Payroll and employee-related costs | 1,632 | 2,184 |
| Other current liabilities | 371 | 384 |
| Total Other current liabilities | $ 9,338 | $ 12,261 |
SCHEDULE OF ANTIDILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING (Details) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive weighted average shares outstanding | 18,718,847 | 9,432,928 |
| Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive weighted average shares outstanding | 3,398,824 | 2,618,824 |
| Stock Options and Equity Awards [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive weighted average shares outstanding | 12,580,297 | 6,814,104 |
| K2 Conversion Feature [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive weighted average shares outstanding | 2,739,726 | |
SCHEDULE OF LONG-TERM DEBT (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
[1] | ||
|---|---|---|---|---|---|
| Long-term Debt | |||||
| Long-term debt, net of debt discount | $ 15,862 | $ 14,845 | |||
| Less: current portion, net of debt discount | 14,845 | ||||
| Long-term debt | $ 15,862 | ||||
| |||||
SCHEDULE OF INTEREST EXPENSE (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Long-term Debt | ||||
| Interest expense | $ 422 | $ 509 | $ 1,330 | $ 1,539 |
| Amortization of debt discount | 468 | 245 | 1,102 | 753 |
| Interest income | (148) | (128) | (426) | (620) |
| Total interest expense, net of interest income | $ 742 | $ 626 | $ 2,006 | $ 1,672 |
SCHEDULE OF FUTURE PRINCIPAL OF LONG-TERM DEBT (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
|---|---|
| Long-term Debt | |
| Remaining 2020 | |
| 2021 | |
| 2022 | 4,683 |
| 2023 | 9,978 |
| 2024 | 6,729 |
| Total | $ 21,390 |
LONG-TERM DEBT (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 21, 2020 |
May 22, 2020 |
Jan. 31, 2019 |
Jul. 17, 2018 |
Dec. 06, 2016 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Oct. 31, 2020 |
Dec. 31, 2019 |
May 06, 2016 |
Jul. 25, 2014 |
|
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 20,000 | ||||||||||
| Proceeds from Warrant Exercises | $ 1,837 | ||||||||||
| [custom:EffectivePriceOfWarrants-0] | $ 1.52 | ||||||||||
| Intrinsic value of beneficial conversion feature recorded to additional paid in capital | $ 2,577 | ||||||||||
| Interest expense | 723 | ||||||||||
| Amortization of debt discount | 461 | ||||||||||
| Fair Value, Inputs, Level 3 [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt Instrument, Fair Value Disclosure | 17,644 | $ 15,272 | |||||||||
| Second Amended Credit Facility [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 363,771 | ||||||||||
| Warrants to purchase common shares original issue date description | July 25, 2019 to December 6, 2021 | ||||||||||
| Increase in debt discount | $ 386 | ||||||||||
| Second Amended Credit Facility [Member] | Extended Maturity [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt Instrument, Maturity Date, Description | May 31, 2018 to December 31, 2018 | ||||||||||
| Third Amended Credit Facility [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 2.75 | ||||||||||
| Increase in debt discount | $ 179 | ||||||||||
| Third Amended Credit Facility [Member] | Exercise Price Four Point One Three [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 4.13 | ||||||||||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 363,771 | 363,771 | |||||||||
| Third Amended Credit Facility [Member] | Exercise Price Three Point Three Five Five [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 3.355 | ||||||||||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 1,341,282 | ||||||||||
| Third Amended Credit Facility [Member] | Extended Maturity [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt Instrument, Maturity Date, Description | Amended Credit Facility (the “Third Amendment”) to i) extend the period the Company was required to pay only the interest on the loan from December 31, 2018 to January 31, 2020, ii) extend the maturity of the term loan to June 30, 2020 | ||||||||||
| Credit Holdings L P [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Repayments of Related Party Debt | 14,500 | ||||||||||
| Gain (Loss) on Extinguishment of Debt | 84 | ||||||||||
| Warrant [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 3.34 | ||||||||||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 550,000 | ||||||||||
| Proceeds from Issuance of Warrants | $ 1,837 | ||||||||||
| Perceptive Credit Holdings, LP [Member] | Amended Credit Facility [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt discount related to Loan Agreement | $ 3,453 | ||||||||||
| Line of Credit Facility, Maximum Borrowing Capacity | $ 6,000 | ||||||||||
| Proceeds from Lines of Credit | 13,200 | ||||||||||
| Line of Credit Facility, Remaining Borrowing Capacity | 1,800 | ||||||||||
| Debt Issuance Costs, Gross | 360 | ||||||||||
| Line of Credit Facility, Commitment Fee Amount | 300 | ||||||||||
| Perceptive Credit Holdings, LP [Member] | Warrant [Member] | Amended Credit Facility [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Proceeds from Issuance of Warrants | $ 2,793 | ||||||||||
| Perceptive Credit Holdings, LP [Member] | Tranche One [Member] | Amended Credit Facility [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 4.13 | ||||||||||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 363,771 | ||||||||||
| Perceptive Credit Holdings, LP [Member] | Tranche Two [Member] | Amended Credit Facility [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 3.355 | ||||||||||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 1,341,282 | ||||||||||
| Loan and Guaranty Agreement [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt Instrument, Periodic Payment | 1,390 | ||||||||||
| Debt Instrument, Face Amount | $ 21,390 | ||||||||||
| Debt annual interest rate | 8.25% | ||||||||||
| Debt increased percentage | 5.00% | ||||||||||
| Debt maturity date | Jun. 01, 2024 | ||||||||||
| Loan and Guaranty Agreement [Member] | Prime Rate [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt annual interest rate | 5.00% | ||||||||||
| Loan and Guaranty Agreement [Member] | K2 Warrant [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Warrant or Right, Reason for Issuance, Description | additional common shares will be issuable pursuant to the K2 Warrant as determined by the principal amount of the additional funds advanced multiplied by 3.5% and divided by the Warrant Price, and the final payment will increase by 6.95% of the funds advanced. | ||||||||||
| Loan and Guaranty Agreement [Member] | Third Tranche [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Secured Debt | $ 10,000 | ||||||||||
| Debt annual interest rate | 8.25% | ||||||||||
| Loan interest period extended date | Jan. 01, 2023 | ||||||||||
| Loan and Guaranty Agreement [Member] | K 2 Healthventures L L C [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Debt Instrument, Description | The Lenders agreed to make available the following additional tranches subject to the following conditions and upon the submission of a loan request by the Company: (1) up to $10 million available between January 1, 2021 and April 30, 2021 upon achievement of certain milestones (the “Second Tranche Term Loan”), (2) $10 million available between the closing date and December 31, 2021, subject to achievement of a certain U.S. Food and Drug Administration approval (the “Third Tranche Term Loan”), and (3) a final tranche of up to $ | ||||||||||
| Debt Conversion, Converted Instrument, Amount | $ 4,000 | ||||||||||
| Debt Instrument, Convertible, Conversion Price | $ 1.46 | ||||||||||
| Debt Issuance Costs, Net | $ 1,021 | ||||||||||
| Secured term loan final payment percentage | 6.95% | ||||||||||
| Additional discount | $ 1,390 | ||||||||||
| Debt discount related to Loan Agreement | $ 6,169 | ||||||||||
| Loan and Guaranty Agreement [Member] | K 2 Healthventures L L C [Member] | K2 Warrant [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | 625,000 | ||||||||||
| Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 1.12 | ||||||||||
| Warrant or Right, Reason for Issuance, Description | The number of common shares issuable pursuant to the K2 Warrant, at any given time, is determined by the aggregate principal amount of the loans advanced at that time pursuant to the Loan Agreement multiplied by 3.5% and divided by the Warrant Price. If the full $50 million available in all K2 tranches is advanced pursuant to the Loan Agreement, up to 1,562,500 common shares will be issuable pursuant to the K2 Warrant. | ||||||||||
| Class of Warrant or Right, Date from which Warrants or Rights Exercisable | May 22, 2030 | ||||||||||
| Proceeds from Warrant Exercises | $ 1,181 | ||||||||||
| Loan and Guaranty Agreement [Member] | K 2 Healthventures L L C [Member] | First Tranche [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Secured Debt | 20,000 | ||||||||||
| Loan and Guaranty Agreement [Member] | K 2 Healthventures L L C [Member] | Final Tranche [Member] | |||||||||||
| Entity Listings [Line Items] | |||||||||||
| Secured Debt | $ 10,000 | ||||||||||
SCHEDULE OF STOCK OPTIONS ACTIVITY (Details) - Equity Option [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2020
$ / shares
shares
| |
| Summary of Investment Holdings [Line Items] | |
| Number of Stock Options Outstanding, Beginning Balance | shares | 6,471,708 |
| Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 2.79 |
| Number of Stock Options, Granted | shares | 5,960,900 |
| Weighted Average Exercise Price, Granted | $ / shares | $ 1.93 |
| Number of Stock Options, Exercised | shares | (750) |
| Weighted Average Exercise Price, Exercised | $ / shares | $ 1.64 |
| Number of Stock Options, Forfeited | shares | (20,013) |
| Weighted Average Exercise Price, Forfeited | $ / shares | $ 1.94 |
| Number of Stock Options Outstanding, Ending Balance | shares | 12,411,845 |
| Weighted Average Exercise Price, Ending Balance | $ / shares | $ 2.38 |
| Number of Stock Options, Exercisable | shares | 5,567,736 |
| Weighted Average Exercise Price, Exercisable | $ / shares | $ 2.86 |
SCHEDULE OF RESTRICTED STOCK UNITS (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Class of Stock [Line Items] | ||
| Weighted Average Fair Value at Grant Date, Granted | $ 1.41 | $ 1.45 |
| Restricted Stock Units (RSUs) [Member] | ||
| Class of Stock [Line Items] | ||
| Number of Stock Awards, Unvested shares outstanding beginning balance | 157,997 | |
| Weighted Average Fair Value at Grant Date, Unvested shares outstanding beginning balance | $ 2.77 | |
| Number of Stock Awards, Granted | 125,000 | |
| Weighted Average Fair Value at Grant Date, Granted | $ 1.46 | |
| Number of Stock Awards, Vested | (107,044) | |
| Weighted Average Fair Value at Grant Date, Vested | $ 2.83 | |
| Number of Stock Awards, Forfeited | (7,501) | |
| Weighted Average Fair Value at Grant Date, Forfeited | $ 1.53 | |
| Number of Stock Awards, Unvested shares outstanding ending balance | 168,452 | |
| Weighted Average Fair Value at Grant Date, Unvested shares outstanding | $ 1.81 | |
SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK-SCHOLES OPTION PRICING ASSUMPTIONS (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Equity [Abstract] | ||
| Volatility | 91.47% | 118.62% |
| Risk free interest rate | 1.20% | 2.46% |
| Expected term in years | 5.81 | 5.78 |
| Expected dividend yield | 0.00% | 0.00% |
| Weighted average fair value per option | $ 1.41 | $ 1.45 |
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Total stock-based compensation expense | $ 1,493 | $ 876 | $ 3,754 | $ 3,120 |
| Research and Development [Member] | ||||
| Total stock-based compensation expense | 309 | 184 | 770 | 629 |
| General and Administrative [Member] | ||||
| Total stock-based compensation expense | 1,170 | 675 | 2,947 | 2,439 |
| Cost of Revenues [Member] | ||||
| Total stock-based compensation expense | $ 14 | $ 17 | $ 37 | $ 52 |
SCHEDULE OF FAIR VALUE OF WARRANTS GRANTED BY USING BLACK-SCHOLES OPTION PRICING ASSUMPTIONS (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Volatility | 91.47% | 118.62% |
| Risk free interest rate | 1.20% | 2.46% |
| Expected dividend yield | 0.00% | 0.00% |
| National Warrants [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Volatility | 103.13% | |
| Risk free interest rate | 0.26% | |
| Expected term in years | 3 | |
| Expected dividend yield | 0.00% | |
| Fair value per warrant | $ 0.64 | |
| K2 Warrant [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Volatility | 95.00% | |
| Risk free interest rate | 0.66% | |
| Expected term in years | 10 | |
| Expected dividend yield | 0.00% | |
| Fair value per warrant | $ 2.25 | |
SCHEDULE OF WARRANT ACTIVITY (Details) - Warrants [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2020
$ / shares
shares
| |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Number of Warrants, Balance Outstanding Beginning | shares | 2,618,824 |
| Weighted Average Exercise Price, Balance Outstanding Beginning | $ / shares | $ 2.87 |
| Number of Warrants, Issued | shares | 1,330,000 |
| Weighted Average Exercise Price, Issued | $ / shares | $ 1.32 |
| Number of Warrants, Exercised | shares | (550,000) |
| Weighted Average Exercise Price, Exercised | $ / shares | $ 3.34 |
| Number of Warrants, Balance Outstanding Ending | shares | 3,398,824 |
| Weighted Average Exercise Price, Balance Outstanding Ending | $ / shares | $ 2.19 |
STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Jul. 21, 2020 |
Apr. 30, 2020 |
Sep. 30, 2020 |
Oct. 31, 2020 |
May 22, 2020 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Warrant exercise price | $ 20,000 | ||||
| Number of common shares issued, shares | 52,272,726 | ||||
| Warrants [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Class of warrant or right, number of securities called by each warrant or right | 705,000 | ||||
| Warrant exercise price | $ 1.50 | ||||
| K2 Warrant [Member] | Loan and Guaranty Agreement [Member] | K 2 Healthventures L L C [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Class of warrant or right, number of securities called by each warrant or right | 625,000 | ||||
| Warrant exercise price | $ 1.12 | ||||
| Warrants and rights outstanding, maturity date | May 22, 2030 | ||||
| Warrant [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Warrant exercise price | $ 3.34 | ||||
| Proceeds from warrants | $ 1,837 | ||||
| Warrant [Member] | Common Shares Exercise of Warrants [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Warrant exercise price | $ 3.34 | ||||
| Number of common shares issued, shares | 550,000 | ||||
| Proceeds from warrants | $ 1,837 | ||||
| 2006 Plan [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 993,666 | ||||
| 2013 Plan [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 0 | ||||
| 2014 Plan [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 521,242 | ||||
| 2016 Plan [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 10,896,937 | ||||
| Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum | 10.00% | ||||
| Maximum percentage of options granted | 10.00% | ||||
| Number of common shares available for issuance | 10,321,347 | ||||
| 2016 VBI Equity Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | |||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 168,452 |
SCHEDULE OF REVENUE COMPRISED (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | $ 298 | $ 647 | $ 897 | $ 1,647 |
| Product [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | 15 | 168 | 213 | 365 |
| Service [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Revenues | $ 283 | $ 479 | $ 684 | $ 1,282 |
SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
|---|---|
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | $ 3,061 |
| Current Portion To September Thirty Two Thousand Twenty One [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | 408 |
| Remaining Portion Thereafter [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | 2,653 |
| Product [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | 469 |
| Product [Member] | Current Portion To September Thirty Two Thousand Twenty One [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | |
| Product [Member] | Remaining Portion Thereafter [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | 469 |
| Service [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | 2,592 |
| Service [Member] | Current Portion To September Thirty Two Thousand Twenty One [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | 408 |
| Service [Member] | Remaining Portion Thereafter [Member] | |
| Disaggregation of Revenue [Line Items] | |
| Revenue remaining performance obligations | $ 2,184 |
SUMMARY OF CHANGES IN DEFERRED REVENUE (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Balance at December 31, 2019 | $ 3,791 | |
| Amounts invoiced and revenue deferred | 11 | |
| Recognition of deferred revenue | (657) | |
| Currency translation | (84) | |
| Balance at September 30, 2020 | 3,061 | |
| Short Term | 408 | $ 882 |
| Long Term | $ 2,653 | $ 2,909 |
REVENUES AND DEFERRED REVENUE (Details Narrative) - USD ($) $ in Thousands |
Dec. 04, 2018 |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|---|
| Disaggregation of Revenue [Line Items] | |||
| Remaining performance obligation, deemed to be initial transaction price | $ 3,061 | ||
| Additional potential regulatory and sales milestone payments | $ 117,500 | ||
| Contract with Customer, Liability | 3,061 | $ 3,791 | |
| License Agreement [Member] | Brii Bio [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Non-refundable upfront payment | $ 11,000 | ||
| Stock issued for the agreement, shares | 2,295,082 | ||
| Stock issued for the agreement | $ 3,600 | ||
| Remaining performance obligation, deemed to be initial transaction price | 7,400 | ||
| License Agreement [Member] | Brii Bio [Member] | R&D Services [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Remaining performance obligation, deemed to be initial transaction price | 4,800 | ||
| License Agreement [Member] | Brii Bio [Member] | VBI-2601 [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Remaining performance obligation, deemed to be initial transaction price | $ 2,600 | ||
| Collaboration and License Agreement [Member] | |||
| Disaggregation of Revenue [Line Items] | |||
| Unsatisfied amount of research and development services | 2,400 | ||
| Contract with Customer, Liability | $ 3,100 |
COLLABORATON ARRANGEMENTS (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Research and development expenses | $ 4,478 | $ 5,401 | $ 10,035 | $ 21,989 |
| Collaboration Agreement [Member] | Glaxo Smith Kline Biologicals S. A. [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Research and development expenses | 149 | 485 | ||
| Collaboration Agreement [Member] | National Research Council Of Canada [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Research and development expenses | $ 131 | $ 395 | ||
INCOME TAXES (Details Narrative) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Tax Disclosure [Abstract] | ||
| Statutory income tax rate | 26.50% | |
| Effective Income Tax Rate Reconciliation, Percent | 0.00% | 0.00% |
SCHEDULE OF LEASE COST AND OTHER INFORMATION (Details) $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2020
USD ($)
|
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Operating lease costs | $ 316 | $ 897 |
| Operating Lease, Weighted Average Remaining Lease Term | 1 year 11 months 8 days | 1 year 11 months 8 days |
| Weighted average discount rate | 12.00% | 12.00% |
SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Remaining 2020 | $ 248 | |
| 2021 | 1,001 | |
| 2022 | 472 | |
| 2023 | 104 | |
| Total | 1,825 | |
| Effect of discounting | (179) | |
| Total lease liability | 1,646 | |
| Less: current portion | (848) | $ (642) |
| Long term lease liability | $ 798 | $ 817 |
COMMITMENTS AND CONTINGENCIES (Details Narrative) |
9 Months Ended | ||||
|---|---|---|---|---|---|
|
Apr. 30, 2020
USD ($)
|
Sep. 05, 2019 |
Sep. 13, 2018
USD ($)
Integer
|
Sep. 30, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
| Product Liability Contingency [Line Items] | |||||
| Lease expires date | Dec. 31, 2022 | ||||
| Operating lease option to extend | the term of the lease was extended until December 31, 2022, with an option to extend the lease for one additional period of three years. | ||||
| Operating Lease, Expense | $ 25,000 | ||||
| Operating Lease, Right-of-Use Asset | $ 1,642,000 | $ 1,459,000 | |||
| Office Facility Lease Agreement [Member] | UNITED STATES | |||||
| Product Liability Contingency [Line Items] | |||||
| Lease expires date | Apr. 30, 2023 | ||||
| Office Facility Lease Agreement [Member] | Massachusetts [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Lease expires date | Apr. 30, 2023 | ||||
| Operating lease option to extend | the Company entered into the seventh amendment to the lease agreement for the office facilities in Cambridge, Massachusetts, which extends the lease for a term of three years | ||||
| Percentage of annual increase for base rent | 3.00% | ||||
| Operating Lease, Right-of-Use Asset | $ 769,000 | ||||
| Manufacturing Facility Lease Agreement [Member] | UNITED STATES | |||||
| Product Liability Contingency [Line Items] | |||||
| Lease expires date | Jan. 31, 2022 | ||||
| Operating lease option to extend | Our manufacturing facility lease agreement expires on January 31, 2022, which includes one five-year option to extend until January 31, 2027. | ||||
| Lease Agreement [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Lease expires date | Dec. 31, 2019 | ||||
| Operating lease option to extend | The lease agreement for our research facility in Canada, which comprises office and laboratory space, had an initial term ending on December 31, 2019 with the option to extend the term for two periods of three years. | ||||
| Sci B Vac [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Number of children vaccinated | Integer | 428,000 | ||||
| Seeking damages | $ 546,207,000 | ||||
| Sci B Vac [Member] | NIS Currency [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Seeking damages | $ 1,879,500,000 |
SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
| Revenue | $ 298 | $ 647 | $ 897 | $ 1,647 |
| ISRAEL | ||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
| Revenue | 48 | 134 | 198 | 287 |
| China / Hong Kong [Member] | ||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
| Revenue | 250 | 467 | 646 | 1,245 |
| Europe [Member] | ||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
| Revenue | $ 0 | $ 46 | $ 53 | $ 115 |
SEGMENT INFORMATION (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
| Revenue | $ 298 | $ 647 | $ 897 | $ 1,647 |
| CANADA | ||||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
| Revenue | $ 0 | $ 0 | $ 0 | $ 0 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | |||
|---|---|---|---|---|
Oct. 22, 2020 |
Oct. 01, 2020 |
Sep. 04, 2020 |
Oct. 31, 2020 |
|
| Subsequent Event [Line Items] | ||||
| Gross proceeds | $ 20,000 | |||
| Subsequent Event [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Right of use asset and lease liability | $ 66 | |||
| Percentage of options vest and exercisable, description | Twenty-five percent | |||
| Percent of options vesting and exercisable | 75.00% | |||
| Options granted expiration date | Oct. 22, 2030 | |||
| Number of shares issued | 13,246 | |||
| Warrant, Exercise Price, Increase | $ 1.50 | |||
| Subsequent Event [Member] | Two Thousand Sixteen Plan [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Shares Held in Employee Stock Option Plan, Allocated | 100,000 | |||
| Lease Agreement [Member] | ||||
| Subsequent Event [Line Items] | ||||
| Lease agreement, description | the Company entered into a further lease agreement for additional office space at its research facility in Canada, the term of which will commence on October 1, 2020 until April 30, 2023. The Company will recognize a right of use asset and lease liability of approximately $ |