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 |
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the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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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.
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VBI VACCINES INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
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 2023 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2024. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | the timing of, and our ability to, obtain and maintain regulatory approvals for our clinical trials, products, and pipeline candidates; |
| ● | our ability to achieve and sustain commercial success of PreHevbrio in the United States (“U.S.”) and PreHevbri in Europe; |
| ● | the timing and results of our ongoing and planned clinical trials for products and pipeline candidates; |
| ● | the amount of funds we require for our prophylactic and therapeutic pipeline candidates; |
| ● | the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements; |
| ● | our ability to manufacture, or to have manufactured, our 3-antigen hepatitis B vaccine and our pipeline candidates, at a commercially viable scale to the standards and requirements of regulatory agencies; |
| ● | our ability to complete the Brii Transactions on a timely basis; |
| ● | the impact of the COVID-19 endemic and its effects on our clinical studies, research programs, manufacturing, business plan, regulatory review including site inspections, and the global economy; |
| ● | our ability to effectively execute and deliver our plans related to commercialization, marketing, manufacturing capabilities and strategy; |
| ● | our ability to retain and maintain a good relationship with our current employees, and our ability to competitively attract new employees with relevant experience and expertise; |
| ● | the suitability and adequacy of our office, manufacturing, and research facilities and our ability to secure term extensions or expansions of leased space; |
| ● | the ability of our vendors and suppliers to manufacture and deliver materials in a timely manner that meet regulatory agency and our standards and requirements to meet planned timelines and milestones; |
| 3 |
| ● | any disruption in the operations of our Rehovot, Israel manufacturing facility where we manufacture all of our clinical and commercial supplies of our 3-antigen hepatitis B vaccine and clinical supplies of our hepatitis B immunotherapeutic, VBI-2601; |
| ● | our compliance with all laws, rules, and regulations applicable to our business and products; |
| ● | our ability to continue as a going concern; |
| ● | our history of losses; |
| ● | our ability to generate revenues and achieve profitability; |
| ● | emerging competition and rapidly advancing technology in our industry that may outpace our technology; |
| ● | customer demand for our 3-antigen hepatitis B vaccine and pipeline candidates; |
| ● | the impact of competitive or alternative products, technologies, and pricing; |
| ● | general economic conditions and events and the impact they may have on us and our potential customers; |
| ● | our ability to obtain adequate financing in the future on reasonable terms, if, as, and when we need it; |
| ● | our ability to implement network systems and controls that are effective at preventing cyber-attacks, malware intrusions, malicious viruses, and ransomware threats; |
| ● | our ability to secure and maintain protection over our intellectual property; |
| ● | our ability to maintain our existing licenses with licensors of intellectual property, or obtain new licenses for intellectual property; |
| ● | changes to legal and regulatory processes for biosimilar approval and marketing that could reduce the duration of market exclusivity for our products; |
| ● | our ability to regain and maintain compliance with the NASDAQ Capital Market’s (“Nasdaq”) listing standards; |
| ● | our success at managing the risks involved in the foregoing items; and |
| ● | other factors discussed in this Form 10-Q. |
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Unless otherwise stated or the context otherwise requires, the terms “VBI,” “we,” “us,” “our,” and the “Company” refer to VBI Vaccines Inc. and its subsidiaries.
Unless indicated otherwise, all references to the U.S. Dollar, Dollar, or $ are to the United States Dollar, the legal currency of the United States of America and all references to € mean Euros, the legal currency of the European Union. We may also refer to NIS, which is the New Israeli Shekel, the legal currency of Israel, and the Canadian Dollar or CAD, which is the legal currency of Canada.
Except for share and per share amounts, or as otherwise specified to be in millions, amounts presented are stated in thousands.
| 4 |
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| 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 | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Deferred revenues, net of current portion | ||||||||
| Lease liability, net of current portion | ||||||||
| Liabilities for severance pay | ||||||||
| Total non-current liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 16) | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Common shares ( authorized; | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 5 |
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
| Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Revenues, net | $ | $ | ||||||
| Operating expenses: | ||||||||
| Cost of revenues | ||||||||
| Research and development | ||||||||
| Sales, general and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest expense, net of interest income | ( | ) | ( | ) | ||||
| Foreign exchange loss | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| NET LOSS | ( | ) | $ | ( | ) | |||
| Other comprehensive income | ||||||||
| 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
| 6 |
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands, except share amounts)
| Accumulated | ||||||||||||||||||||||||
| Number of | Additional | Other | Total | |||||||||||||||||||||
| Common | Share | Paid-in | Comprehensive | Accumulated | Stockholders’ | |||||||||||||||||||
| Shares | Capital | Capital | Income (Loss) | Deficit | Equity (Deficit) | |||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Common shares issued for cash, net of issuance costs | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Currency translation adjustments | - | |||||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Currency translation adjustments | - | |||||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 7 |
VBI Vaccines Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For the Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Inventory reserve | ||||||||
| Change in operating right of use assets | ||||||||
| Unrealized foreign exchange loss | ||||||||
| 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 accounts payable | ( | ) | ||||||
| Change in deferred revenues | ( | ) | ||||||
| Change in other current liabilities | ( | ) | ( | ) | ||||
| Payments made on operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash flows used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of commons shares for cash | ||||||||
| Share issuance costs | ( | ) | ||||||
| Net cash flows provided by financing activities | ||||||||
| Effect of exchange rates on cash | ( | ) | ( | ) | ||||
| CHANGE IN CASH FOR THE PERIOD | ( | ) | ( | ) | ||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| Supplementary information: | ||||||||
| Interest paid | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Promissory note issued by Brii Biosciences Limited assigned to K2 HealthVentures | ||||||||
| Capital expenditures included in accounts payable and other current liabilities | ||||||||
| Share issuance costs included in other current liabilities | ||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
| 8 |
VBI Vaccines Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2024 and 2023
(in thousands, except share and per share amounts)
1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS
Corporate Overview
VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.
The Company and its wholly owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies, Inc., a Canadian company and the wholly owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd., an Israeli company (“SciVac”); SciVac Hong Kong Limited, a company incorporated pursuant to the Companies Ordinance (Chapter 622 of the Laws of HongKong) and a wholly owned subsidiary (“SciVac HK”); and VBI Vaccines B.V, a Netherlands company and a wholly owned subsidiary (“VBI BV”), are collectively referred to as the “Company”, “we”, “us”, “our”, or “VBI”.
The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 160 Second Street, Floor 3, Cambridge, MA 02142. In addition, the Company has manufacturing facilities located in Rehovot, Israel and research facilities located in Ottawa, Ontario, Canada.
Principal Operations
VBI is a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.
Partnership with Brii Bio
On
July 5, 2023, the Company announced the expansion of its hepatitis B partnership with Brii Biosciences Limited (“Brii Bio”). Through (i) a Collaboration and License
Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between the Company and Brii Bio, and (ii) the Amended
and Restated Collaboration and License Agreement (the “A&R Collaboration Agreement, and together with the Collaboration Agreement,
the “Brii Collaboration Agreements”), dated July 5, 2023, by and between the Company and Brii Bio, Brii Bio expanded its
exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in Asia Pacific (“APAC”),
excluding Japan. As part of this collaboration, Brii Bio paid the Company an upfront payment of $
| 9 |
On
February 13, 2024, the Company entered into a series of agreements with Brii Bio, pursuant to which, subject to achievement of
certain activities, we would receive up to $
Rehovot Purchase Agreement
On February 13, 2024, the Company and SciVac entered into a purchase agreement
(the “Rehovot Purchase Agreement”) with Brii Bio Israel Ltd (“Brii Israel”), a wholly-owned subsidiary of Brii
Bio, prior to the closing, and joined as a party to the agreement prior to the closing as the purchaser, and Brii Biosciences, Inc, a
Delaware corporation, pursuant to which, upon achievement of certain activities and closing of the transactions contemplated by the Rehovot
Purchase Agreement, subject to the terms and conditions therein, SciVac will sell to Brii Israel certain assets, including SciVac and
its affiliates’ interest and rights in certain leases with respect to the vaccine manufacturing facility in Israel, for an aggregate
purchase price of $
The Rehovot Purchase Agreement contains representations and warranties of SciVac and Brii Israel that are typical for transactions of this type. The Rehovot Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type.
The closing of the transactions pursuant to the Rehovot Purchase Agreement are subject to the terms and conditions therein, including closing conditions that are typical for transactions of this type and the Company’s completion of the Essential Activities (as defined below). Closing will not occur prior to June 30, 2024.
Brii Purchase Agreement
On
February 13, 2024, the Company and VBI Cda entered into a Purchase Agreement with Brii Bio (the “Brii Purchase Agreement”),
pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio,
substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for a secured promissory note in
the principal amount up to $
Brii Side Letter
On
February 13, 2024, the Company and Brii Bio entered into a side letter (the “Side Letter”) setting forth certain
essential and additional priority activities to transfer manufacturing responsibility for clinical supply and commercial supply of
VBI-2601 and PreHevbri for the Brii Territories set forth in the Side Letter (the “Essential Activities”) the Company is
required to complete as a condition to the entry into the License Agreement (as defined below) and consummation of the transactions
pursuant to the Rehovot Purchase Agreement. As of March 31, 2024, the Essential Activities were still in progress and not yet
completed. The principal amount of the Note shall increase up to $
Brii License Agreement
Upon completion
of the Essential Activities pursuant to the Side Letter, VBI Cda and Brii Bio will enter into a license agreement (the “Brii License
Agreement”) pursuant to which Brii Bio shall issue a secured promissory note in the amount of $
| 10 |
Loan Agreement and Forbearance Agreement with K2HV
On each of January 9, 2024, January 23, 2024, and February 6, 2024, as discussed in Note 9, the Loan Parties entered into extensions to the Forbearance Agreement. Additionally, on February 13, 2024, as discussed in Note 9, the Loan Parties entered into the Fourth Amendment.
Liquidity and Going Concern
The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development and commercialization of its products.
The
Company has an accumulated deficit of $
The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and commercially launch and sell our approved products. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. Based on available cash at March 31, 2024, together with the net proceeds from the April 2024 Offering (defined below), in order to continue to fund our operations, we must raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so. If we are unable to obtain additional financing in the near future, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.
ATM Program
On
August 26, 2022, the Company 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which
covers the offering, issuance and sale of up to $
On
April 16, 2024, upon filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company
became subject to General Instruction I.B.6 of Form S-3, pursuant to which in no event will the Company sell its common shares in a
registered primary offering using Form S-3 with a value exceeding more than one-third of our public float in any 12 calendar month
period so long as our public float remains below $
| 11 |
April 2024 Registered Direct Offering
On April 9, 2024, the Company entered into a securities purchase agreement
(the “April 2024 Purchase Agreement”) with certain institutional investors named therein pursuant to which the Company issued and sold common shares and accompanying warrants to purchase up to
Nasdaq Minimum Bid Price Requirement – Extension of Compliance Period
As previously reported, on November 1, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023, through October 31, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
On April 30, 2024, the Company received a letter from the Nasdaq Stock Market notifying the Company that the Company has been granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in Nasdaq’s deficiency notice to the Company, dated November 1, 2023. The Nasdaq Stock Market’s determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
If compliance with the Minimum Bid Price Requirement cannot be demonstrated by October 28, 2024, the Nasdaq Stock Market will provide written notification that the Company’s common shares could be delisted. In such event, Nasdaq rules permit the Company to appeal any delisting determination to a Nasdaq Hearings Panel. Accordingly, there can be no assurance that the Company will be able to regain compliance with the Nasdaq listing rules or maintain its listing on Nasdaq. The Company has not regained compliance as of the date of this Form 10-Q, and if it fails to regain compliance by October 28, 2024, its common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.
Financial instruments recognized in the condensed consolidated balance sheet consist of cash, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2023 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), as filed with the SEC on April 16, 2024.
| 12 |
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.
In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.
Significant Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2023 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2024.
3. NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements, not yet adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires incremental annual and quarterly disclosures about segment measures of profit or loss as well as significant segment expenditures. It also requires public entities with a single reportable segment to provide all segment disclosures required by the amendments and all existing segment disclosures in Topic 280. ASU 2023- 07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. As we have a single reportable segment, we expect the adoption of this standard to result in increased disclosures in the notes to our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) which enhances the transparency and decision usefulness of income tax disclosures. The amendments under ASU 2023-09 require public business entities to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for fiscal years beginning after December 15, 2024. Public business entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. The Company will apply this ASU for year ended December 31, 2025, and we do not anticipate that this new guidance will have a material impact on the note disclosures going forward.
4. INVENTORY, NET
Inventory consists of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Finished goods | $ | $ | ||||||
| Work-in-process | ||||||||
| Raw materials | ||||||||
| $ | $ | |||||||
5. OTHER CURRENT ASSETS
Other current assets consisted of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Government receivables | $ | $ | ||||||
| Other current assets | ||||||||
| $ | $ | |||||||
| 13 |
6. INTANGIBLE ASSETS, NET, AND GOODWILL
| March 31, 2024 | ||||||||||||||||||||
| Gross | Cumulative | Cumulative | ||||||||||||||||||
| Carrying | Accumulated | Impairment | Currency | Net Book | ||||||||||||||||
| Amount | Amortization | Charge | Translation | Value | ||||||||||||||||
| IPR&D assets | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
| December 31, 2023 | ||||||||||||||||||||
| Gross | Cumulative | Cumulative | ||||||||||||||||||
| Carrying | Accumulated | Impairment | Currency | Net Book | ||||||||||||||||
| Amount | Amortization | Charge | Translation | Value | ||||||||||||||||
| IPR&D assets | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
The
change in carrying value for IPR&D assets from December 31, 2023, relates to currency translation adjustments which decreased by
$
| March 31, 2024 | ||||||||||||||||
| Gross | Cumulative | Cumulative | ||||||||||||||
| Carrying | Impairment | Currency | Net Book | |||||||||||||
| Amount | Charge | Translation | Value | |||||||||||||
| Goodwill | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| December 31, 2023 | ||||||||||||||||
| Gross | Cumulative | Cumulative | ||||||||||||||
| Carrying | Impairment | Currency | Net Book | |||||||||||||
| Amount | Charge | Translation | Value | |||||||||||||
| Goodwill | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
The
change in carrying value for goodwill from December 31, 2023, relates to currency translation adjustments which decreased by $
7. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Accrued research and development expenses (including clinical trial accrued expenses) | $ | $ | ||||||
| Accrued professional fees | ||||||||
| Payroll and employee-related costs | ||||||||
| Deferred funding | ||||||||
| 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, Long-Term Debt and Note 10, Stockholders’ Equity (Deficit) and Additional Paid-in Capital.
| 14 |
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Stock options and restricted stock units | ||||||||
| K2HV conversion feature | ||||||||
9. LONG-TERM DEBT
As of March 31, 2024, and December 31, 2023, the Company’s long-term debt is as follows:
| March 31, 2024 | December 31, 2023 | |||||||
| Long-term debt, net of debt discount of $ | $ | $ | ||||||
| Current portion, net of debt discount of $ | ( | ) | ( | ) | ||||
| Long-term debt, net of current portion | $ | $ | ||||||
On
May 22, 2020, the Company, along with its subsidiary VBI Cda (collectively, the “Borrowers”), entered into the Loan and Guaranty
Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”).
On May 22, 2020, the Lenders advanced the first tranche of term loans of $
On
May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the
Lenders and received additional loan advances of $
On
September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the
Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $
On
September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment)
in an aggregate amount of $
Pursuant
to the Second Amendment, the Lenders have the ability to convert $
| 15 |
In
connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to
The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.
The
Company is required to make a final payment equal to
Upon
receipt of additional funds, issuable pursuant to the various tranches, under the Second Amendment, additional common shares will be
issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the applicable tranche actually funded multiplied
by 3.5% and divided by the warrant exercise price of $
On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.
The
secured term loan maturity date is
| 16 |
On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement periods ended September 30, 2023, from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. On each of November 28, 2023, December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, and February 6, 2024, the Loan Parties entered into extensions to the Forbearance Agreement pursuant to which the Lenders agreed to extend the Forbearance Period through and including December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, February 6, 2024, and February 20, 2024, respectively, subject to compliance by the Borrowers with the same terms and conditions as set forth in the Forbearance Agreement.
The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.
On
February 13, 2024, the Loan Parties entered into an amendment (the “Fourth Amendment”) to the Loan Agreement, effective upon
entry into certain transactions with Brii Bio, pursuant to which the parties have agreed to, among other things, (i) remove a financial
covenant requiring us to maintain minimum net revenue of
The
effectiveness of the Fourth Amendment was conditioned upon entry into the Brii Purchase Agreement, the Rehovot Purchase Agreement and
the Side Letter, each of which were entered into by us and the respective parties thereto on February 13, 2024,
as described above. As discussed in Note 1, on February 13, 2024 the obligations under the Loan Agreement were reduced by the initial
principal amount of the Note of $
The
total principal amount of the loan under the Loan Agreement, as amended by the Fourth Amendment, outstanding at March 31, 2024, including
the Original Final Payment of $
The
total initial debt discount related to the Second Amendment is $
At
March 31, 2024 and December 31, 2023, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy,
is estimated to be $
Interest expense, net recorded in the three months ended March 31, 2024 and 2023 was as follows:
Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Interest expense | $ | $ | ||||||
| Amortization of debt discount | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 17 |
10. STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL
Stock option plans
The Company’s stock option plans are approved by and administered by the Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.
2006 VBI US Stock Option Plan
The 2006 VBI US Stock Option Plan (the “2006 Plan”), was approved by and was previously administered by the VBI US board of directors which designated eligible participants to be included under the 2006 Plan, and designated the number of options, exercise price and vesting period of the new options. The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan (as defined below) following the PLCC Merger and no further options will be issued under the 2006 Plan. As of March 31, 2024, there were options outstanding under the 2006 Plan.
2014 Equity Incentive Plan
On May 1, 2014, the VBI DE board of directors adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the VBI DE’s shareholders on July 14, 2014. The 2014 Plan was superseded by the 2016 Plan (as defined below) and no further options will be issued under the 2014 Plan. As of March 31, 2024, there were options outstanding under the 2014 Plan.
2016 VBI Equity Incentive Plan
The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of % of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”), performance share units (“PSUs”), shares of restricted stock, or other such award as may be permitted under the 2016 Plan. As of March 31, 2024, there were options outstanding and no RSUs unvested under the 2016 Plan.
The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled at March 31, 2024.
| Number of | Weighted | |||||||
| Stock | Average | |||||||
| Options | Exercise Price | |||||||
| Balance outstanding at December 31, 2023 | $ | |||||||
| Forfeited | ( | ) | ||||||
| Balance outstanding at March 31, 2024 | $ | |||||||
| Exercisable at March 31, 2024 | $ | |||||||
| 18 |
Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Research and development | $ | $ | ||||||
| Sales, general and administrative | ||||||||
| Cost of revenues | ||||||||
| $ | $ | |||||||
11. REVENUES, NET AND DEFERRED REVENUE
Revenues, net comprises the following:
Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Product revenues, net | $ | $ | ||||||
| R&D service revenues | ||||||||
| $ | $ | |||||||
The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at March 31, 2024:
| Total | Current portion to March 31, 2025 | Remaining portion thereafter | ||||||||||
| Product revenues, net | $ | $ | $ | |||||||||
| License revenues | ||||||||||||
| R&D service revenues | ||||||||||||
| $ | $ | $ | ||||||||||
The following table presents changes in the deferred revenue balance for the three months ended March 31, 2024:
| Balance at January 1, 2023 | $ | |||
| Balance at December 31, 2023 | ||||
| Revenue deferred | ||||
| Recognition of deferred revenue | ( | ) | ||
| Currency translation | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Short Term | $ | |||
| Long Term | $ |
| 19 |
Brii Collaboration Agreements – VBI-2601
On December 4, 2018, the Company entered into a Collaboration and License Agreement (the “Brii Collaboration and License Agreement”) with Brii Bio, as amended on April 8, 2021, pursuant to which:
| ● | the Company and Brii Bio agreed to collaborate on the development of a HBV recombinant protein-based immunotherapeutic in the licensed territory, which consists of China, Hong Kong, Taiwan, and Macau (collectively, the “Licensed Territory”), and to conduct a Phase II collaboration clinical trial for the purpose of comparing VBI-2601, which is a recombinant protein-based immunotherapeutic developed by VBI for use in treating chronic HBV, with a novel composition developed jointly with Brii Bio (either being the “Licensed Product”); | |
| ● | the Company granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as may be required to obtain and maintain marketing approval of the Licensed Product, for the treatment of HBV in the Licensed Territory and to commercialize and the Licensed Product for the diagnosis and treatment of chronic HBV in the Licensed Territory; and | |
| ● | Brii Bio granted the Company an exclusive royalty-free license under Brii Bio’s technology and Brii Bio’s interest in any joint technology developed during the collaboration to develop and commercialize the Licensed Product for the diagnosis and treatment of chronic HBV in the countries of the world other than the Licensed Territory. |
On December 20, 2021, the Company and Brii Bio further amended the Brii Collaboration and License Agreement (the “Brii Second Amendment Collaboration and License Agreement”) whereby:
| ● | the Company and Brii Bio agreed to conduct an additional Phase II combination clinical trial of VBI-2601, both with and without IFN-α, and BRII-835 (VIR-2218) (“Combo Clinical Trial”); and | |
| ● | Brii Bio granted the Company a non-exclusive royalty free license under the Brii Bio technology arising from the data generated in the Combo Clinical Trial solely for use in the development, manufacture, or commercialization of the Licensed Product in combination with an siRNA in the countries of the world other than the Licensed Territory. |
Pursuant to the Brii Collaboration and License Agreement, as amended by the Brii Second Amendment Collaboration and License Agreement, the Company was responsible for the R&D Services and Brii Bio was responsible for costs relating to the clinical trials for the Licensed Territory.
The
initial consideration of the Brii Collaboration and License Agreement consisted of an $
There was no additional consideration contemplated in the Brii Second Amendment Collaboration and License Agreement.
On
July 5, 2023, the Company and Brii Bio entered into the A&R Collaboration Agreement, to, among other things, and subject to the terms
and conditions set forth in the A&R Collaboration Agreement, expand the Licensed Territory to the entire world (the “New Licensed
Territory”) for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI-2601
(“VBI-2601 Licensed Product”). Pursuant to the A&R Collaboration Agreement, the Company granted Brii Bio an exclusive
royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities,
as may be required to obtain and maintain marketing approval of the VBI-2601 Licensed Products in the New Licensed Territory; and (ii)
research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the VBI-2601
Licensed Products for the field of the diagnosis and treatment of hepatitis B in the New Licensed Territory. Except for the rights and
licenses expressly granted in the A&R Collaboration Agreement, the Company and Brii Bio retained all rights under their respective
intellectual property. Additionally, the A&R Collaboration Agreement constituted the entire agreement between the VBI and Brii Bio
relating to VBI-2601 and superseded all previous agreements, including the Brii Collaboration and License Agreement and the Brii Second
Amendment Collaboration and License Agreement. As a result of the A&R Collaboration Agreement, the unsatisfied performance obligation
of $
| 20 |
The
initial consideration of the A&R Collaboration Agreement consisted of a $
The A&R Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) expiration, invalidation or lapse of the last Company patent claiming such VBI-2601 Licensed Product, (ii) 10 years from the date of first commercial sale of such VBI-2601 Licensed Product in the applicable region, or (iii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such VBI-2601 Licensed Product in such region. Upon expiration (but not an earlier termination) of the A&R Collaboration Agreement in each region of the New Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license, which such license, pursuant to the Brii Purchase Agreement (as defined herein), shall also be irrevocable under the Company’s technology related to the VBI-2601 Licensed Products in such region to make and sell VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.
On
February 13, 2024, the Company and VBI Cda entered into the Brii Purchase Agreement, pursuant to which, upon achievement of certain
activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual
property related to VBI-2601 owned by the Company and VBI Cda, for the Note to be issued by Brii Bio, which is then required to be
assigned to K2HV pursuant to the terms of the Fourth Amendment, in exchange for a reduction in the Company’s obligations under
the Loan Agreement equal to the initial principal amount of the Note. The Note was issued by Brii Bio on February 13, 2024 for the
initial principal amount of $
| 21 |
Brii Collaboration Agreements – PreHevbri
On July 5, 2023, the Company and Brii Bio also entered into the Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the Collaboration Agreement, acquired an exclusive license for PreHevbri in APAC, excluding Japan (“PreHevbri Licensed Territory”), for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import PreHevbri (“PreHevbri Licensed Product”). Pursuant to the Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the PreHevbri Licensed Products in the PreHevbri Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in the PreHevbri Licensed Territory. Except for the rights and licenses expressly granted in the Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property.
The
initial consideration of the Collaboration Agreement consisted of a $
The Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) 10 years from the date of first commercial sale of such PreHevbri Licensed Product in the applicable region, or (ii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such PreHevbri Licensed Product in such region. Upon expiration (but not an earlier termination) of the Collaboration Agreement in each region of the PreHevbri Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license, which such license, pursuant to the Brii Purchase Agreement, shall also be irrevocable, under the Company’s technology related to the PreHevbri Licensed Products in such region to make and sell PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.
Pursuant to the Brii Purchase Agreement, on February 13, 2024, the Company and Brii Bio agreed to amend the Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for the global development activities of the Licensed Product to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval for the Licensed Product in certain territories and (iii) omit the requirement for Brii Bio to make royalty and milestone payments to the Company.
The R&D services and technology transfer for the Brii Collaboration Agreements 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.
Upon termination of the Brii Collaboration Agreements 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.
Supply Agreement
On
July 5, 2023, in connection with the Brii Collaboration Agreements, the Company and Brii Bio entered into the Supply Agreement related
to the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures, as negotiated.
Pursuant to the Supply Agreement, the Company received an advance payment of $
| 22 |
The performance obligation of a unit of VBI-2601 and/or PreHevbri will be satisfied at a point in time using the prices set out in the Supply Agreement and revenue will be recognized upon transfer of control of the performance obligation.
The manufacturing expenditures 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 March 31, 2024, performance obligations related to the Brii Collaboration Agreements, Brii Purchase Agreement and the Supply Agreements
that remain unsatisfied were $
12. COLLABORATION ARRANGEMENTS
The Company has entered into, and expects to enter into from time to time in the future, license agreements, funding agreements, collaboration agreements, and similar agreements related to the advancement of its product candidates and research and development efforts. Significant agreements (collectively, the “Collaboration Agreements”) are described in detail in the Company’s 2023 10-K. While specific amounts will fluctuate from quarter to quarter based on clinical trials progress, advancement and completion of research studies and manufacturing projects, and other factors, the Company believes its overall activities regarding Collaboration Agreements are materially consistent with those described in the 2023 10-K, other than described below.
Set forth below are the approximate amounts expensed for Collaboration Agreements during the three months ended March 31, 2024 and 2023, respectively. These expensed amounts are included under Research and Development expenses in the accompanying condensed consolidated statements of operations.
Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Coalition for Epidemic Preparedness Innovations (“CEPI”) | $ | $ | ||||||
| $ | $ | |||||||
CEPI
The
Company has $
13. GOVERNMENT GRANTS
Strategic Innovation Fund (“SIF”)
On
September 16, 2020, we signed the Contribution Agreement (as amended, the “Contribution Agreement”) with Her Majesty the
Queen in Right of Canada, as represented by the Minister of Industry (the “Minister”), whereby the Minister agreed to contribute
an amount not exceeding the lesser of (i)
| 23 |
Costs
associated with the Contribution Agreement are expensed as incurred in Research and Development expenses and overhead charges are included
in Sales, General and Administrative. For the three months ended March 31, 2024 and 2023, the Company recognized $
14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
On
September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac
as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac
discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing
its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects
from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of
The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023, and July 13, 2023. The next preliminary hearing is scheduled to be held on June 20, 2024.
On December 5, 2022, another tort claim was filed in the District Court of the central district in Israel naming our subsidiary, SciVac, as a defendant. The claim was filed by a minor and his parents against SciVac, the IMoH, and Prof. Arieh Raziel, requesting compensation due to bodily injury of the minor, who was diagnosed as suffering from an Autism Spectrum Disorder. The plaintiffs allege that the minor’s disabilities and the syndrome from which he suffers were caused due to a combination of several factors, including negligent pregnancy monitoring, negligent labor and delivery procedure, and administration of the alleged defective vaccine (Sci-B-Vac vaccine). Preliminary hearings have not yet been scheduled.
SciVac intends to defend these claims vigorously.
15. 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 U.S. expires on October 31, 2024 with no option to extend.
| 24 |
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.
Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Operating lease cost | $ | $ | ||||||
| Weighted average discount rate | % | % | ||||||
| Weighted average remaining lease term | ||||||||
Operating lease costs are included G&A expenses in the statement of operations and comprehensive loss.
The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
| Remaining 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | ||||
| Effect of discounting | ( | ) | ||
| Total lease liability | ||||
| Current portion | ( | ) | ||
| Lease liability, net of current portion | $ |
16. SEGMENT INFORMATION
The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.
Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:
Three Months Ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| United States | $ | $ | ||||||
| Israel | ||||||||
| China / Hong Kong | ||||||||
| Europe | ||||||||
| $ | $ | |||||||
There
was
17. SUBSEQUENT EVENTS
Jefferies ATM Program
Subsequent
to March 31, 2024 the Company sold and issued
common shares under the Jefferies ATM Program for total gross proceeds of $
April 2024 Offering
On April 9, 2024 the Company entered into the April 2024 Purchase Agreement, as discussed in Note 1, and issued to the investors named therein an aggregate of common shares and the April 2024 Warrants at a combined offering price of $ per common share and accompanying April 2024 Warrant in a registered direct offering.
Exercised Warrants
Subsequent
to March 31, 2024, upon exercise of certain outstanding warrants at an exercise price of $
| 25 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”). In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.
Product Pipeline
Our pipeline is comprised of vaccine and immunotherapeutic programs developed by virus-like particle technologies to target two distinct, but often related, disease areas – infectious disease and oncology. We prioritize the development of programs for disease targets that are challenging, underserved, and where the human immune system, when powered and stimulated appropriately, can be a formidable opponent.
VLP vaccines are a type of sub-unit vaccine, in which only the portions of viruses critical for eliciting an immune response are presented to the body. Because of their structural similarity to viruses presented in nature, including their particulate nature and repetitive structure, VLPs can stimulate potent immune responses. VLPs can be customized to present any protein antigen, including multiple antibody and T cell targets, making them, we believe, ideal technologies for the development of both prophylactic and therapeutic vaccines. However, only a few antigenic proteins self-assemble into VLPs, which limit the number of potential targets. Notably, HBV antigens are among those that are able to spontaneously form orderly VLP structures.
Our eVLP platform technology expands the list of potentially viable target indications for VLPs by providing a stable core (Gag Protein) and lipid bilayer (the “envelope”). It is a flexible platform that enables the synthetic manufacture of an “enveloped” VLP, or “eVLP”, which looks structurally and morphologically similar to the virus, with no infectious material. We have also developed a technology that leverages the strengths of both eVLP and mRNA technologies to create a proprietary mRNA-launched eVLP platform technology. This novel approach to particulate vaccines adds a genetic code for particle-forming structural protein – the same protein at the core of our eVLPs – to a mRNA vaccine, fundamentally changing the cellular interaction with the vaccine. The addition of this structural protein instructs cells to not only create target antigens but also to create eVLPs in vivo. These particles are released from the cells that generate them to circulate in the body, provoking the immune system to drive B-cell and T-cell responses.
Our product pipeline includes an approved vaccine and multiple late- and early-stage investigational programs. The investigational programs are in various stages of clinical development and the scientific information included about these candidates is preliminary and investigative. The investigational programs have not been approved by the United States Food and Drug Administration (“FDA”), European Medicines Agency, United Kingdom Medicines and Healthcare products Regulatory Agency, Health Canada, or any other health authority and no conclusion can or should be drawn regarding the safety or efficacy of these investigational programs.
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In addition to our existing pipeline programs, we may also seek to in-license clinical-stage vaccines or vaccine-related technologies that we believe complement our pipeline, as well as technologies that may supplement our efforts in both immuno-oncology and infectious disease.
Key Targeted Disease Areas
Hepatitis B Virus (“HBV”)
HBV infection can cause liver inflammation, fibrosis, and liver injury, resulting in potentially life-threatening conditions through acute illness and chronic disease, including liver failure, cirrhosis, and cancer. HBV remains a significant public health burden with as many as 2.2 million chronically infected people in the United States (“U.S.”) alone. Worldwide, this number is estimated to be as high as 350 million, with approximately 800,000 deaths resulting from the consequences of HBV infection each year.
Despite the highly infectious nature of HBV, due to its often-asymptomatic nature, it is estimated that as many as 67% of chronically infected adults in the U.S. are unaware of their infection status. There is no cure available for HBV infection and while public health initiatives highlight immunization as the most effective strategy for the prevention of HBV infections, the U.S. adult HBV vaccination rates remain persistently low at only about 30% of all adults aged 19 years and older.
In April 2022, the Centers for Disease Control and Prevention (“CDC”) Advisory Committee on Immunization Practices (“ACIP”) implemented a change to the adult HBV vaccine recommendations. As incorporated in the CDC’s 2022 Adult Immunization Schedule and as published in the April 1, 2022, CDC Morbidity and Mortality Weekly Report, adults aged 19 to 59 years are now universally recommended to be vaccinated against HBV infection. Additionally, while adults aged 60 years and older with risk factors for HBV infection are still recommended to receive HBV vaccinations, adults aged 60 years and older without known risk factors for HBV may now also receive HBV vaccinations.
In addition to our approved vaccine, PreHevbrio [Hepatitis B Vaccine (Recombinant)], there are four other vaccines approved in the U.S. for the prevention of HBV infection in adults: Engerix-B® and Twinrix®, manufactured by GlaxoSmithKline Biologicals S.A. (“GSK”), Recombivax HB®, manufactured by Merck &. Co., and Heplisav-B®, manufactured by Dynavax Technologies Corporation.
COVID-19 and Other Coronaviruses
Coronaviruses are a large family of enveloped viruses that cause respiratory illness of varying severities. Only seven coronaviruses are known to cause disease in humans, four of which most frequently cause symptoms typically associated with the common cold. Three of the seven coronaviruses, however, have more serious outcomes in people. These more pathogenic coronaviruses are (1) SARS-CoV-2, a novel coronavirus identified as the cause of COVID-19; (2) MERS-CoV, identified in 2012 as the cause of Middle East Respiratory Syndrome (“MERS”); and (3) SARS-CoV, identified in 2002 as the cause of Severe Acute Respiratory Syndrome (“SARS”). While the declaration of a public health emergency associated with COVID-19 expired in the U.S. in May 2023, new strains of the coronavirus continue to evolve and boosters for currently approved vaccines addressing new strains are expected in the foreseeable future.
Glioblastoma (“GBM”)
GBM is among the most common and aggressive malignant primary brain tumors in humans. In the U.S. alone, about 12,000 new GBM cases are diagnosed each year. The current standard of care for GBM is surgical resection, followed by radiation and chemotherapy. Even with intensive treatment, GBM progresses rapidly and has a high mortality rate, with median overall survival for primary GBM of about 15 months. Median overall survival for recurrent GBM is even lower, at about 8 months.
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Cytomegalovirus (“CMV”)
CMV is a common virus that is a member of the herpes family. It infects one in every two people in many developed countries. Most CMV infections are “silent”, meaning the majority of people who are infected exhibit no signs or symptoms. Despite its typically asymptomatic nature in older children and adults, CMV may cause severe infections in newborn children (congenital CMV) and may also cause serious infections in people with weakened immune systems, such as solid organ or bone marrow transplant recipients. Congenital CMV infection can be treated – but not cured – and there are currently no approved vaccines available for the prevention of infection in either the congenital or the transplant setting.
Pipeline Programs
The table below is an overview of our commercial vaccine and our lead investigational programs as of May 15, 2024:
| Indication | Program | Technology | Current Status | |||
| Approved Vaccine | ||||||
| ● Hepatitis B | PreHevbrio1,2,3 | VLP | Registration/Commercial | |||
| Hepatitis B Vaccine | ||||||
| (Recombinant) | ||||||
| Therapeutic Candidates | ||||||
| ● Glioblastoma | VBI-1901 | eVLP | Ongoing Phase IIb | |||
| ● Hepatitis B | VBI-2601 (BRII-179)4 | VLP | Ongoing Phase II | |||
| ● Undisclosed | Undisclosed | MLE | Pre-clinical | |||
| Prophylactic Candidates | ||||||
| ● Coronaviruses (Multivalent) | VBI-2901 | eVLP | Ongoing Phase I | |||
| ● COVID-19 (Beta variant) | VBI-2905 | eVLP | Phase Ib Completed | |||
| ● COVID-19 (Ancestral) | VBI-2902 | eVLP | Phase Ia Completed | |||
| ● Cytomegalovirus | VBI-1501 | eVLP | Phase I Completed | |||
| ● Coronaviruses (Multivalent) | Undisclosed | eVLP | Pre-Clinical | |||
| ● Undisclosed | Undisclosed | MLE | Pre-Clinical |
1Approved for use in the U.S. and Canada, under the brand name PreHevbrio, for the prevention of infection caused by all known subtypes of HBV in adults 18 years of age and older.
2Approved for use in the European Union (“EU”) / European Economic Area (“EEA”) and the UK, under the brand name PreHevbri, for active immunization against infection caused by all known subtypes of the HBV in adults. It can be expected that hepatitis D will also be prevented by immunization with PreHevbri as hepatitis D (caused by the delta agent) does not occur in the absence of HBV infection.
3Approved for use in Israel, under the brand name Sci-B-Vac, for active immunization against hepatitis B virus (HBV infection).
4On February 13, 2024, the Company and Variation Biotechnologies Inc., a Canadian federal corporation (“VBI Cda”) entered into the Brii Purchase Agreement with Brii Biosciences Limited (“Brii Bio”), pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Recent Developments–February 2024 Transactions With Brii Bio” below.
A summary of our marketed product, lead pipeline programs, and recent developments follows.
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Marketed Product
PreHevbrio [Hepatitis B Vaccine (Recombinant)]
PreHevbrio [Hepatitis B Vaccine (Recombinant)] was approved by the FDA on November 30, 2021, for the prevention of infection caused by all known subtypes of HBV in adults aged 18 years and older. PreHevbrio contains the S, pre-S2, and pre-S1 HBV surface antigens, and is the only approved 3-antigen HBV vaccine for adults in the U.S. On February 23, 2022, following discussion at the CDC’s ACIP meeting, PreHevbrio joined the list of recommended products for prophylactic adult vaccination against HBV infection. The inclusion of PreHevbrio in the ACIP recommendation was reflected in a CDC publication on April 1, 2022 and was a notable milestone as many insurance plans and institutions require an ACIP recommendation before a vaccine can be reimbursed or is made available to patients. Additionally, PreHevbrio was included in the 2023 annual update of the CDC Adult Immunization Schedule, as detailed in the CDC publication on February 10, 2023. VBI launched PreHevbrio in the U.S. at the end of the first quarter of 2022, and revenue generation began in the second quarter of 2022. In June 2023, PreHevbrio was also awarded part of the CDC 2023 Adult Vaccine contract, for up to $25,350. The CDC vaccine contracts are established for the purchase of vaccines by immunization programs that receive CDC immunization cooperative agreement funds (i.e., state health departments, certain large city immunization projects, and certain current and former U.S. territories).
Commercial and regulatory activity for VBI’s 3-antigen HBV vaccine outside of the U.S. include:
● EU: On May 2, 2022, we announced that the European Commission (the “EC”) granted Marketing Authorization for PreHevbri [Hepatitis B Vaccine (Recombinant, Adsorbed)]. The European Commission’s centralized marketing authorization is valid in all EU Member States as well as in the EEA countries (Iceland, Liechtenstein, and Norway). On September 8, 2022, we announced a partnership with Valneva SE (“Valneva”) for the marketing and distribution of PreHevbri in select European markets, initially including the UK, Sweden, Norway, Denmark, Finland, Belgium, and the Netherlands. On July 19, 2023, we announced that PreHevbri is now available in the Netherlands and Belgium for active immunization against infection caused by all known subtypes of HBV in adults. PreHevbri became available in Sweden at the end of 2023, and in Denmark and Norway in early 2024.
● UK: On June 1, 2022, we announced that the UK Medicines and Healthcare Products Regulatory Agency granted marketing authorization for PreHevbri [Hepatitis B Vaccine (Recombinant, Adsorbed)]. This follows the EC centralized marketing authorization received in May 2022 and was conducted as part of the EC Decision Reliance Procedures. The UK is included in the Valneva marketing and distribution agreement for PreHevbri. On June 15, 2023, VBI announced the launch and availability of PreHevbri in the UK as part of the Valneva partnership. On April 9, 2024, UK Health Security Agency published an update to the hepatitis B chapter of the Green Book including detailed information about PreHevbri, a resource for healthcare providers with the latest information on vaccines in the UK.
● Canada: On December 8, 2022, we announced that Health Canada approved PreHevbrio [3-antigen Hepatitis B Vaccine (Recombinant)] for the prevention of infection caused by all known subtypes of HBV in adults aged 18 years and older.
● Israel: Approved and commercially available under the brand name Sci-B-Vac® since 2000.
● APAC: On July 5, 2023, we announced a license and collaboration agreement with Brii Bio for the development and commercialization of PreHevbri in the Asia Pacific region (“APAC”), excluding Japan.
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Therapeutic Investigational Candidates
VBI-1901: Glioblastoma (GBM)
Our cancer vaccine immunotherapeutic program, VBI-1901, targets CMV proteins present in tumor cells. CMV is associated with a number of solid tumors including GBM, breast cancer, and pediatric medulloblastoma.
In January 2018, we initiated dosing in a two-part, multi-center, open-label Phase I/IIa clinical study of VBI-1901 in 38 patients with recurrent GBM. Phase I (Part A) of the study was a dose-escalation phase that defined the safety, tolerability, and optimal dose level of VBI-1901 adjuvanted with granulocyte-macrophage colony-stimulating factor (GM-CSF) in recurrent GBM patients with any number of prior recurrences. In December 2018, this phase completed enrollment of 18 patients across three dose cohorts, the highest of which (10 µg) was selected as the optimal dose level to test in the Phase IIa portion (Part B) of the study. Phase IIa of the study, which initiated enrollment in July 2019, was a two-arm study that enrolled 20 first-recurrent GBM patients who received 10 µg of VBI-1901 in combination with either GM-CSF or GSK proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 was provided pursuant to a Clinical Collaboration and Support Study Agreement with GSK, which we entered into on September 10, 2019. Enrollment of the 10 patients in the VBI-1901 with GM-CSF arm was completed in March 2020 and enrollment of the 10 patients in the VBI-1901 with AS01 arm was completed in October 2020.
Data from the Phase IIa portion of the study was announced throughout 2020, 2021, and 2022, with the latest data presented in November 2022 at the 2022 Society for Neuro-Oncology (SNO) Annual Meeting. The data from the Phase IIa portion of this study demonstrate: (1) improvement in 6-month, 12-month, and 18-month overall survival (“OS”) data compared to historical controls; (2) 12-month OS of 60% (n=6/10) in the VBI-1901 + GM-CSF study arm and 70% (n=7/10) in the VBI-1901 + AS01 study arm, compared to historical controls of ~30%; (3) 18-month OS of 30% (3/10) in the VBI-1901 + GM-CSF study arm and 40% (n=4/10) in the VBI-1901 + AS01 study arm; (4) 2 patients with partial tumor responses, one of whom remained on protocol for over two years and had achieved a 93% tumor reduction relative to baseline at initiation of treatment at the start of the study, and 10 stable disease observations across all study arms; and (5) VBI-1901 continues to be safe and well tolerated at all doses tested, with no safety signals observed.
On June 8, 2021, we announced that the FDA granted Fast-Track Designation for VBI-1901 formulated with GM-CSF for the treatment of recurrent GBM patients with first tumor recurrence. The designation was granted based on data from the Phase I/IIa study.
On June 22, 2022, we announced that the FDA granted Orphan Drug Designation for VBI-1901 for the treatment of GBM.
On October 12, 2022, we announced a collaboration with Agenus Inc. to evaluate VBI-1901 in combination with anti-PD-1 balstilimab in a second Phase II study as part of the INSIGhT adaptive platform trial in patients with primary GBM.
On September 7, 2023, we announced that the dosing of the first patient in a Phase IIb study of VBI-1901 in recurrent GBM patients with first tumor recurrence. This study expands the existing study to include a Part C, which is a multi-center, randomized, controlled, open-label study.
On April 3, 2024, we announced early tumor response data from the ongoing Phase IIb study during a presentation at World Vaccine Congress 2024. Early data from patients eligible for evaluation at week 12 show two observations of stable disease, indicating no tumor progression, in the VBI-1901 treatment arm (n=2/5, 40% disease control rate [DCR]). By comparison, no tumor responses have been observed in the control arm to-date (n=0/6, 0% DCR), with all patients seeing a 2-8x increase in tumor size by week 6. As of March 22, 2024, 17 patients have been randomized 1:1 to either the active, VBI-1901 treatment arm, or to the control, standard-of-care treatment arm (SoC). 14 leading neuro-oncology centers are actively recruiting patients across the US, with 2 new clinical sites activated in March 2024, and a third expected to be active in the second quarter of 2024. Additional interim data analyses are expected mid-year 2024 and year-end 2024, subject to speed of enrollment.
On February 13, 2024, we entered into a series of agreements with Brii Bio. Upon completion of the Essential Activities pursuant to the Side Letter (each as defined below), VBI Cda and Brii Bio will enter into a license agreement (the “Brii VBI-1901 License Agreement”) pursuant to which Brii Bio shall issue a secured promissory note in the amount of $5,000 as consideration for a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to VBI-1901 for development and commercialization in the APAC region (excluding Japan), which such note is then required to be assigned to K2 HealthVentures (“K2HV”) pursuant to the terms of the Fourth Amendment (defined herein). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments – February 2024 Agreements with Brii Bio” below.
VBI-2601: HBV Immunotherapeutic Candidate
VBI-2601 is a novel, recombinant, protein-based immunotherapeutic candidate in development for the treatment of chronic HBV infection. VBI-2601 is formulated to induce broad immunity against HBV, including T-cell immunity which plays an important role in controlling HBV infection. On July 5, 2023, we announced the A&R Collaboration Agreement (as defined below) with Brii Bio, expanding Brii Bio’s rights to the development and commercialization of VBI-2601 from Greater China rights to global rights.
On February 13, 2024, we entered into a series of agreements with Brii Bio, including as related to VBI-2601 (BRII-179). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Recent Developments–February 2024 Transactions with Brii Bio” below.
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Prophylactic Investigational Candidates
VBI-2900: Coronavirus Vaccine Program (VBI-2901, VBI-2902, VBI-2905)
In response to the SARS-CoV-2 (COVID-19) pandemic, VBI initiated development of a prophylactic coronavirus vaccine program in 2020. Coronaviruses are enveloped viruses by nature which make them a prime target for VBI’s flexible eVLP platform technology. At that time, VBI selected two vaccine candidates with the goal of bringing forward candidates that add meaningful clinical and medical benefit to those already approved: (1) VBI-2901, a multivalent coronavirus vaccine candidate expressing the SARS-CoV-2, SARS, and MERS spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing an optimized “prefusion” form of the SARS-CoV-2 spike protein.
In March 2021, a Phase I study of VBI-2902 was initiated and on June 29, 2021, we announced initial positive data from the Phase Ia portion of this study that evaluated one- and two-dose regimens of 5µg of VBI-2902 in 61 healthy adults aged 18-54 years. After two doses, VBI-2902 induced neutralization titers in 100% of participants, with 4.3x higher geometric mean titer (“GMT”) than that of the convalescent serum panel (n=25), and peak antibody binding GMT of 1:4,047. VBI-2902 was also well tolerated with no safety signals observed.
In response to the increased circulation of SARS-CoV-2 variants, the Phase Ib portion of the Phase I study was initiated in September 2021 to assess VBI-2905, our eVLP vaccine candidate directed against the SARS-CoV-2 Beta variant. On April 5, 2022, we announced new data from the Phase Ib study (n=53). A single-dose booster of VBI-2905 increased the GMT of neutralizing antibodies directed against the Beta variant 3.8-fold, at day 28, in participants who had previously received two-doses of an mRNA vaccine (ancestral strain) – approximately 2-fold increases were also seen at day 28 in antibody GMTs against both the ancestral and delta variant. New preclinical data announced at the same time showed that against a panel of coronavirus variants in mice, reactivity was seen with VBI-2902 against all variants including the ancestral strain, Delta, Beta, Omicron, Lambda, and RaTG13 (a bat coronavirus that is distant to circulating human strains). In this same panel, VBI-2901 was able to elicit an even stronger response against all variants tested – as the strains became more divergent from the ancestral strain, VBI-2901 elicited a greater difference in GMT from VBI-2902, ranging from 2.5-fold higher against the ancestral strain to 9.0-fold higher against the bat coronavirus. Additionally, a validated pseudoparticle neutralization assay benchmarked against the WHO reference standard demonstrated that VBI-2902 elicited neutralizing antibody responses of 176 IU50/mL in its Phase Ia study – this international standard measure would predict a greater than 90% efficacy, with two internationally approved vaccines estimated to have 90% efficacy at 83 and 140 IU50/mL (Gilbert, PB, 2021). The clinical and preclinical data for all three candidates continue to support the potential of the eVLP platform against coronaviruses.
On September 29, 2022, we announced that we initiated the first clinical study of VBI’s multivalent coronavirus candidate, VBI-2901, designed to increase breadth of protection against COVID-19 and related coronaviruses. Interim data was announced on September 27, 2023, demonstrating that VBI-2901 induced broad and durable protective titers against variants of concern. Notably:
| ● | All participants saw boosting and/or high neutralizing responses against a panel of COVID-19 variants, including Wuhan, Delta, Beta, Omicron BA.5, as well as multiple animal coronaviruses including bat and pangolin variants | |
| ● | Participants with low baseline neutralization titers (geometric mean titer (“GMT”): 148 IU50/mL), who are at the highest risk of infection, saw the greatest vaccine-induced boosting effects across all variants tested at Day 28, after one dose, with increases of: 8.5x against Wuhan, 9.1x against Delta, 14.2x against Beta, and 5.8x against Omicron BA.5 | |
| ● | All participants who received one dose had enhanced persistence of neutralizing responses, with only about 25% reduction in GMT against Wuhan after 5 months vs. peak responses | |
| ● | Similar enhanced durability trends were observed against all tested variants | |
| ● | By comparison, a published study [Gilboa et al., 2022] evaluating immune responses after a third dose of a licensed mRNA vaccine in nearly 4,000 healthcare workers in Israel demonstrated an approximate 77% decline in GMT against Wuhan after 5 months vs. peak responses |
| ■ | In the same study [Gilboa et al., 2022], durability trends against other variants, including Omicron, were seen to wane even more aggressively, with 4-fold to 10-fold lower neutralization titers within 4 months of the third dose |
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Durability and breadth of the antibody response to COVID-19 variants were maintained at month 12 after the first dose of VBI-2901 were administered in this Phase I study. Additional data are expected from the Phase I study in 2024.
The VBI-2900 program is supported by a partnership with the Coalition for Epidemic Preparedness Innovations (“CEPI” and the partnership, the “CEPI Funding Agreement”), with contributions of up to $33,018; a partnership with the Strategic Innovation Fund, established by the Government of Canada, with an award of up to CAD $55,976; contribution of up to CAD $1,000 from the Industrial Research Assistance Program (“IRAP”) of the National Research Council of Canada (“NRC”); and a collaboration with the NRC. On December 6, 2022, we and CEPI announced that we expanded the scope of the CEPI Funding Agreement to advance the development of multivalent coronavirus vaccines that could be deployed against COVID-19 as well as a future “Coronavirus X”.
VBI-1501: Prophylactic CMV Vaccine Candidate
Our prophylactic CMV vaccine candidate uses the eVLP platform to express a modified form of the CMV glycoprotein B antigen and is adjuvanted with alum, an adjuvant used in FDA-approved products.
Following the successful completion of the Phase I study in May 2018, and positive discussions with Health Canada, we announced plans for a Phase II clinical study evaluating VBI-1501 on December 20, 2018. We received similarly positive guidance from the FDA in July 2019. The Phase II study is expected to assess the safety and immunogenicity of dosages of VBI-1501 up to 20µg with alum. We are currently evaluating further data and next steps regarding VBI-1501.
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 “original 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.
Effective September 1, 2021, the Company amended and restated the original Ferring License Agreement (the “Amended and Restated Ferring License Agreement”), which amends and restates certain of the terms relating to the manufacture and marketing of HBsAg products, which includes, among others, updates to the definition of net sales, and a reduction in the fixed royalty rate on net sales of HBsAg products (“Product”) from seven percent (7%) to three and a half percent (3.5%) in consideration for the grant of the license to utilize genetically engineered CHO cells encoding the hepatitis B antigen and certain information related to the manufacture of hepatitis B vaccines. In connection with the Amended and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac Ltd.’s, an Israeli company (“SciVac”) obligations under the Amended and Restated Ferring License Agreement, or if the Amended and Restated Ferring License Agreement is assigned to a third party, guarantor for SciVac’s obligations that have accrued up until the date of such assignment. Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd., dated February 14, 2012 (the “SciGen Assignment Agreement”), we are required to pay royalties to SciGen Ltd. equal to 5% of net sales (as defined in the original Ferring License Agreement) of Product. Under the original 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 original 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 Amended and Restated Ferring License Agreement and SciGen Assignment Agreement will continue to be payable for the duration of the extended license periods.
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Under a license agreement with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents that expired in the U.S. in 2023 and expired in other countries in 2021. UPMC is also a co-owner of the patent family covering our VBI-1501 CMV vaccine and we are negotiating an agreement with UPMC to cover this patent family. During the three months ended March 31, 2024, we did not make any milestone payments.
Expanded Hepatitis B Partnership with Brii Bio
On July 5, 2023, we announced the expansion of our hepatitis B partnership with Brii Bio. Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between us and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement, which amended and restated that certain collaboration and license agreement (the “Brii Collaboration and License Agreement”) between us and Brii Bio, dated December 4, 2018, as amended on April 8, 2021 and December 20, 2021 (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between us and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in APAC, excluding Japan. As part of this collaboration, Brii Bio paid us an upfront payment of $15,000, consisting of a $3,000 equity investment in a concurrent registered direct offering (as discussed herein), $5,000 as an advance payment for the clinical and commercial manufacture and supply of the VBI-2601 licensed product and PreHevbri and any related manufacturing expenditures, pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023 by and between us and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement, dated July 5, 2023, by and among us, SciVac and Brii Bio, we also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2HV, in all of our respective right, title and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of our obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (as defined herein).
February 2024 Agreements with Brii Bio
On February 13, 2024, we entered into a series of agreements with Brii Bio, pursuant to which, subject to the achievement of certain activities, we would receive up to $33,000 in consideration from Brii Bio, consideration which will be used to correspondingly reduce our obligations due under the Loan Agreement (as defined herein).
Brii Purchase Agreement
On February 13, 2024, the Company and VBI Cda entered into a purchase agreement (the “Brii Purchase Agreement”) with Brii Bio, pursuant to which, subject to the achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for a secured promissory note in the principal amount up to $10,000 (the “Note”) to be issued by Brii Bio, which is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment, in exchange for a reduction in the Company’s obligations under the Loan Agreement equal to the initial principal amount of the Note. The initial principal amount of the Note was $2,500, which shall be increased by an aggregate amount equal to $7,500 upon the Company obtaining applicable consents under the Ferring License Agreement.
In addition to the foregoing, the Brii Purchase Agreement contains certain amendments to the Brii Collaboration Agreements, which such amendments are further described below.
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Amendments to the Brii Collaboration Agreements
As previously disclosed and described above, on December 4, 2018, we and Brii Bio entered into the Brii Collaboration and License Agreement, pursuant to which we 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 “VBI-2601 Licensed Territory”). Further, as previously disclosed and as described above, on July 5, 2023, we and Brii Bio entered into the Brii Collaboration Agreements.
Pursuant to the Brii Purchase Agreement, on February 13, 2024, the Company and Brii Bio agreed to amend the Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for the global development activities of PreHevbri to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval for PreHevbri in certain territories and (iii) omit the requirement for Brii Bio to make royalty and milestone payments to the Company.
Additionally, pursuant to the Brii Purchase Agreement, on February 13, 2024, we and Brii Bio also agreed, subject to achievement of certain activities, to amend the A&R Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the A&R Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for research studies and development of VBI-2601 to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval and commercialize VBI-2601 in the U.S. and China, (iii) revise the indemnity requirements such that Brii Bio indemnifies us with respect to certain transferred intellectual property after the effective date of the Brii Purchase Agreement and we indemnify Brii Bio prior to such date, (iv) omit the requirement for Brii Bio to make royalty and milestone payments to us, and (v) omit certain of our rights to terminate the A&R Collaboration Agreement and certain other effects of termination of the A&R Collaboration Agreement.
Side Letter
On February 13, 2024, the Company and Brii Bio entered into the Side Letter setting forth certain essential and additional priority activities to transfer manufacturing responsibility for clinical supply and commercial supply of VBI-2601 and PreHevbri for the Brii Territories set forth in the Side Letter (the “Essential Activities”) the Company is required to complete as a condition to the entry into the Brii License Agreement and consummation of the transactions pursuant to the Rehovot Purchase Agreement. As of March 31, 2024, the Essential Activities were still in progress and not yet completed. The principal amount of the Note shall increase up to $18,000 upon completion of the Essential Activities and the Company’s obligations under the Loan Agreement shall be reduced by a corresponding amount.
Brii License Agreement
Upon completion of the Essential Activities pursuant to the Side Letter, VBI Cda and Brii Bio will enter into the Brii License Agreement pursuant to which Brii Bio shall issue a secured promissory note in the amount of $5,000 as consideration for a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to the GBM program (VBI-1901) for development and commercialization in the APAC region (excluding Japan), which such note is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment.
The entry by VBI Cda and Brii Bio into the Brii License Agreement is subject to the Company completing the Essential Activities.
Rehovot Purchase Agreement
On February 13, 2024, the Company and SciVac entered into a purchase agreement (the “Rehovot Purchase Agreement”) with a wholly-owned subsidiary of Brii Bio, to be formed in Israel (“Brii Israel”) prior to the closing, and joined as a party to the agreement prior to the closing as the purchaser, and Brii Biosciences, Inc, a Delaware corporation, pursuant to which, upon achievement of certain activities and closing of the transactions contemplated by the Rehovot Purchase Agreement, subject to the terms and conditions therein, SciVac will sell to Brii Israel certain assets, including SciVac and its affiliates’ interest and rights in certain leases with respect to the vaccine manufacturing facility in Israel, for an aggregate purchase price of $10,000, which is then required to be paid to K2 HealthVentures (“K2HV”) pursuant to the terms of the Fourth Amendment.
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The Rehovot Purchase Agreement contains representations and warranties of SciVac and Brii Israel that are typical for transactions of this type. The Rehovot Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type.
The closing of the transactions pursuant to the Rehovot Purchase Agreement are subject to the terms and conditions therein, including closing conditions that are typical for transactions of this type and the Company’s completion of the Essential Activities (as defined below). Closing will not occur prior to June 30, 2024.
Recent Developments
Termination of Jefferies ATM Program
On August 26, 2022, we entered into an Open Market Sale Agreement (the “Jefferies Sales Agreement”) with Jefferies LLC (“Jefferies”), to act as our sales agent or principal, with respect to the issuance and sale of up to $125,000 of our common shares, from time to time in an at-the-market offering (the “Jefferies ATM Program”). We agreed to pay Jefferies a commission of up to 3.0% of the gross proceeds from the sale of our common shares pursuant to the Jefferies Sales Agreement. On May 9, 2024, we terminated the Jefferies Sales Agreement with Jefferies, effective as of May 10, 2024.
April 2024 Offering
On April 9, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold 2,272,728 common shares and accompanying warrants to purchase up to 2,272,728 common shares (the “April 2024 Warrants”) at a combined offering price of $0.88 per common share and accompanying April 2024 Warrant in a registered direct offering (the “April 2024 Offering”). The April 2024 Offering closed on April 11, 2024. The April 2024 Warrants have an exercise price of $0.76 per share, are immediately exercisable on the date of issuance, and expire five years following the date of issuance. Net proceeds to us from the April 2024 Offering, after deducting placement agent fees and estimated offering expenses payable by us, were approximately $1,700.
In connection with the April 2024 Offering, we also issued to H.C. Wainwright & Co., LLC or its designees, warrants to purchase up to 136,364 common shares (the “April 2024 Placement Agent Warrants”) as compensation in connection with the April 2024 Offering. The April 2024 Placement Agent Warrants have substantially the same terms and conditions as the April 2024 Warrants, except that the April 2024 Placement Agent Warrants have an exercise price of $1.10 per share, which represents 125% of the offering price per common share and accompanying April 2024 Warrant and expire five years following the commencement of sales pursuant to the April 2024 Offering.
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Nasdaq Minimum Bid Price Requirement – Extension of Compliance Period
As previously reported, on November 1, 2023, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023, through October 31, 2023, we did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market (“Nasdaq”) pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The letter also indicated that we were provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
On April 30, 2024, we received a letter from Nasdaq notifying us that we were granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in the Nasdaq Stock Market’s deficiency notice to us, dated November 1, 2023. The Nasdaq Stock Market’s determination was based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and our written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
If compliance with the Minimum Bid Price Requirement cannot be demonstrated by October 28, 2024, the Nasdaq Stock Market will provide written notification that our common shares could be delisted. In such event, Nasdaq rules permit us to appeal any delisting determination to a Nasdaq Hearings Panel. Accordingly, there can be no assurance that we will be able to regain compliance with the Nasdaq listing rules or maintain our listing on Nasdaq. We have not regained compliance as of the date of this Form 10-Q, and if we fail to regain compliance during the additional 180-day grace period, our common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to our ability to raise additional capital.
Financial Operations Overview
At present, our operations are focused on:
| ● | continuing the commercialization of PreHevbrio in the U.S. and commercialization of PreHevbri in Europe; |
| ● | completing certain activities as part of the partnership with Brii Bio and preparation to transfer the Rehovot, Israel manufacturing facility to Brii Bio pursuant to the Rehovot Purchase Agreement; |
| ● | manufacturing our 3-antigen HBV vaccine at commercial scale to meet demand in the U.S., Europe, and Israel, where it is approved, and to prepare for supply in markets where we or our partner Brii Bio may obtain marketing authorization; |
| ● | manufacturing VBI-2601, our protein-based immunotherapeutic candidate for treatment of chronic HBV, in collaboration with Brii Bio; |
| ● | continuing the Phase IIb clinical study of our GBM vaccine immunotherapeutic candidate, VBI-1901, in the recurrent GBM setting; |
| ● | preparing for a clinical study of VBI-1901 in the primary GBM setting;
|
| ● | continuing the Phase I clinical study of our multivalent coronavirus candidate, VBI-2901; |
| ● | continuing our development and scaling-up production processes for our prophylactic coronavirus vaccine candidates using a Contract Development and Manufacturing Organization (“CDMO”) located in Canada; |
| ● | preparation for further development of VBI-1501, our preventative CMV vaccine candidate; |
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| ● | continuing the research and development (“R&D”) of our other pipeline candidates, including the exploration and development of new pipeline candidates; |
| ● | implementing operational, compliance, financial, and management information systems, including through third party partners, to support our commercialization activities; |
| ● | maintaining, expanding, and protecting our intellectual property portfolio; and |
| ● | developing our internal systems and processes for regulatory affairs, legal, and compliance. |
VBI’s revenue generating activities have been the sale of our 3-antigen HBV vaccine, under the brand name PreHevbrio in the U.S., PreHevbri in the UK and certain countries in Europe, and Sci-B-Vac in Israel. We have also generated revenue from various business development transactions and R&D services generating fees. To date, we have financed our operations primarily with proceeds from sales of our securities, our long-term debt agreements, and contribution agreements and partnerships with CEPI and the Government of Canada.
VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and new pipeline candidates. As of March 31, 2024, VBI had an accumulated deficit of approximately $600,345, stockholders’ deficit of approximately $5,467, and cash of $12,595. Cash outflows from operating activities were $11,770 for the three months ended March 31, 2024. Our ability to maintain our status as an operating company and to realize our investment in our In Process Research & Development (“IPR&D”) assets, which consist of our CMV and GBM programs, is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our administrative overhead and our research and development activities, and ultimately to profitably monetize our IPR&D. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing, if required. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.
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 $17,900 for the three months ended March 31, 2024, and we expect to continue to incur substantial losses in future periods. We anticipate that we will continue to incur substantial operating expenses as we continue our research and development and clinical studies, and as we continue the commercialization of PreHevbrio in the U.S., and PreHevbri in Europe. These include expenses related to the focus of our operations highlighted above.
In addition, we have incurred and will continue to incur significant expenses as a public company, which subject us to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of Nasdaq, and the Canadian securities regulators. We have also incurred and will continue to incur regulatory compliance costs and general and administrative costs related to our clinical regulatory operations and commercialization of our marketed product and product candidates.
Overall Performance
The Company had net losses of $17,900 and $27,751 for the three months ended March 31, 2024 and 2023, respectively. We had an accumulated deficit of $600,345 at March 31, 2024. We had $12,595 of cash and net working capital deficit of $51,233 as of March 31, 2024.
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Revenues, net
Revenues, net consist of product sales of PreHevbrio in the U.S., PreHevbri in the UK and certain countries in the EU as part of our partnership with Valneva, sales of Sci-B-Vac in Israel, and R&D services revenue recognized as part of the Brii Collaboration Agreements.
In the U.S., beginning in the second quarter of 2022, PreHevbrio was sold to a limited number of wholesalers and specialty distributors and beginning in 2023, PreHevbri was sold to our partner Valneva in the UK and certain countries in the EU (collectively, our “Customers”). We expect to continue to expand our market share in 2024 and beyond. Revenues from product sales are recognized when we have satisfied our performance obligations, which is the transfer of control of our product upon delivery to the Customer. Our standard credit terms are short-term, and we expect to receive payment in less than one year, there is no significant financing component on the related receivables. Taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues.
In Israel, Sci-B-Vac is sold through procurement requests from four health funds (“HMOs”) (collectively, the “Sci-B-Vac Customers”).
Overall, product revenue, net, reflects our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.
Cost of Revenues
Cost of revenues consist primarily of costs incurred for manufacturing our 3-antigen HBV vaccine which includes cost of materials, consumables, supplies, contractors, and manufacturing salaries.
Research and Development Expenses
R&D expenses, net of government grants and funding arrangements, consist primarily of costs incurred for the advancement of our lead programs, including: our 3-antigen HBV vaccine; VBI-1901, our GBM vaccine immunotherapeutic candidate; VBI-1501, our CMV vaccine candidate; VBI-2601, our hepatitis B immunotherapeutic candidate; and VBI-2900, our coronavirus vaccine program. These costs include:
| ● | the cost of acquiring, developing, and manufacturing clinical study materials, and other consumables and lab supplies used in our pre-clinical studies; | |
| ● | expenses incurred under agreements with contractors or CDMOs or Contract Research Organizations to advance the vaccine candidates 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.
Sales, General, and Administrative (“SG&A”) Expenses
SG&A expenses consist principally of commercialization costs, salaries, and related costs for executive and other administrative personnel and consultants, including stock-based compensation, and travel expenses. Other sales, general and administrative expenses include professional fees for legal, patent protection, consulting and accounting services, travel and conference fees, board of directors meeting costs, scientific and commercial advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies, information technology costs and expenses, insurance, and other general expenses. SG&A expenses are expensed when incurred.
Interest Expense, Net
Interest expense, net of interest income, is associated with our long-term debt as discussed in Note 11 of the Notes to the Consolidated Financial Statements.
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Results of Operations
Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
All dollar amounts stated below are in thousands, unless otherwise indicated.
| Three months ended | ||||||||||||||||
| March 31 | ||||||||||||||||
| 2024 | 2023 | Change $ | Change % | |||||||||||||
| Revenues, net | $ | 1,214 | $ | 485 | $ | 729 | 150 | % | ||||||||
| Expenses: | ||||||||||||||||
| Cost of revenues | 2,724 | 3,559 | (835 | ) | (23 | )% | ||||||||||
| Research and development | 2,571 | 3,151 | (580 | ) | (18 | )% | ||||||||||
| Sales, general and administrative | 7,671 | 13,284 | (5,613 | ) | (42 | )% | ||||||||||
| Total operating expenses | 12,966 | 19,994 | (7,028 | ) | (35 | )% | ||||||||||
| Loss from operations | (11,752 | ) | (19,509 | ) | 7,757 | (40 | )% | |||||||||
| Interest expense, net | (1,818 | ) | (1,429 | ) | (389 | ) | 27 | % | ||||||||
| Foreign exchange loss | (4,330 | ) | (6,813 | ) | 2,483 | (36 | )% | |||||||||
| Loss before income taxes | (17,900 | ) | (27,751 | ) | 9,851 | (35 | )% | |||||||||
| Income tax expense | - | - | - | 0 | % | |||||||||||
| NET LOSS | $ | (17,900 | ) | $ | (27,751 | ) | $ | 9,851 | (35 | )% | ||||||
Revenues, net
Revenues, net for the three months ended March 31, 2024, were $1,214 as compared to $485 for the three months ended March 31, 2023. Revenues for the three months ended March 31, 2024 increased by $729 or 150% due to mainly an increase in product revenue. Product revenue increased as a result of an increase in PreHevbrio sales in the U.S.
Revenues, net Composition
Three months ended March 31 | ||||||||
| 2024 | 2023 | |||||||
| Product revenue, net | $ | 979 | $ | 478 | ||||
| R&D service revenue | 235 | 7 | ||||||
| Total revenues, net | $ | 1,214 | $ | 485 | ||||
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Revenues, net by Geographic Region
| Three months ended | ||||||||||||||||
| March 31 | ||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Revenue, net in United States | $ | 961 | $ | 322 | $ | 639 | 198 | % | ||||||||
| Revenue, net in Israel | 20 | - | 20 | 100 | % | |||||||||||
| Revenue, net in China / Hong Kong | 32 | 7 | 25 | 357 | % | |||||||||||
| Revenue, net in Europe | 201 | 156 | 45 | 29 | % | |||||||||||
| $ | 1,214 | $ | 485 | $ | 729 | 150 | % | |||||||||
Cost of Revenues
Cost of revenues for the three months ended March 31, 2024 was $2,724 as compared to $3,559 for the three months ended March 31, 2023. The decrease in the cost of revenues of $835 or 23% is due to lower direct labor costs as a result of the previously disclosed organizational changes commencing in April 2023, and decreased inventory-related costs incurred in the three months ended March 31, 2024 compared to the three months ended March 31, 2023, offset by increased product sales.
Research and Development Expenses
R&D expenses for the three months ended March 31, 2024 were $2,571 as compared to $3,151 for the three months ended March 31, 2023. R&D expenses were offset by $664 for the three months ended March 31, 2024 and $2,402 for the three months ended March 31, 2023 due to government grants and funding arrangements. The decrease in R&D expenses of $580 or 18%, is mainly a result of a decrease in R&D expenses related to the development of our vaccine candidates VBI-2901 and VBI-1901. During the three months ended March 31, 2023, the clinical trial for VBI-2901 was ongoing and had achieved full patient enrollment. During the three months ended March 31, 2024, the clinical trial for VBI-1901 is ongoing, however, patient enrollment is still continuing, while VBI-2901 is nearing completion.
Sales, General, and Administrative Expenses
SG&A expenses, net of government grants and funding arrangements, for the three months ended March 31, 2024 were $7,671 as compared to $13,284 for the three months ended March 31, 2023. SG&A expenses were offset by $102 for the three months ended March 31, 2024 and $183 for the three months ended March 31, 2023 due to government grants and funding arrangements. The SG&A expense decrease of $5,613 or 42%, is mainly a result of the previously disclosed organizational changes commencing in April 2023, which reduced our internal headcount, commercial field teams, and our activity-based commercial expenses related to PreHevbrio in the U.S.
Loss from Operations
The net loss from operations for the three months ended March 31, 2024 was $11,752 as compared to $19,509 for the three months ended March 31, 2023. The $7,757 decrease in the net loss from operations resulted from the reduction in other expenses and other items discussed above.
Interest Expense, Net
Interest expense, net for the three months ended March 31, 2024 was $1,818 as compared to $1,429 for the three months ended March 31, 2023. The increase in interest expense, net of $389 or 27% is due to increased interest payments on our long-term debt due to higher interest rates.
Foreign Exchange Loss
The foreign exchange loss for the three months ended March 31, 2024 was $4,330 compared to $6,813 for the three months ended March 31, 2023. The decrease in the foreign exchange loss is 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, including the foreign exchange impact of intercompany loans that are translated at period end.
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Net Loss
Net loss for the three months ended March 31, 2024 was $17,900 compared to $27,751 for the three months ended March 31, 2023 and was a result of the items discussed above.
Liquidity and Capital Resources
| March 31, 2024 | December 31, 2023 | $ Change | % Change | |||||||||||||
| Cash | $ | 12,595 | $ | 23,685 | $ | (11,090 | ) | (47 | )% | |||||||
| Current Assets | 26,361 | 36,231 | (9,870 | ) | (27 | )% | ||||||||||
| Current Liabilities | 77,594 | 75,736 | 1,858 | 2 | % | |||||||||||
| Working Capital Deficit | (51,233 | ) | (39,505 | ) | (11,728 | ) | 30 | % | ||||||||
| Accumulated Deficit | (600,345 | ) | (582,445 | ) | (17,900 | ) | 3 | % | ||||||||
As of March 31, 2024, we had cash of $12,595 as compared to $23,685 as of December 31, 2023. As of March 31, 2024, we had working capital deficit of $51,233 as compared to working capital deficit of $39,505 at December 31, 2023. Working capital is calculated by subtracting current liabilities from current assets.
Net Cash Used in Operating Activities
The Company incurred net losses of $17,900 and $27,751 in the three months ended March 31, 2024 and 2023, respectively. The Company used $11,770 and $21,656 in cash for operating activities during the three months ended March 31, 2024 and 2023, respectively. The decrease in cash outflows is largely a result of the decrease in net loss and the change in operating working capital, most notably in inventory, other current assets, accounts payable, and other current liabilities.
Net Cash Used in Investing Activities
Net cash flows used by investing activities was $151 for the three months ended March 31, 2024 compared to cash used in investing activities of $534 for the three months ended March 31, 2023. The cash outflow in both periods is a result of routine property and equipment purchases.
Net Cash Provided by Financing Activities
Net cash flows provided by financing activities was $843 for the three months ended March 31, 2024 compared to cash flows provided by financing activities of $0 during the three months ended March 31, 2023. The cash flows provided for the three months ended March 31, 2024 relates to net proceeds from the sale and issuance of our common shares under our Jefferies ATM Program.
Sources of Liquidity
April 2024 Offering
On April 9, 2024, we entered into a securities purchase agreement with certain institutional investors named therein pursuant to which we issued and sold 2,272,728 common shares and accompanying April 2024 Warrants at a combined offering price of $0.88 per common share and accompanying April 2024 Warrants in the April 2024 Offering. The April 2024 Offering closed on April 11, 2024. The April 2024 Warrants have an exercise price of $0.76 per share, are immediately exercisable on the date of issuance, and expire five years following the date of issuance. Net proceeds to us from the April 2024 Offering, after deducting placement agent fees and estimated offering expenses payable by us were approximately $1,700.
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In connection with the April 2024 Offering, we also issued to H.C. Wainwright & Co., LLC (“HCW”) or its designees the April 2024 Placement Agent Warrants as compensation in connection with the April 2024 Offering. The April 2024 Placement Agent Warrants have substantially the same terms and conditions as the April 2024 Warrants, except that the April 2024 Placement Agent Warrants have an exercise price of $1.10 per share, which represents 125% of the offering price per common share and accompanying April 2024 Warrant and expire five years following the commencement of sales pursuant to the April 2024 Offering.
Jefferies Open Market Sale Agreement
On August 26, 2022, we 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies, pursuant to which we may offer and sell our common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal. During the first quarter of 2024, we issued 1,317,783 common shares under the Jefferies ATM Program, for total gross proceeds of $868 at a weighted average price of $0.6589 per share. The Company incurred $25 in sales agent commissions and share issuance costs related to the common shares issued in the quarter ended March 31, 2024, resulting in net proceeds of $843. On May 9, 2024, we terminated the Jefferies ATM Program, effective as of May 10, 2024.
On April 16, 2024, upon filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company became subject to General Instruction I.B.6 of Form S-3, pursuant to which in no event will the Company sell its common shares in a registered primary offering using Form S-3 with a value exceeding more than one-third of our public float in any 12 calendar month period so long as our public float remains below $75,000.
K2 HealthVentures LLC Long Term Debt
On May 22, 2020, the Company, along with its subsidiary VBI Cda, (collectively, the “Borrowers”) entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders converted $2,000 of the secured term loan into 45,662 common shares at a conversion price of $43.80 per share.
On May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the Lenders and received additional loan advances of $12,000.
On September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $100,000 from $50,000, which term loans are available in additional tranches subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants, (iii) extend the final maturity date for the term loans to September 14, 2026, which may be extended to September 14, 2027, under certain circumstances, and (iv) to the extent that the maturity date is extended, the term loans will begin amortizing on a monthly basis on September 14, 2026.
On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.
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Pursuant to the Second Amendment, the Lenders have the ability to convert $7,000 into common shares, by which $2,000 of the term loans shall be convertible into 45,662 common shares at a conversion price of $43.80 per share and $5,000 of the term loans shall be convertible into 159,734 common shares at a conversion price of $31.302 per share (“K2HV conversion feature”).
In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08. If and/or when additional tranches are advanced pursuant to the Second Amendment, the Company will issue additional warrants to purchase up to 72,680 common shares pursuant to the Second Amendment Warrant. If the full remaining $50,000 available in the K2HV tranches is advanced pursuant to the Second Amendment, up to an additional 72,680 common shares will be issuable pursuant to the Second Amendment Warrant.
The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.
The Company is required to make a final payment equal to 6.95% of the aggregate term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Second Amendment (the “Second Amendment Final Payment”). The final payment related to the refinanced $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment of $2,224 remains and is due the earlier of June 1, 2024 or the earlier prepayment of the term loans in accordance with the Second Amendment (the “Original Final Payment”).
Upon receipt of additional funds, issuable pursuant to the various tranches, under the Second Amendment, additional common shares will be issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the applicable tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $24.08, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.
On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.
The secured term loan maturity date is September 14, 2026, until which the Company is required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, included both financial and non-financial covenants, including quarterly minimum Net Revenue (as defined in the Loan Agreement) targets. The Company was not in compliance with the minimum Net Revenue covenant for the measurement periods ended September 30, 2023 and December 31, 2023, and did not qualify for an exception for this covenant, which constituted an Event of Default (as defined in the Loan Agreement). In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, the Company began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023.
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On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement periods ended September 30, 2023, from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. On each of November 28, 2023, December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, and February 6, 2024, the Loan Parties entered into extensions to the Forbearance Agreement pursuant to which the Lenders agreed to extend the Forbearance Period through and including December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, February 6, 2024, and February 20, 2024, respectively, subject to compliance by the Borrowers with the same terms and conditions as set forth in the Forbearance Agreement.
The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.
On February 13, 2024, the Loan Parties entered into an amendment (the “Fourth Amendment”) to the Loan Agreement, effective upon entry into certain transactions with Brii Bio, pursuant to which the parties have agreed to, among other things, (i) remove a financial covenant requiring us to maintain minimum net revenue of 75% of projections, (ii) the forbearance by K2HV and the other lenders party thereto, prior to the earlier of (A) December 31, 2024, (B) the date the Side Letter (as defined below) ceases to be in full force and effect prior to the completion of the Essential Activities (as defined below) and (C) the date the Essential Activities (as defined below) are complete (the “Forbearance Expiration Date”) from exercising their remedies with respect to the occurrence of Events of Default (as defined in the Loan Agreement) subject to certain exceptions, and (iii) following the Forbearance Expiration Date, add a financial covenant requiring us to maintain a minimum cash amount equal to our obligations under the Loan Agreement at all times.
The effectiveness of the Fourth Amendment was conditioned upon entry into the Brii Purchase Agreement, the Rehovot Purchase Agreement and the Side Letter (each as defined herein), each of which were entered into by us and the respective parties thereto on February 13, 2024, as described above. As discussed above, on February 13, 2024 the obligations under the Loan Agreement were reduced by the initial principal amount of the Note of $2,500.
The total principal amount of the loan under the Loan Agreement as amended by the Fourth Amendment, outstanding at March 31, 2024, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $5,699 in connection with the Fourth Amendment, is $53,199. The principal amount of the loan made under the Loan Agreement as amended by the Fourth Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4%. The interest rate as of March 31, 2024 was 12.50%. The effective interest rate on the loan of $47,500, excluding the Original Final Payment and Second Amendment Final Payment, is 20.39%.
CEPI Partnership
On March 9, 2021, we and CEPI announced the CEPI Funding Agreement, to develop eVLP vaccine candidates against SARS-COV-2 variants, including the Beta variant, also known as the B.1.351 variant and as 501Y.V2, first identified in South Africa. CEPI agreed to provide up to $33,018 to support the advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion form of the spike protein from the Beta variant strain, through Phase I clinical development. On December 6, 2022, we and CEPI entered into the CEPI Amendment to expand the scope of the CEPI Funding Agreement. The CEPI Amendment, among others, (i) expands the definition of “Project Vaccine” to include additional multivalent vaccine constructs within the VBI-2900 program, (ii) removes certain pricing restrictions previously allocated to high-income countries in the CEPI Funding Agreement, (iii) updates the proposed volume commitment percentage contributions by us to CEPI for a Project Vaccine, and (iv) adds certain commercial benefits and related adjustments for CEPI following the pandemic period, including royalties paid to CEPI, in the event that CEPI provides funding for Phase III clinical studies of the Project Vaccine. Since inception of the CEPI Funding Agreement we received $19,327, of which there is a balance remaining of $3,601 in other current liabilities on the consolidated balance sheet.
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Plan of Operations and Future Funding Requirements
The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2023, contains an explanatory paragraph regarding our ability to continue as a going concern. VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out our planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and the advancement of our pipeline candidates. As of March 31, 2024, VBI had an accumulated deficit of $600,345, stockholders’ deficit of $5,467 and cash of $12,595. Cash outflows from operating activities were $11,770 for the three months ended March 31, 2024.
Our ability to maintain our status as an operating company and to realize our investment in our IPR&D assets is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our commercialization activities, our administrative overhead and our research and development activities. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, government or non-government grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing. Based on available cash at March 31, 2024, together with the net proceeds from the financing activities subsequent to March 31, 2024, in order to continue to fund our operations, we must raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so. If we are unable to obtain additional financing in the near future or complete the transactions contemplated by the various agreements with Brii Bio consummated in February 2024 on a timely basis, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about our ability to 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 from this uncertainty. Our long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of our products, to bring about their successful commercial release, to generate revenue, and, ultimately, to attain profitable operations, or, alternatively, to advance our products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.
We will require additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and, subject to such approvals, commercially launch and sell our products, and will need to secure additional financing in the future to support our operations and to realize our investment in our IPR&D assets. We base this belief on assumptions that are subject to change, and we may be required to use our available cash and cash equivalent resources sooner than we currently expect. Our actual future capital requirements will depend on many factors, including the progress and results of our ongoing clinical trials, the duration and cost of discovery and preclinical development, laboratory testing and clinical trials for our pipeline candidates, the timing and outcome of regulatory review of our products, product sales, 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, debt financings, government grants or non-government funding, or business development transactions. Pursuant to the Contribution Agreement, we will receive up to CAD $55,976 as a government grant to support the development of the Company’s coronavirus vaccine program, though Phase II clinical studies, and pursuant to the CEPI Funding Agreement, as amended by the CEPI Amendment, we will receive up to $33,018 in funding to support the development of the Company’s coronavirus vaccine program. 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, government grants or non-government funding, or business development transactions may not be available on acceptable terms, if at all. If adequate funds are not available or we are unable to complete the Brii Transactions on a timely basis, 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.
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The common warrants sold in July 2023 in the underwritten public offering and the registered direct offering contain reset provisions applicable to the exercise price to be triggered upon issuance of equity or equity-linked securities at an effective common share purchase price of less than the exercise price in effect. Such obligations may make any additional financing difficult to obtain or unavailable to the Company.
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 continuing wars between Russia and Ukraine and between Israel and Hamas, and inflation, among others, have caused an unstable economic environment globally. Disruptions in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Current economic conditions have been, and continue to be, volatile. Continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business.
The Company’s long-term success and ability to continue as a going concern are dependent upon obtaining sufficient capital to fund the research and development of its pipeline candidates, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or, alternatively, to advance its products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.
To date, the Company has been able to obtain financing as and when it was needed; however, there is no assurance that financing will be available in the future, or if it is, that it will be available at acceptable terms.
As of March 31, 2024, 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.
Known Trends, Events, and Uncertainties
As with other companies that are in the process of developing and commercializing novel pharmaceutical and biologic products, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In addition, the emergence and effects of public health crises, such as endemics and epidemics and the consequences of the ongoing war between Russia and Ukraine and between Israel and Hamas, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than as discussed in this report, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.
Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.
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Critical Accounting Policies and Estimates
There have been no changes to our critical accounting policies during the three months ended March 31, 2024. Critical accounting policies and the significant accounting estimates made in accordance with such policies are regularly discussed with the Audit Committee of the Company’s board of directors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” included in Item 7 of our 2023 10-K, as well as in our consolidated financial statements and the footnotes thereto, included in the 2023 10-K.
Recent Accounting Pronouncements
See Note 3 of Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer and Head of Corporate 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 Corporate 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 Corporate 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 March 31, 2024, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($510,595). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) 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.
The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023, and July 13, 2023. The next preliminary hearing is scheduled to be held on June 20, 2024.
On December 5, 2022, another tort claim was filed in the District Court of the central district in Israel naming our subsidiary, SciVac, as a defendant. The claim was filed by a minor and his parents against SciVac, the IMoH, and Prof. Arieh Raziel, requesting compensation due to bodily injury of the minor, who was diagnosed as suffering from an Autism Spectrum Disorder. The plaintiffs allege that the minor’s disabilities and the syndrome from which he suffers were caused due to a combination of several factors, including negligent pregnancy monitoring, negligent labor and delivery procedure, and administration of the alleged defective vaccine (Sci-B-Vac vaccine). Preliminary hearings have not yet been scheduled.
SciVac intends to defend these claims vigorously.
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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 the 2023 10-K. 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.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common shares.
On November 1, 2023, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). On April 30, 2024, we received a letter from Nasdaq notifying us that we had been granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in Nasdaq’s deficiency notice to us, dated November 1, 2023. Nasdaq’s determination was based on our meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and our written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
In order to regain compliance with Nasdaq’s minimum bid price requirement, our common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days (with such compliance period extendable at the discretion of Nasdaq) during the additional 180-day grace period, which will end on October 28, 2024. As of the date of this filing, we have not regained compliance with the Minimum Bid Price Requirement, and there can be no assurance that the market price of our common shares will remain at least $1.00 for a minimum of ten consecutive business days in order for us to regain compliance with the Minimum Bid Price Requirement prior to October 28, 2024.
If we fail to regain compliance with the Minimum Bid Price Requirement by October 28, 2024, our common shares will be subject to delisting by Nasdaq. We would then be permitted to appeal any delisting determination to a Nasdaq Hearings Panel. Our common shares would remain listed on Nasdaq pending the panel’s decision after the hearing. If we do not appeal the delisting determination, or do not succeed in such an appeal, then our common shares would be delisted from Nasdaq and we may list our common shares on an over-the-counter exchange. Any delisting could seriously decrease or eliminate the value of an investment in our common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital, even if our shares continued to trade in the over-the-counter market.
To resolve our noncompliance with the Minimum Bid Price Requirement, we may consider available options including a reverse share split, which may not result in a permanent increase in the market price of our shares, which is dependent on many factors, including general economic, market and industry conditions and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission. It is not uncommon for the market price of a company’s shares to decline in the period following a reverse share split. For example, we did not satisfy the Minimum Bid Price Requirement for the period between May 18, 2022 to June 30, 2022, and we effected the Reverse Stock Split in April 2023 with the primary intent of increasing the price of our common shares immediately following the Reverse Stock Split to regain compliance with the Minimum Bid Price Requirement, and we regained such compliance in April 2023. It cannot be assured that any future reverse stock split will result in any sustained proportionate increase in the market price of our common shares, which is dependent upon many factors, including the business and financial performance of the company, general market conditions, and prospects for future success, which are unrelated to the number of shares of our common shares outstanding. It is not uncommon for the market price of a company’s common shares to decline in the period following a reverse stock split.
Although we expect to take actions intended to restore our compliance with the Minimum Bid Price Requirement, we can provide no assurance that any action taken by us would be successful, or that we would successfully maintain compliance with the Minimum Bid Price Requirement or any of Nasdaq’s other listing requirements or that any such action would stabilize the market price or improve the liquidity of our common shares. Should a delisting occur, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our shares, and our ability to raise future capital through the sale of our shares could be severely limited.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
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 Disclosures
Not applicable.
Item 5. Other Information
None.
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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.
EXHIBIT INDEX
* Filed herewith.
** Furnished herewith.
+ Indicates a management contract or compensatory plan.
| (1) | Certain material has been omitted from this document pursuant to a request for confidential treatment. The omitted material has been filed separately with the SEC. |
| (2) | Certain of the schedules (and similar attachments) to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K under the Securities Act because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the Exhibit or the disclosure document. The registrant hereby agrees to furnish a copy of all omitted schedules (or similar attachments) to the SEC upon its request. |
| (3) | Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K under the Securities Act, because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished 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: May 15, 2024 | VBI VACCINES INC. | |
| By: | /s/ Jeffrey Baxter | |
| Jeffrey Baxter | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Nell Beattie | |
| Nell Beattie | ||
| Chief Financial Officer and Head of Corporate Development | ||
| (Principal Financial and Accounting Officer) | ||
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Exhibit 10.5
FOURTH AMENDMENT TO LOAN AND GUARANTY AGREEMENT, WAIVER AND FORBEARANCE AGREEMENT
This FOURTH AMENDMENT TO LOAN AND GUARANTY AGREEMENT, WAIVER AND FORBEARANCE AGREEMENT (this “Amendment”) is entered into as of February 13, 2024 (the “Fourth Amendment Effective Date”), by and among VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation (“VBI Cda”, and in its capacity as borrower representative, “Borrower Representative”), VBI VACCINES INC., a British Columbia corporation (“Parent”, and together with Borrower Representative, and any other Person from time to time party to the Agreement (as defined below) as a borrower, collectively, “Borrowers”, and each, a “Borrower”), each of the parties set forth on the signature page hereto as guarantors (together with any other Person from time to time party to the Agreement as a guarantor, collectively, “Guarantors” and each, a “Guarantor”), the lenders party hereto (together with any other lender from time to time under the Agreement, collectively, “Lenders”, and each, a “Lender”) constituting Required Lenders (as defined in the Loan Agreement (as defined below)), and K2 HEALTHVENTURES LLC (“K2”), as administrative agent for Lenders (in such capacity, together with its successors, “Administrative Agent”).
RECITALS
| A. | Reference is made to the following: |
| (i) | that certain Loan and Guaranty Agreement, dated as of May 22, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) by and among Borrowers, Guarantors, Lenders, Administrative Agent and, and ANKURA TRUST COMPANY, LLC, as collateral trustee for Lenders (in such capacity, together with its successors, “Collateral Trustee”) and the Loan Documents entered into pursuant thereto, including without limitation, that certain Forbearance Agreement, dated as of November 13, 2023, by and among Borrowers, Guarantors and Administrative Agent (the “Forbearance Agreement”); | |
| (ii) | that certain Letter Agreement by and between Parent and Brii Biosciences Limited, an exempted company organized under the laws of the Cayman Islands (“Brii Bio”), dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Side Letter”); | |
| (iii) | that certain Purchase Agreement, dated as of the date hereof, by and among Parent, VBI Cda and Brii Bio (as amended, restated, supplemented or otherwise modified from time to time, the “BRII-179 Purchase Agreement”); | |
| (iv) | that certain Secured Promissory Note, dated as of the date hereof, delivered by Brii Bio to Parent (as amended, restated, supplemented or otherwise modified from time to time, the “Brii-179 Note”); and | |
| (v) | that certain Secured Promissory Note, dated as of the date hereof, delivered by Brii Biosciences (Hong Kong) Co. Limited to Parent (as amended, restated, supplemented or otherwise modified from time to time, the “VBI-1901 Note”, and together with the Brii-179 Note, the “Brii Notes”, and each, a “Brii Note”). |
| B. | Certain Specified Defaults have occurred and are continuing, as defined in the Forbearance Agreement. |
| C. | In connection with certain transactions contemplated by this Amendment, Administrative Agent and Lender have agreed to waive the Specified Defaults and to forbear with respect to future Events of Default during the period and subject to the terms and conditions set forth herein, and the parties hereto have agreed to amend the Agreement and certain other modifications to the Loan Documents as set forth herein. |
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall have the respective meanings given to them in the Agreement.
2. Waiver of Specified Defaults. Subject to terms and conditions of this Amendment, Administrative Agent and the undersigned Lenders, constituting Required Lenders, hereby agree to waive the Specified Defaults.
3. Forbearance Agreement. Subject to satisfaction of the Forbearance Conditions (as defined below), Administrative Agent and the undersigned Lenders, constituting Required Lenders, hereby agree to forbear from exercising (or causing to be exercised) Secured Parties’ rights and remedies under the Loan Documents and applicable law with respect to any Additional Specified Defaults (as defined below), from the date hereof through and including the Forbearance Expiration Date (as defined below, and such period, the “Forbearance Period”), provided that if the Forbearance Conditions cease to be met or if negotiations with respect to any agreement required for compliance with Section 10 of this Amendment have been abandoned by any Loan Party or Brii Bio, without the prior written consent of K2, the Forbearance Period shall immediately terminate. For purposes of this Section 3:
“Additional Specified Defaults” means any Event of Default that may exist from time to time during the Forbearance Period, provided that the Additional Specified Defaults shall not include:
(i) any Event of Default arising from a willful breach by any Loan Party of any covenant set forth in Section 7 of the Agreement;
(ii) any Event of Default pursuant to Section 8.4(b), 8.5(b) or (c) or 8.12 of the Agreement (as amended hereby);
(iii) any Event of Default arising pursuant to Section 8.6 of the Agreement, due to any other holder of Indebtedness taking enforcement actions with respect to any breach or default under such Indebtedness or exercising remedies with respect to a material portion of the Collateral; or
(iv) any Event of Default pursuant to Section 8.1 of the Agreement due to failure to pay regularly scheduled interest payments or failure to apply proceeds of the transactions contemplated by the Side Letter, the BRII-179 Purchase Agreement, the VBI-1901 License and the Rehovot Purchase Agreement, in accordance with Section 2.2(c) of the Agreement.
“Forbearance Conditions” means the Loan Parties shall comply with the terms of Section 5 of this Amendment.
“Forbearance Expiration Date” means the Termination Date (as defined in the Brii-179 Note).
4. Amendments.
4.1 Section 2.2(c) of the Agreement is hereby amended by adding the following at the end of such subsection: “Additionally, (i) the applicable Loan Parties shall cause the Brii Notes to be assigned to (and any related collateral documents to be entered into in favor of) Administrative Agent for the benefit of Secured Parties, and the principal amount of the Obligations shall be reduced by the initial principal amount of the Brii Notes, and upon any principal increase in accordance with the terms thereof, including in connection with the effectiveness of the VBI-1901 License, and in connection with the completion of the activities pursuant to the Side Letter, respectively, the principal amount of the Obligations shall be further reduced by the amount of each such principal increase, provided that, if following a principal reduction of the Obligations, the principal amount of the BRII-179 Note is reduced in connection with a Default Notice (as defined in the BRII -179 Purchase Agreement), the principal balance of the Obligations shall be increased by the amount of such reduction, and (ii) upon the receipt of the Rehovot Purchase Price by a Loan Party, such proceeds shall be immediately paid over to Administrative Agent for the ratable benefit of Lenders, and applied to the outstanding principal balance of the Loans.”
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4.2 Section 2.2(d) of the Agreement is hereby amended by adding the following at the end of such subsection: “Notwithstanding the foregoing, during the Forbearance Period, no Loan Party shall make any prepayment of principal, except as required in accordance with Section 2.2(c).”
4.3 Section 6.10 of the Agreement is hereby amended and restated in its entirety to read as follows:
6.10 Financial Covenant – Minimum Cash. Effective at all times following the Forbearance Expiration Date, maintain at all times unrestricted cash and Cash Equivalents in Collateral Accounts subject to a perfected security interest in favor of the applicable Secured Party, in an amount not less than the aggregate amount of outstanding Obligations, as of any date of determination, provided that the performance or compliance with this Section 6.10 by any Loan Party may be waived in writing at any time and for such period as determined in the sole discretion of the Administrative Agent
4.4 Exhibit A to the Agreement is hereby amended by amending and restating or, as applicable, adding in appropriate alphabetical order, the following defined terms:
“Brii-179 Note” has the meaning set forth in the Fourth Amendment
“Brii Bio” means Brii Biosciences Limited, an exempted company organized under the laws of the Cayman Islands.
“Brii Notes” has the meaning set forth in the Fourth Amendment.
“BRII-179 Purchase Agreement” means that certain Purchase Agreement, dated as of February 13, 2024, by and among Parent, Borrower Representative and Brii Bio (as amended, restated, supplemented or otherwise modified from time to time.
“Essential Activities” has the meaning set forth in the Side Letter.
“Fourth Amendment” means that certain Fourth Amendment to Loan and Guaranty Agreement, Waiver and Forbearance Agreement, dated as of February 13, 2024, by and among the parties to this Agreement.
“Rehovot Acquisition” has the meaning set forth in the Fourth Amendment.
“Rehovot Purchase Agreement” has the meaning set forth in Fourth Amendment.
“Rehovot Purchase Price” has the meaning set forth in the Rehovot Purchase Agreement.
“Restatement Term Loans” means the Restatement First Tranche Term Loan.
“Restatement Term Loan Maturity Date” means September 14, 2026.
“Side Letter” has the meaning set forth in the Fourth Amendment.
“VBI-1901 License” has the meaning set forth in the Fourth Amendment.
“VBI-1901 Note” has the meaning set forth in the Fourth Amendment
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4.5 Exhibit C to the Agreement is hereby amended and restated as set forth in Exhibit C attached hereto.
4.6 The Restatement Second Tranche Term Loan Commitment, the Restatement Third Tranche Term Loan Commitment and the Restatement Fourth Tranche Term Loan Commitment are hereby cancelled. Sections 2.2(a)(ii), (iii) and (iv), and the defined terms “Additional Restatement Second Tranche Advance”, “Initial Restatement Second Tranche Advance”, “Liquidity Requirement”, “Restatement Fourth Tranche Availability Period”, Restatement Fourth Tranche Term Loan”, “Restatement Fourth Tranche Term Loan Commitment”, Restatement Second Tranche Availability Period”, “Restatement Second Tranche Milestones”, Restatement Second Tranche Term Loan”, “Restatement Second Tranche Term Loan Commitment”, “Restatement Third Tranche Availability Period”, Restatement Third Tranche Milestone”, Restatement Third Tranche Term Loan”, “Restatement Third Tranche Term Loan Commitment” are hereby deleted. Schedule 1 to the Agreement is hereby amended and restated as set forth on Schedule 1 attached hereto.
5. Additional Agreements.
5.1 13-Week Cash Flow Budget; Variance Report and Adherence to Budget.
(a) Borrower Representative shall deliver to Administrative Agent not later than 5:00 p.m., Eastern Time, on each Wednesday (the “Delivery Date”) following the Fourth Amendment Effective Date:
(i) cash flow forecast and sources and uses budget for the 13-week period commencing at such time and in the form agreed to by the Loan Parties and the Administrative Agent prior to the Delivery Date (the “13-Week Cash Flow Budget”), which shall be reasonably acceptable to Administrative Agent; and
(ii) an accounts payable aging report, in form satisfactory to Administrative Agent.
(b) Not later than 5:00 p.m., Eastern Time, on every Wednesday, Borrower Representative shall deliver to Administrative Agent a report, in form and substance reasonably satisfactory to Administrative Agent, for the immediately preceding four-week period, that (i) sets forth the variances for the Loan Parties (as a percentage and as a dollar amount) between the actual cash uses and the corresponding projected amounts reflected in the 13-Week Cash Flow Budget then in effect for the corresponding period.
(c) Loan Parties shall not permit total cash uses for any four week period to exceed the amount set forth in the 13-Week Cash Flow Budget for such four week period, as applicable by more than 10% without prior written approval by Administrative Agent, provided that for purposes of the foregoing, Lender Expenses and any legal expenses of the Loan Parties incurred in connection with the Loan Documents or other fees and expenses as approved by Administrative Agent as from time to time may be disregarded. Loan Parties shall promptly (and in any event, within one (1) Business Day) deliver such financial reporting and other information as Administrative Agent may reasonably require, including to verify compliance with this provision.
5.2 Transactions. The applicable Loan Parties shall use commercially reasonable efforts to:
(a) Achieve the Essential Activities by the applicable deadlines therefore specified in the Side Letter;
(b) Upon the achievement of the Essential Activities, enter into the License Agreement (in the form attached hereto as Appendix 1) (the “VBI-1901 License”);
(c) Enter into the Rehovot Acquisition (as defined in the Rehovot Purchase Agreement) no later than December 31, 2024.
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In connection with the foregoing, Borrower Representative shall provide an update to Administrative Agent upon request with respect to progress of completing the above activities and transaction and status of negotiation of related transaction documents, and shall provide copies of drafts of such transaction documents (and revisions thereto) promptly when available.
5.3 VBI-1901 License Cancellation or Buy-Back Right. No Loan Party shall elect to cancel the VBI-1901 License transaction prior to effectiveness thereof or to exercise any Buy Back Right (as defined in the VBI-1901 License), without the prior written approval of Administrative Agent, in its sole and absolute discretion.
6. Consents to Certain Transactions. Subject to the terms and conditions set forth in this Amendment, Administrative Agent and the undersigned Lenders, constituting Required Lenders, hereby consent to, and waive any applicable restrictions on, all transactions contemplated by the following agreements:
(a) the Side Letter, provided that the Brii Notes remain in full force and effect;
(b) the BRII-179 Purchase Agreement, provided that the Brii-179 Note remains in full force and effect other than in accordance with its terms;
(c) the VBI-1901 License in the form of Appendix 1, provided that the VBI-1901 Note remains in full force and effect other than in accordance with its terms; and
(d) the Rehovot Purchase Agreement, provided that the purchase consideration for the Rehovot Acquisition shall be paid directly to Administrative Agent to be applied to the Obligations in accordance with Section 2.2(c) of the Agreement, as amended by this Amendment.
7. Conditional Release. Upon the effectiveness of each of the transactions set forth in Section 6 of this Amendment, subject to the terms and conditions hereof, including the assignment or application of consideration to be received by any Loan Party in accordance with Section 2.2(c), Administrative Agent’s security interest in the following assets shall be automatically released without any further action by any Person:
(a) in case of the BRII-179 Purchase Agreement, the assets transferred pursuant thereto;
(b) in case of the Rehovot Acquisition, the assets transferred in connection therewith; and
(c) in the case of the VBI-1901 License, the assets transferred in connection therewith; and
(d) in the case of the completion of the Essential Activities, the assets transferred in connection therewith.
Administrative Agent shall, at the request of Borrower Representative or Brii Bio, deliver such other releases and make such filings as may be reasonably required to evidence the foregoing release, including, without limitation, pursuant to applicable Canadian Security Documents and Israeli Security Documents.
8. Limitation of Amendments, Waivers and Consents. The amendments, waivers and consents set forth herein are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) establish a course of dealing with respect to any other amendment, modification or waiver of any term or condition of any Loan Document or otherwise obligate Administrative Agent or any Lender to waive any future Event of Default, or (b) otherwise prejudice any right or remedy any Secured Party may now have or may have in the future under or in connection with any Loan Document.
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9. Representations. To induce Administrative Agent and Required Lenders to enter into this Amendment, each Loan Party hereby represent and warrant as follows:
9.1 Each Loan Party has the power and authority to execute and deliver this Amendment and to perform its obligations under the Agreement and other Loan Documents to which it is a party, in each case, as amended by this Amendment (as applicable).
9.2 The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of their respective obligations under the Agreement and the other Loan Documents to which it is a party, in each case, as amended by this Amendment (as applicable), (a) have been duly authorized by all necessary action on the part of such Loan Party, and (b) do not and will not contravene (i) any material Requirement of Law, (ii) any material contractual restriction in any material agreement with a Person binding on such Loan Party, (iii) any order, judgment or decree of any Governmental Authority binding on such Loan Party, or (iv) the Operating Documents operating of such Loan Party.
9.3 The execution and delivery by each Loan Party of this Amendment and the performance by each Loan Party of their respective obligations under the Agreement and the other Loan Documents to which it is a party, in each case, as amended by this Amendment (as applicable), do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, Governmental Authority, except as already has been obtained or made.
9.4 This Amendment has been duly executed and delivered by each Loan Party and is the binding obligation of each Loan Party, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application relating to or affecting creditors’ rights and by general equitable principles.
9.5 The Israeli Subsidiary (as defined in Schedule 1 hereto) is duly and validly registered with the Israeli Registrar of Companies; and as of the date hereof it is not in a status of a “breaching company” (‘ חברה מפרה’) within the meaning provided therefor under the Israeli Companies Law, 5759-1999).
10. Conditions. As a condition to the effectiveness of this Amendment, Administrative Agent shall have received, in form and substance satisfactory to Administrative Agent in its sole discretion, the following:
(a) this Amendment, duly executed by the Loan Parties;
(b) the BRII-179 Purchase Agreement, duly executed by the parties thereto;
(c) the Brii Notes, duly executed by the applicable parties thereto;
(d) the Side Letter duly executed by the applicable parties thereto;
(e) a certificate of each Loan Party, duly executed by a Responsible Officer, certifying and attaching (i) the Operating Documents as in effect on the Fourth Amendment Effective Date (or confirming no change to the Operating Documents previously delivered), (ii) resolutions duly approved by the Board of such Loan Party approving this Amendment and the documents to be entered into in connection therewith, (iii) any resolutions, consent or waiver duly approved by the requisite holders of each such Loan Party’s Equity Interests, if applicable (or certifying that no such resolutions, consent or waiver is required), and (iv) a schedule of incumbency;
(f) the fully executed purchase agreement with respect to the Rehovot Acquisition (the “Rehovot Purchase Agreement”), the establishment of the escrow for the purchase price related to the Rehovot Acquisition and a fully executed escrow agreement, each on terms reasonably acceptable to Administrative Agent; and
(g) payment of all fees and Lender Expenses due on the Fourth Amendment Effective Date.
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11. Additional Agreements.
No Loan Party shall enter into an amendment to the Side Letter or the Rehovot Purchase Agreement without the prior written consent of the Administrative Agent. Loan Parties shall consult with the Administrative Agent with respect to publicity materials pursuant to which the transactions with Brii shall be announced by Brii or any Loan Party to ensure that the description of such transactions is reasonably satisfactory to Administrative Agent.
12. Affirmations.
12.1 The Agreement, as amended hereby is reaffirmed by the Loan Parties and the Loan Parties agree and acknowledge that the Agreement, as modified by this Amendment, remains in full force and effect and that the same is hereby ratified and confirmed in all respects.
12.2 Except as modified by this Amendment, the Loan Parties agree and acknowledge that the security interest as granted pursuant to the applicable Loan Documents continues to secure the Obligations from the Closing Date without novation, and this Amendment is not intended to be, and shall not constitute, a novation.
12.3 The Guarantors agree and acknowledge the terms of this Amendment and confirm that the guaranty pursuant to Section 13 of the Agreement remains in full force and effect as of the date hereof with respect to the Obligations (as modified this Amendment).
13. Governing Law. Section 11 of the Agreement is incorporated herein, mutatis mutandis, provided that references to the “Agreement” shall be understood to refer to this Amendment.
14. General Provisions.
14.1 This Amendment and the Loan Documents represent the entire agreement with respect to this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.
14.2 This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one agreement. The words “execution,” “signed,” “signature” and words of like import herein shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act. Delivery of an executed counterpart of a signature page of this Amendment or any document delivered in connection therewith by electronic means including by email delivery of a “.pdf” format data file shall be effective as delivery of an original executed counterpart thereof.
14.3 The applicable provisions of Section 12 of the Agreement are hereby incorporated by reference herein, mutatis mutandis. This Amendment shall constitute a Loan Document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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[SIGNATURE PAGE TO FOURTH AMENDMENT TO LOAN AND GUARANTY AGREEMENT, WAMR AND FORBEARANCE AGREEMENTI
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first set forth above.
| BORROWERS: | ||
| VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation | ||
| By: | /s/ J.R. Baxter | |
| Name: | J.R. Baxter | |
| Title: | CEO | |
| VBI VACCINES INC., a British Columbia corporation | ||
| By: | /s/ J.R. Baxter | |
| Name: | J.R. Baxter | |
| Title: | CEO | |
| GUARANTORS: | ||
| SCIVAC LTD., an Israeli corporation | ||
| By: | /s/ J.R. Baxter | |
| Name: | J.R. Baxter | |
| Title: | CEO | |
| VBI VACCINES (DELAWARE) INC., a Delaware corporation | ||
| By: | /s/ J.R. Baxter | |
| Name: | J.R. Baxter | |
| Title: | CEO | |
| VARIATION BIOTECHNOLOGIES (US), INC., a Delaware corporation | ||
| By: | /s/ J.R. Baxter | |
| Name: | J.R. Baxter | |
| Title: | CEO | |
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[SIGNATURE PAGE TO FOURTH AMENDMENT TO LOAN AND GUARANTY AGREEMENT, WAIVER AND FORBEARANCE AGREEMENT]
| ADMINISTRATIVE AGENT: | ||
| K2 HEALTHVENTURES LLC | ||
| By: | /s/ Anup Arora | |
| Name: | Anup Arora | |
| Title: | Managing Director and Chief Investment Officer | |
| By | /s/ Anup Arora | |
| Name: | Anup Arora | |
| Title: | Managing Director and Chief Investment Officer | |
| LENDER: | ||
| K2 HEALTHVENTURES LLC | ||
| By: | /s/ Anup Arora | |
| Name: | Anup Arora | |
| Title: | Managing Director and Chief Investment Officer | |
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Exhibit 10.6
[**] Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (“Purchase Agreement”) is entered into as of 13 February, 2024 (the “Effective Date”) between, VBI VACCINES, INC. a company organized under the laws of the Province of British Columbia, Canada, and VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation (together, “VBI”), and each having a principal place of business at 310 Hunt Club Road, Suite 201, Ottawa ON K1V 1C1, and BRII BIOSCIENCES LIMITED, an exempted company organized under the laws of the Cayman Islands (“Brii Bio”), and having a place of business at One City Center, Suite 5-110, 110 Corcoran Street, Durham, NC 27701.
VBI and Brii Bio may be referred to herein as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not otherwise defined herein shall have the respective meanings given such terms in the applicable Agreement.
RECITALS
Whereas:
| A. | On December 4, 2018, the Parties entered into a Collaboration and License Agreement (the “Original Collaboration Agreement”), pursuant to which the Parties agreed to collaborate on the development of a Hepatitis B recombinant protein-based immunotherapeutic (“VBI-2601”) in the licensed territory, which consisted of China, Hong Kong, Taiwan, and Macau; |
| B. | On July 5, 2023, the Parties agreed to amend and restate the Original Collaboration Agreement (the “A&R Collaboration Agreement”), to, among other things, subject to the terms and conditions set forth in the A&R Collaboration Agreement, expanded the licensed territory to the entire world for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI-2601; |
| C. | On July 5, 2023, the Parties entered into a Collaboration and License Agreement (the “Collaboration Agreement”, and together with the A&R Collaboration Agreement, the “July 2023 Agreements”), pursuant to which, among other things, subject to the terms and conditions set forth in the Collaboration Agreement, the Parties agreed to collaborate on the further development of PreHevbri, a three antigen vaccine, for use in the licensed territory, which consists of the Asia Pacific region other than Japan, to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export, or otherwise commercialize PreHevbri in the field of the prevention of Hepatitis B; |
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| D. | The Parties desire to amend certain provisions in the July 2023 Agreements on the term and conditions set forth herein; and |
| E. | The Parties have entered into this agreement on the terms set out below. |
Now, Therefore:
In consideration of the foregoing premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows.
1. UNDERTAKINGS
| 1.1 | As of the Effective Date, the Collaboration Agreement shall be amended as per Article 3 of this Purchase Agreement. |
| 1.2 | As consideration, on the Effective Date, Brii Bio shall cause the secured promissory note (the “Promissory Note”) in the initial principal amount of $2,500,000 to be issued in the form attached hereto as Exhibit B hereto in consideration of the transactions contemplated by this Purchase Agreement. |
| 1.3 | Within [**] ([**]) days of the Effective Date, Brii Bio will provide to VBI an initial list of documents and other information related to the shipment, export, and import (including clearance of customs) of Manufacturing Technology (as defined in the A&R Collaboration Agreement) and other materials to any Third Party designated by Brii Bio, including any such Third Parties in China (such documents and information, the “Shipping Information”). Within fifteen (15) business days of receiving such initial list, VBI shall deliver to Brii Bio all Shipping Information that is in VBI’s possession. If any of the Shipping Information initially requested by Brii Bio comes into VBI’s possession after the initial [**] ([**])-day period, VBI shall promptly, and in any case, within [**] ([**]) business days of receipt, deliver such Shipping Information to Brii Bio. If any of the Shipping Information is not in VBI’s possession at the time of initial request by Brii Bio, the Parties will discuss and agree on a reasonable timeline to produce such missing Shipping Information. VBI shall provide continuing support to Brii Bio regarding the Shipping Information, including by responding to questions about or requests for additional Shipping Information from Brii Bio. |
| 1.4 | If Brii Bio believes that VBI is in breach of its obligations set forth in Section 1.3, with respect only to the initial list received, then Brii Bio will provide written notice to VBI describing such breach (“Breach Notice”). If VBI does not cure such breach within thirty (30) days of the delivery of the Breach Notice, Brii Bio shall deliver written notice to VBI (“Default Notice”) and upon delivery of the Default Notice, the principal amount of the Promissory Note shall automatically decrease by $2,500,000 in accordance with the terms of the Promissory Note. |
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| 1.5 | VBI shall use commercially reasonable efforts to obtain consent under the Ferring License (as such term is defined in the July 2023 Agreements) in the form attached hereto as Exhibit C (the “Ferring Consent Letter”). Until VBI has obtained such consent, VBI shall (a) communicate with Ferring in writing no less than [**] regarding the status of the Ferring Consent Letter and (b) provide Brii Bio with an update on the status of the Ferring Consent Letter and copies of any such communication sent to or received from Ferring on a [**] basis. Neither VBI nor any of its Affiliates shall make or agree to make any accommodations, amendments to the Ferring Consent Letter, conditions, or increase any obligation of Brii Bio or its affiliates in any matter, without first obtaining Brii’s written consent. VBI agrees to bear all such costs and expenses associated with or related to obtaining Ferring’s consent. Promptly after obtaining such consent, VBI shall provide written notice and a copy of the executed Ferring Consent Letter to Brii Bio, and the date Brii Bio receives both such notice and such copy of the executed Ferring Consent Letter shall be the “Consent Delivery Date”. |
| 1.6 | As further consideration, on the Consent Delivery Date, the principal amount of the Promissory Note shall automatically increase by $7,500,000 in accordance with the terms of the Promissory Note. |
| 1.7 | On the Consent Delivery Date, the Parties shall execute the Patent Assignment Agreement, attached hereto as Exhibit A, whereby VBI shall irrevocably and unconditionally sell, transfer, convey and assign to Brii Bio all intellectual property and VBI’s rights, title and interest in and to such intellectual property as set forth in Schedule A. |
| 1.8 | As of the Consent Delivery Date, the A&R Collaboration Agreement shall be amended as per Article 2 of this Purchase Agreement. |
2. AMENDMENTS TO THE A&R COLLABORATION AGREEMENT
| 2.1 | Amendments to Article 1. |
| 2.1.1 | Article 1 of the A&R Collaboration Agreement is hereby amended by adding the following definitions thereto in appropriate alphabetical order: |
“Asset Purchase Agreement” shall mean the Asset Purchase Agreement, dated February 13, 2024, by and among Brii Bio, VBI, and their respective Affiliates.
“Consent Delivery Date” shall have the meaning set forth in the Purchase Agreement.
“Essential Activities Side Letter” shall mean the Letter Agreement, dated February 13, 2024, by and between Brii Bio and VBI.
“Purchase Agreement” shall mean the Purchase Agreement, dated February 13, 2024, by and between Brii Bio and VBI.
“Retained IP” shall have the meaning set forth in Section 3.7.
“Transferred IP” shall have the meaning set forth in Section 3.7.
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| 2.1.2 | Section 1.15 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“Competing Product” shall mean a [**] vaccine that is for the (i) pretreatment or diagnosis of persons infected with Hepatitis B or (ii) treatment of Hepatitis B and that shares the same (or similar) antigens as VBI-2601. For the avoidance of doubt, PreHevbri as defined in the PreHevbri Agreement shall not be considered a competing product under this Agreement, provided it is only developed, marketed, or promoted by VBI for any prophylactic indication for which PreHevbri has obtained marketing approval.
| 2.2 | Amendments to Article 3. Article 3 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.2.1 | The title of Article 3 of the A&R Collaboration Agreement is hereby deleted and replaced with the following: “TRANSFER OF INTELLECTUAL PROPERTY AND GRANT OF LICENSES TO NON-TRANSFERRED INTELLECUAL PROPERTY.” |
| 2.2.2 | Section 3.1 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“3.1 VBI License to Brii Bio.
Subject to the terms and conditions of this Agreement, VBI hereby grants to Brii Bio an exclusive, perpetual, irrevocable, royalty-bearing license, with the right to grant sublicenses through multiple tiers in accordance with Section 3.2 under the Retained IP for Brii Bio, its Affiliates and Sublicensees to:
(a) perform, or have performed, studies (including Pre-Clinical Studies or Clinical Trials) and regulatory and other activities as may be required to obtain and maintain Marketing Approval of the Licensed Products in the Licensed Territory; and
(b) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, 4 export or otherwise commercialize the Licensed Products in the Field in the Licensed Territory.”
| 2.2.3 | Section 3.3 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“3.3 Rights Reserved. Each Party retains all rights and interests in and to its intellectual property not expressly granted or transferred to the other Party under this Agreement.”
| 2.2.4 | Section 3.4 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
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| 2.2.5 | The following is hereby added as a new Section 3.7 of the A&R Collaboration Agreement: |
“3.7 Transfer of Intellectual Property.
(a) As of the Consent Delivery Date, VBI hereby sells, transfers and assigns to Brii Bio all VBI Technology owned by VBI or its Affiliates as of the Consent Delivery Date (the “Transferred IP”). For the avoidance of doubt, VBI acknowledges and agrees that the foregoing assignment includes all rights of VBI to sue for past, present, or future infringement, violations, or misappropriation of the Transferred IP anywhere in the world.
(b) VBI shall not transfer or assign the (i) Ferring License, (ii) the SciGen Agreement, and (iii) VBI’s rights in the Ferring License or the SciGen Agreement, unless, in each case, concurrently or subsequently transferred or assigned by VBI to Brio Bio or its Affiliates under the Asset Purchase Agreement (the foregoing (i), (ii) and (iii) collectively, the “Retained IP”). The Retained IP shall remain subject to Section 3.1 and the other provisions of this Agreement.
(c) In connection with and without limiting the assignment of the Transferred IP in Section 3.7(a), VBI and Brii Bio shall execute and deliver a Patent Assignment Agreement in a form agreed by the Parties to confirm the assignment of VBI’s entire interest in the Joint Patents and VBI Patents.
(d) Except for the representations and warranties of VBI set forth in Section 13.3 of A&R Collaboration Agreement (which shall be deemed incorporated by reference and made a part hereof), VBI does not make any representation or warrant regarding the Transferred IP. Brii Bio accepts such Transferred IP on an “AS-IS, WHERE-IS” basis with all faults. Furthermore, Brii Bio assumes all liabilities arising from or related to the Transferred IP that accrued after the Consent Delivery Date.”
| 2.3 | Amendments to Article 5. Article 5 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.3.1 | Section 5.1 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.3.2 | Section 5.3 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.4 | Amendment to Article 6. Article 6 of the A&R Collaboration Agreement is hereby amended by replacing Section 6.1(b) with the following: “Intentionally Omitted”. |
| 2.5 | Amendment to Article 7. Article 7 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.5.1 | Section 7.1 of the A&R Collaboration Agreement is hereby amended and restated by replacing 5 such Section with the following: |
“7.1 Clinical Supply Obligations. VBI shall supply quantities of Licensed Product for use by Brii Bio in the conduct of Clinical Trials in the Licensed Territory, either itself or through a Secondary Manufacturer, in accordance with the terms and conditions set forth in that certain Supply Agreement entered into by the Parties on July 5, 2023.”
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| 2.5.2 | Section 7.3 of the A&R Collaboration Agreement is hereby amended by adding the following as a new subsection (e) |
“Prior to the effective date of the Purchase Agreement, Brii Bio provided VBI with written notice electing to have VBI transfer manufacturing responsibility for clinical supply and commercial supply of Licensed Product in the License Territory. Pursuant to and in accordance with this Section 7.3 and the Essential Activities Side Letter, VBI shall effect such transfer.”
| 2.6 | Amendment to Article 8. Article 8 of the A&R Collaboration Agreement is hereby amended by replacing Section 8.1(c) with the following: “Intentionally Omitted”. |
| 2.7 | Amendments to Article 9. Article 9 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.7.1 | Section 9.2 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.7.2 | Section 9.3 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.7.3 | Section 9.4 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“9.4 Royalty Payments. Brii Bio shall pay to VBI a royalty equal to the Third Party Royalty on Net Sales or Attributable Net Sales, as applicable, of each Licensed Product in each Region from the date of the First Commercial Sale of such Licensed Product in such Region until the termination or expiration of VBI’s obligation to pay Third Party Royalties with respect to sales of such Licensed Product in such Region (the “Royalty Term”).”
| 2.7.4 | Section 9.5 of the A&R Collaboration Agreement if hereby amended and restated by replacing such Section with the following: |
“9.5 Royalty Reduction. In the event that VBI negotiates a reduction in Third Party Royalties (e.g., through a reduced Third Party Royalty rate under the [**] or [**]) with respect to Licensed Products in the Field in the Licensed Territory, then the amount of royalties payable by Brii Bio pursuant to Section 9.4 shall be reduced to the reduced Third Party Royalty amount.”
| 2.7.5 | Section 9.7 of the A&R Collaboration Agreement is hereby amended by adding the following as the final sentence thereof: “At VBI’s written instruction, Brii Bio shall make all Royalty Payments directly to [**]., as applicable.” |
| 6 |
| 2.7.6 | Section 9.8 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.7.7 | Section 9.9 of the A&R Collaboration Agreement is hereby amended and restated by replacing 6 such Section with the following: “Intentionally Omitted”. |
| 2.8 | Amendments to Article 12. Article 12 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.8.1 | Section 12.1 of the A&R Collaboration Agreement is amended and restated in its entirety and replaced with the following: |
“12.1 Ownership of Intellectual Property. Brii Bio shall have the sole right in its sole discretion to prepare, file, register, prosecute and maintain all Transferred IP (including all VBI Patents and Joint Patents) and shall bear all of the costs associated therewith. After the Consent Delivery Date, VBI shall have no obligation to or liability in respect of the preparation, filing, registration, prosecution or maintenance of any Transferred IP (including any VBI Patents and Joint Patents).”
| 2.8.2 | Section 12.2 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.8.3 | Section 12.3 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.8.4 | Section 12.4 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.8.5 | Section 12.5 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.8.6 | Section 12.6 of the A&R Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 2.9 | Amendments to Article 14. Article 14 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.9.1 | Section 14.1 of the A&R Collaboration Agreement is amended and restated and replaced with the following: |
“14.1 Indemnification of VBI. Brii Bio shall indemnify and hold harmless VBI and its Affiliates, and its and their directors, officers, employees and agents of such entities (the “VBI Indemnitees”) from and against any and all losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys’ fees and other expenses of litigation) (“Losses”) from any claims, actions, suits or proceedings brought by a Third Party (a “Third Party Claims”) incurred by any VBI Indemnitee, arising from, or occurring as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by Brii Bio or its Affiliates or Sublicensees in the Licensed Territory; (b) gross negligence or willful misconduct by or on behalf of Brii Bio or its Affiliates in performing any activities in connection with this Agreement; (c) the practice of the Transferred IP after the Consent Delivery Date; and (d) any material breach of any representations, warranties or covenants by Brii Bio under this Agreement; except, in each case ((a) – (d)), to the extent such Third Party Claims fall within the scope of the indemnification obligations of VBI set forth in Section 14.2.”
| 7 |
| 2.9.2 | Section 14.2 of the A&R Collaboration Agreement is amended and restated and replaced with the follows: |
“14.2 Indemnification of Brii Bio. VBI shall indemnify and hold harmless each of Brii Bio and its Affiliates and its and their directors, officers, employees and agents of such entities (the “Brii Bio Indemnitees”), from and against any and all Losses from any Third Party Claim incurred by any Brii Bio Indemnitee arising from, or occurring as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by VBI or its Affiliates; (b) gross negligence or willful misconduct by or on behalf of VBI or its Affiliates in performing any activities in connection with this Agreement; (c) the practice of the Transferred IP prior to the Consent Delivery Date; and (d) any material breach of any representations, warranties or covenants by VBI under this Agreement; except, in each case ((a) – (d)) to the extent such Third Party Claims fall within the scope of the indemnification obligations of Brii Bio set forth in Section 14.1.”
| 2.10 | Amendments to Article 15. Article 15 of the A&R Collaboration Agreement is hereby amended as follows: |
| 2.10.1 | Section 15.2 of the A&R Collaboration Agreement is amended and restated and replaced with the following: |
“15.2 VBI Termination Rights. VBI shall have the right to terminate the license granted to Brii Bio under Section 3.1 upon written notice to Brii Bio if Brii Bio is in material breach of its obligations under Section 9.4 and has not cured such breach withing thirty (30) days after notice from VBI requesting cure of such breach. Any such termination shall become effective at the end of such thirty (30) day period unless Brii Bio has cured such breach prior to the end of such period; provided that, such thirty (30) period shall be tolled during the pendency of any good faith dispute that has been deferred to resolution pursuant to Article 16 with respect to the validity of such allegation of breach. Notwithstanding the foregoing, VBI shall not have the right to terminate the license as set forth in this Section 15.2 if (a) VBI is in breach of its obligation to pay Third Party Royalties as set forth in the [**] or [**], as applicable, and (b) Brii Bio pays the applicable Third Party Royalties owing from Brii Bio’s exercise of its rights under the sublicense granted to it under Section 3.1 directly to the applicable Third Party(ies) in lieu of making such payment to VBI under Section 9.4 of this Agreement. Notwithstanding anything to the contrary, VBI shall not have the right to terminate the license granted to Brii Bio under Section 3.1 except as set forth in this Section 15.2.” 2.10.2
| 8 |
| 2.10.2 | Section 15.3 of the A&R Collaboration Agreement is amended and restated and replaced with the following: |
“15.3 Brii Brio Termination Rights. Brii Bio shall have the right in its sole and absolute discretion to terminate the license granted to it under Section 3.1, either with respect to the [**] or the [**] or both, either with respect to a Region or in its entirety, upon one hundred and eighty (180) days’ prior written notice to VBI for convenience, without cause, and for any or no reason.”
| 2.10.3 | Section 15.4 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.4 | Section 15.5 of the A&R Collaboration Agreement is amended and restated and replaced with the following: |
“15.5 Effects of Termination. Upon any termination of this Agreement, the licenses granted pursuant to Section 3.1 herein provided to Brii Bio by VBI shall automatically terminate and Brii Bio’s obligations (including any payment obligations) with respect thereto to shall also automatically terminate.”
| 2.10.5 | Section 15.6 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.6 | Section 15.7 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.7 | Section 15.8 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.8 | Section 15.9 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.9 | Section 15.10 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.10 | 2.10.10 Section 15.11 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 2.10.11 | Section 15.12 of the A&R Collaboration Agreement is amended and restated and replaced with the following: “Intentionally Omitted”. |
| 9 |
3. AMENDMENTS TO THE COLLABORATION AGREEMENT
| 3.1 | Amendment to Article 3. Article 3 of the Collaboration Agreement is hereby amended by replacing Section 3.1 with the following: |
“3.1 VBI License to Brii Bio. Subject to the terms and conditions of this Agreement, VBI hereby grants to Brii Bio an exclusive, perpetual, irrevocable, royalty-bearing license, with the right to grant sublicenses through multiple tiers in accordance with Section 3.3, under the VBI Technology, for Brii Bio, its Affiliates and Sublicensees to:
(a) carry out its obligations pursuant to the Global Development Plan (as applicable);
(b) perform, or have performed, studies (including Pre-Clinical Studies or Clinical Trials) and regulatory and other activities as may be required to obtain and maintain Marketing Approval of Licensed Product in the Licensed Territory; and
(c) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize Licensed Product in the Field in the Licensed Territory; provided, however, that Brii Bio shall not practice its right to make Licensed Product unless there is a breach by VBI of the Supply Agreement.”
| 3.2 | Amendment to Article 6. Article 6 of the Collaboration Agreement is hereby amended by replacing Section 6.1(b) with the following: “Intentionally Omitted”. |
| 3.3 | Amendment to Article 7. Article 7 of the Collaboration Agreement is hereby amended as follows: |
| 3.3.1 | Section 7.1 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“7.1 Clinical Supply Obligations. VBI shall supply quantities of Licensed Product for use by Brii Bio in the conduct of Clinical Trials in the Licensed Territory in accordance with the terms and conditions set 9 forth in the certain Supply Agreement entered into by the Parties on July 5, 2023.”
| 3.4 | Amendments to Article 9. Article 9 of the Collaboration Agreement is hereby amended as follows: |
| 3.4.1 | Section 9.2 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 3.4.2 | Section 9.3 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 3.4.3 | Section 9.4 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“9.4 Royalty Payments. Brii Bio shall pay to VBI a royalty equal to the Third Party Royalty amounts on Net Sales or Attributable Net Sales, as applicable, of each Licensed Product in each Region from the date of the First Commercial Sale of such Licensed Product in such Region until the termination or expiration of VBI’s obligation to pay Third Party Royalties with respect to sales of such Licensed Product in such Region (the “Royalty Term”).”
| 10 |
| 3.4.4 | Section 9.5 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: |
“9.5 Royalty Reduction. In the event that VBI negotiates a reduction in Third Party Royalties (e.g., through a reduced Third Party Royalty rate under the [**] or [**]) with respect to Licensed Products in the Field in the Licensed Territory, then the amount of royalties payable by Brii Bio pursuant to Section 9.4 shall be reduced to the reduced Third Party Royalty amount.”
| 3.4.5 | Section 9.7 of the Collaboration Agreement is hereby amended by adding the following as the final sentence thereof: “At VBI’s written instruction, Brii Bio shall make all Royalty Payments directly to [**] and/or [**]., as applicable.” |
| 3.4.6 | Section 9.8 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
| 3.4.7 | Section 9.9 of the Collaboration Agreement is hereby amended and restated by replacing such Section with the following: “Intentionally Omitted”. |
4. GENERAL PROVISIONS
| 4.1 | Entire Agreement. This Purchase Agreement, as an amendment to and part of the July 2023 Agreements, constitutes the entire agreement between the Parties with respect to the subject matter herein, and supersedes all prior agreements, proposals, negotiations, representations or communications relating to such subject matter. The Parties acknowledge that they have not been induced to enter into this Agreement by any representations or promises not specifically stated herein. |
| 4.2 | Governing Law; Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to Parties residing in Delaware, without regard applicable principles of conflicts of law. Each of the Parties irrevocably consents to the exclusive jurisdiction of any court located within Wilmington, Delaware, in connection with any matter based upon or arising out of this Agreement, the Related Agreements or the matters contemplated hereby or thereby and agrees that process may be served upon it in any manner authorized by the laws of the State 10 of Delaware for such Persons and waives and covenants not to assert or plead any objection which it might otherwise have to such jurisdiction and such process. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING (WHETHER AT LAW, IN CONTRACT, IN TORT OR OTHERWISE) ARISING OUT OF OR RELATED TO THIS AGREEMENT. |
| 11 |
| 4.3 | Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the terms or provisions of this Agreement were not performed in accordance with their specific wording or were otherwise breached. The Parties accordingly agree that, in the event of any breach or threatened breach by any Party of any covenant, obligation or other provision set forth in this Agreement, for the benefit of any other Party: (a) such other Parties shall be entitled (in addition to any other remedy that may be available to it) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (ii) an injunction restraining such breach or threatened breach; and (b) such other Parties shall not be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related Legal Proceeding. |
| 4.4 | Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by email, sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: |
If to VBI, to:
VBI Vaccines Inc.
160 Second Street, Floor 3
Cambridge, MA 02142
Attn: Nell Beattie
Email: [**]
with required copies to:
Haynes and Boone, LLP
30 Rockefeller Plaza
New York, NY 10112
Attn: Greg Kramer
Email: [**]
If to Brii Bio, to:
Brii Biosciences Limited
One City Center, Suite 5-110 110
Corcoran Street
Durham, NC 27701
Attn: Zhi Hong
Email: [**]
with required copies to:
Cooley LLP
IFC - Tower 2, Level 35, Unit 3510
8 Century Avenue
Pudong New Area
Shanghai, China 2001204
Attention: Yiming Liu; Lila Hope
Email: [**]
| 4.5 | Execution; Counterparts. This Purchase Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile signatures, including signatures in a fixed electronic format such as PDF, shall have the same effect as originals. |
| 12 |
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE EFFECTIVE DATE.
| VBI VACCINES INC. | BRII BIOSCIENCES LIMITED | |||
| By: | /s/ Jeff R. Baxter | By: | /s/ Zhi Hong | |
| Name: | Jeff R. Baxter | Name: | Zhi Hong | |
| Title: | Chief Executive Officer | Title: | Chief Executive Officer | |
| Date: | February 13, 2024 | Date: | February 13, 2024 | |
Signature Page to Purchase Agreement
Exhibit A
Form of Patent Assignment Agreement
[Attached]
| 13 |
PATENT ASSIGNMENT AGREEMENT
[**]
Signature Page to Patent Assignment Agreement
Schedule A to Patent Assignment Agreement
[**]
Exhibit B
Form of Promissory Note
| 14 |
SECURED PROMISSORY NOTE
[**]
SCHEDULE 1
[**]
SCHEDULE 2
ISSUER INFORMATION
[**]
Exhibit C
Ferring Consent Letter
CONSENT AGREEMENT
[**]
| 1 |
Schedule A
[**]
| 2 |
Exhibit 10.7
CONFIDENTIAL
Execution Version
[**] Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.
ASSET PURCHASE AGREEMENT
by and among
Purchaser,
Seller,
VBI Vaccines Inc.
(as Guarantor)
and
Brii Biosciences, Inc.
(as Purchaser Guarantor)
Dated as of February 13, 2024
THIS DRAFT IS SUBJECT TO CONTINUING DUE DILIGENCE IN ALL RESPECTS. THIS DRAFT IS NOT INTENDED NOR SHALL IT BE DEEMED TO CREATE A LEGALLY BINDING OR ENFORCEABLE OFFER OR AGREEMENT OF ANY TYPE OR NATURE, UNLESS AND UNTIL AGREED, EXECUTED AND DELIVERED BY THE PARTIES.
TABLE OF CONTENTS
| Page | |||
| 1. | DEFINITIONS. | 1 | |
| 2. | PURCHASE AND SALE OF ASSETS | 12 | |
| 2.1 | Acquired Assets. | 12 | |
| 2.2 | Assumed Liabilities | 13 | |
| 2.3 | Excluded Liabilities | 14 | |
| 2.4 | Assets Incapable of Transfer | 15 | |
| 3. | CONSIDERATION | 16 | |
| 3.1 | Consideration; Escrow Deposit. | 16 | |
| 3.2 | Allocation of Consideration | 16 | |
| 3.3 | Withholding | 16 | |
| 4. | CLOSING | 17 | |
| 4.1 | Closing | 17 | |
| 4.2 | Conditions to Closing. | 17 | |
| 4.3 | Release of Escrow Following Closing | 19 | |
| 4.4 | Possession | 19 | |
| 5. | REPRESENTATIONS AND WARRANTIES | 19 | |
| 5.1 | Representations and Warranties of Seller and Guarantor | 19 | |
| 5.2 | Representations and Warranties of Purchaser and Purchaser Guarantor | 30 | |
| 6. | ADDITIONAL AGREEMENTS | 31 | |
| 6.1 | Conduct of the Business | 31 | |
| 6.2 | Acquisition Proposal | 33 | |
| 6.3 | Access to Information | 33 | |
| 6.4 | Notification of Certain Matters | 34 | |
| 6.5 | Confidentiality | 34 | |
| 6.6 | Public Disclosure | 35 | |
| 6.7 | Cell Banks | 36 | |
| 6.8 | Further Assurances and Cooperation. | 37 | |
| 6.9 | Tax Matters | 37 | |
| 6.10 | Service Provider Matters | 37 | |
| -i- |
TABLE OF CONTENTS
(continued)
| Page | |||
| 6.11 | Reconciliation. | 39 | |
| 6.12 | Formation of Purchaser; Joinder | 40 | |
| 6.13 | Purchaser Permits | 40 | |
| 6.14 | Repurchase | 41 | |
| 7. | INDEMNIFICATION | 42 | |
| 7.1 | Indemnification by Seller, Guarantor, Purchaser and Purchaser Guarantor. | 42 | |
| 7.2 | Survival | 43 | |
| 7.3 | Limits on Indemnification. | 43 | |
| 7.4 | Exclusive Remedy | 44 | |
| 7.5 | Resolution of Indemnification Disputes | 45 | |
| 7.6 | Payments; Tax Treatment | 46 | |
| 8. | TERMINATION | 47 | |
| 8.1 | Termination Rights | 47 | |
| 8.2 | Effect of Termination; Release of Escrow | 48 | |
| 8.3 | Extension; Waiver | 48 | |
| 9. | MISCELLANEOUS | 48 | |
| 9.1 | Governing Law; Waiver of Jury Trial | 48 | |
| 9.2 | Remedies Cumulative | 48 | |
| 9.3 | Specific Performance | 49 | |
| 9.4 | Entire Agreement; Severability | 49 | |
| 9.5 | Notices | 49 | |
| 9.6 | No Assignment; Binding Effect | 50 | |
| 9.7 | Relationship of the Parties | 50 | |
| 9.8 | Headings; Interpretation | 51 | |
| 9.9 | Counterparts; Signatures | 51 | |
| 9.10 | Expenses | 51 | |
| 9.11 | Amendments | 51 | |
| 9.12 | Guarantee by Guarantor | 51 | |
| 9.13 | Guarantee by Purchaser Guarantor | 52 | |
| -ii- |
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) is made as of February 13, 2024 (the “Agreement Date”), by and among (a) SciVac Ltd., an Israeli company (“Seller”) (b) an Israeli company to be formed as a subsidiary of Brii Cayman following the Agreement Date in accordance with Section 6.13 (“Purchaser”), (c) VBI Vaccines Inc., a company organized under the laws of the province of British Columbia, Canada (“Guarantor”) and (d) Brii Biosciences, Inc., a Delaware Corporation (“Purchaser Guarantor”). Each of Seller and Purchaser is sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
Recitals
A. Guarantor is the parent company of Seller, which owns and operates the Rehovot Facility, which is used for conducting the Business.
B. Purchaser will be incorporated following the Agreement Date as a direct or indirect wholly-owned subsidiary of Brii Cayman and once incorporated, will execute a Written Joinder in accordance with Section 6.13 to assume all of its rights and obligations hereunder as “Purchaser” and to be bound by all of the terms of this Agreement as “Purchaser”.
C. Seller desires to sell, convey, transfer, deliver and assign to Purchaser, and Purchaser desires to purchase from Seller, certain assets related to the Business, including Seller’s and its Affiliates’ interest and rights in and to each of the Rehovot Facility Leases and in furtherance thereof, at the Closing, Seller will (and will cause its Affiliates to) sell, convey, transfer, deliver and assign to Purchaser, and Purchaser will purchase and assume from Seller (and its Affiliates), the Acquired Assets and the Assumed Liabilities free and clear of all Liens (except for any Permitted Liens), all on the terms and conditions hereinafter set forth.
Now, Therefore, in consideration of the premises and of the respective representations, warranties, covenants, agreements, and conditions contained herein, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:
Agreement
| 1. | Definitions. |
In this Agreement and any Exhibit, Disclosure Schedule, and Schedule attached hereto, the following terms have the meanings specified or referred to in this Section 1 and shall be equally applicable to both the singular and plural forms.
“Acquired Assets” has the meaning set forth in Section 2.1(a).
“Acquired Contracts” has the meaning set forth in Section 2.1(a)(i).
“Action” or “Actions” means any lawsuit, claim, hearing, enforcement, audit, investigation, lawsuit, action (including arbitration or mediation) or other regulatory, quasi-judicial, or judicial Proceeding.
| 1 |
| Confidential |
“Additional Material Contract” has the meaning set forth in Section 5.1(h).
“Affiliate” means, when used with reference to any specified Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the preamble.
“Agreement Date” has the meaning set forth in the preamble.
“Anti-Corruption Laws” means the Foreign Corrupt Practices Act of 1977, as amended, the Anti-Kickback Act of 1986 or any applicable Laws of similar effect, and the related regulations and published interpretations thereunder.
“As-Is Basis” means the physical condition of an applicable Tangible Property as of the Agreement Date.
“Assumed Liabilities” has the meaning set forth in Section 2.2.
“Brii Cayman” means Brii Biosciences Limited, a company incorporated in the Cayman Islands.
“Business” means the lease and operation of the Rehovot Facility and manufacturing of the Products.
“Business Governmental Grants” has the meaning set forth in Section 5.1(r).
“Business Permits” means any such Permits held by Seller in effect as of the Agreement Date used for the operation of the Business as conducted as of the Agreement Date, all as listed in Section 5.1(s) of the Disclosure Schedules.
“Business Service Providers” means all employees, consultants, advisors, and independent contractors, employed or engaged by Seller or the extent applicable, its Affiliates, providing services necessary for the operation of the Business.
“Business Day” means a day other than a Saturday, Sunday or any other day on which banking institutions in New York, New York or Tel Aviv, Israel are authorized or required by applicable Law to remain closed.
“Cell Banks” means the master cell banks and working cell banks for the manufacture of the Products (regardless of whether held on or off the Rehovot Facility).
“Cell Lines” means Chinese Hamster Overy (CHO) cell lines, encoding Pre-S1, Pre-S2, and S antigens, existing at the Rehovot Facility for the manufacture of the Products.
| 2 |
| Confidential |
“Claim” means a claim for Losses.
“Claim Notice” has the meaning set forth in Section 7.5.
“Closing” has the meaning set forth in Section 4.1.
“Closing Date” has the meaning set forth in Section 4.1.
“Code” means the Internal Revenue Code of 1986, as amended.
“Collaboration Agreements” means collectively, (a) the PreHevbri License Agreement and (b) that certain Amended & Restated Collaboration and License Agreement, dated as of July 5, 2023, by and between Guarantor and Purchaser Guarantor.
“Competing Transactions” means any transaction involving the sale, transfer, license or other disposition of all or any portion of the Business or Acquired Assets.
“Confidential Information” means any and all trade secrets, business or technical information, and information and materials, whether or not protectible as a trade secret, whether or not stored in any medium, relating to the Acquired Assets or the Business, including business information, technical documentation, product or service specifications or strategies, marketing plans, research and development, designs, formulae, computer programs (including source code thereto), pricing information, financial information, information relating to existing, previous, and potential suppliers, customers, and Contracts, and know-how.
“Conflict” has the meaning set forth in Section 5.1(c).
“Contract” means any written or oral contract, agreement, or instrument, including supply contracts, licenses, binding understandings or commitments, customer agreements, subcontracts, leases of personal property, notes, guarantees, pledges, and conditional sales agreements to which the Person referred to is a party or by which any of its assets are bound.
“Disclosure Schedules” has the meaning set forth in Section 5.1.
“Employee Plan” means (a) all employee benefit plans, policies, agreements or arrangements maintained by Seller or its Affiliates for the benefit of Business Service Providers, (b) all employment, individual consulting, executive compensation, or other compensation agreements of the Business Service Providers, including any bonus or other incentive compensation, stock purchase, equity or equity-based compensation, deferred compensation, change in control, retention, severance, sick leave, vacation, recreation, retirement, pension, loans, salary continuation, health, medical, dental, vision, accident, disability, cafeteria, life insurance and educational assistance plans, policies or arrangements, and (c) any collective bargaining agreement or union contract, in each case, whether written or unwritten, that are sponsored or maintained by Seller for the benefit of any Business Service Provider.
| 3 |
| Confidential |
“Environmental Laws” means all applicable Law, policies, permits, licenses, certificates, approvals, judgments, decrees, orders, directives, or requirements concerning or relating to the protection of public health and safety, protection of worker health and safety, or pollution or protection of the environment, or that pertain to the presence, use, manufacturing, refining, production, generation, handling, transportation, treatment, recycling, transfer, storage, disposal, distribution, importing, labeling, testing, processing, discharge, release, threatened release, emission, re-use, recycling, control or other contact or action or failure to act involving Hazardous Materials.
“Escrow Agent” means JPMorgan Chase Bank, N.A.
“Escrow Agreement” means that certain Escrow Agreement, dated as of the Agreement Date, entered into by and among Purchaser Guarantor, Guarantor, Seller and the Escrow Agent.
“Excluded Assets” has the meaning set forth in Section 2.1(b).
“Excluded Liabilities” has the meaning set forth in Section 2.3.
“Excluded Tangible Property” means any Finished PreHevbri Products held on or off the Rehovot Facility Site by or for Seller or its Affiliates at Closing.
“Ferring License” means that certain License Agreement that was made as of September 1, 2021, by and among Ferring International Center S.A., Seller, and Guarantor, as amended or restated.
“Finished PreHevbri Product” means any PreHevbri Product that has been filled into vials and is labeled for commercial distribution by Seller or any of its Affiliates.
“Fundamental Representations” means the representations made by Seller pursuant to Sections 5.1(a), (b), (c), (e), (f), (l) and the last sentence of (q).
“GAAP” means U.S. generally accepted accounting principles, consistently applied.
“Governmental Authority” means any federal, state, local, or any non-U.S. government, governmental, regulatory (including self-regulatory) or administrative authority, body, agency or commission or any court, tribunal, or judicial or arbitral body.
“Governmental Grant” means any grant, incentive, qualification, subsidy, award, participation, exemption, status, cost sharing arrangement, reimbursement arrangement or other benefit, relief or privilege, from the government of the State of Israel or any other Governmental Authority, or judicial or arbitral body thereof, any outstanding application to receive the same filed by Seller, including, any material Tax or other incentive granted to, provided or made available to, or enjoyed by Seller, under the Laws of the State of Israel, and further including without limitation, by or on behalf of or under the authority of the Innovation Authority.
“Guarantor” has the meaning set forth in the preamble.
| 4 |
| Confidential |
“Hazardous Materials” means any material, chemical, compound, substance, mixture or by-product that is identified, defined, designated, listed, restricted or otherwise regulated under Environmental Laws as a “hazardous constituent,” “hazardous substance,” “hazardous material,” “acutely hazardous material,” “extremely hazardous material,” “hazardous waste,” “hazardous waste constituent,” “acutely hazardous waste,” “extremely hazardous waste,” “infectious waste,” “medical waste,” “biomedical waste,” “pollutant,” “toxic pollutant,” “contaminant” or any other formulation or terminology intended to classify or identify substances, constituents, materials or wastes by reason of properties that are deleterious to the environment, natural resources, worker health and safety, or public health and safety, including ignitability, corrosivity, reactivity, carcinogenicity, toxicity and reproductive toxicity.
“Identified Service Providers” has the meaning set forth in Section 6.11(b).
“IIA Consent” means obtaining all consents necessary for removing the IIA Lien.
“IIA Lien” means the lien described on Section 5.1(r) of the Disclosure Schedule.
“Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as applicable.
“Indemnifying Party” means (a) Seller with respect to an indemnification Claim made by a Purchaser Indemnified Party pursuant to Section 7.1(a) or (b) Purchaser with respect to an indemnification Claim made by a Seller Indemnified Party pursuant to Section 7.1(b).
“Innovation Authority” means the National Technological Innovation Authority established pursuant to the provisions of the Innovation Law (formerly operating as the Office of Chief Scientist).
“Innovation Law” means the Israeli Law for Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, as amended, together with the regulations promulgated thereunder.
“Intellectual Property” means any and all rights in or affecting intellectual or industrial property or other proprietary rights, existing now or in the future in the United States or anywhere in the universe. Intellectual Property includes, without limitation, any and all rights in, to, or subsisting in the following:
(a) all issued patents, reissued or reexamined patents, revivals of patents, divisions, continuations and continuations-in-part of patents, all renewals and extensions thereof utility models, and certificates of invention, regardless of country or formal name;
(b) all published or unpublished nonprovisional and provisional patent applications, including the right to file other or further applications, reexamination proceedings, invention disclosures and records of invention;
(c) all copyrights, copyrightable works, semiconductor topography and mask work rights, including, without limitation, all rights of authorship, use, publication, reproduction, distribution, performance, transformation, moral rights and ownership of copyrightable works, semiconductor topography works and mask works, the right to create derivative works, and all applications for registration, registrations, renewals and extensions of registrations, together with all other interests accruing by reason of international copyright, semiconductor topography and mask work conventions;
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(d) all trademarks, service marks, logos, trade names, Internet domain names, 1-800, 1-888, 1-877 and other “vanity” telephone numbers, together with the goodwill of the business associated therewith, all applications for registration and registrations thereof, renewals thereof, the right to bring opposition and cancellation proceedings and any and all rights under the laws of trade dress;
(e) all proprietary information and materials, whether or not patentable or copyrightable, and whether or not reduced to practice, including without limitation all technology, ideas, research and development, inventions, designs, manufacturing and operating specifications and processes, know-how, formulae, customer and supplier lists, shop rights, designs, drawings, patterns, trade secrets, confidential information, technical data, databases, data compilations and collections, computer programs, and all hardware, software and processes; and
(f) all other intangible assets, properties and rights; and
(g) all claims, causes of action and rights to sue for past, present and future infringement or unconsented use of any of the foregoing intellectual and other proprietary rights set forth in the foregoing paragraphs (a) through (f), the right to file applications and obtain registrations, and all rights arising therefrom and pertaining thereto and all products, proceeds, royalties and revenues arising from or relating to any and all of the foregoing.
“Insolvency Event” means a general assignment for the benefit of, or an arrangement or composition generally with, such party’s creditors, appointment of an examiner or of a receiver, custodian, liquidator, trustee or similar person over all or substantially all of the party’s property, the passing of a resolution for winding up, liquidation, dissolution, or reorganization or similar process, or the filing of a petition or commencement of a proceeding under any bankruptcy or insolvency act or similar law of any jurisdiction whether voluntarily or involuntarily.
“Insurance Coverage” has the meaning set forth in Section 5.1(k).
“Inventory” means all inventory, raw materials, reagents, samples, vials and inventories held by Seller (or on its behalf) for the Business as of the Closing Date, being such inventory as listed in Schedule 2.1(a)(iii) as updated by Seller pursuant to Section 4.2(a)(v)(5).
“Israeli VAT” means Value Added Tax under Israeli Law.
“Israeli Income Tax Ordinance” means The Israeli Income Tax Ordinance, New Version, 5722-1961, and the rules and regulations promulgated thereunder, as amended.
“Key Employees” has the meaning set forth in Section 6.11(a).
“Knowledge” means the actual knowledge of any of the officers or directors of the applicable Party after due enquiry; provided, however, that with respect to Intellectual Property, Knowledge shall not require the conduct of freedom to operate analyses; provided, further, that any such analyses that have been conducted or obtained will not be excluded from the term “Knowledge.”
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“Know-How” means all trade secrets, methods, techniques, processes, formulae, practices, specifications, inventions, designs, discoveries, improvements or other know-how or proprietary information or results that are in the possession of Seller, and necessary or useful to enable the operation of the Rehovot Facility for the Business. For the avoidance of doubt, Know-How does not include Intellectual Property specific to (a) PreHevbri, which is subject to the Ferring License and licensed to Brii Cayman and/or its Affiliates under that certain Collaboration and License Agreement between the Parties and/or their Affiliates, dated July 5, 2023 (as amended pursuant to a separate purchase agreement, between the Parties and/or their Affiliates, dated as of the Agreement Date, the “PreHevbri License Agreement”) and (b) VBI-2601, which will be assigned to Purchaser and/or its Affiliates under that certain Purchase Agreement between the Parties and/or their Affiliates, dated as of the Agreement Date, in accordance with its terms.
“Landlord Securities” means the promissory notes, bank guarantees or other securities provided by Seller to the landlords (or sub-landlords, as the case may be) of the Rehovot Facility in accordance with the express terms of the Rehovot Facility Leases.
“Laws” means any applicable laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by or otherwise put into effect by or under the authority of any Governmental Authority (including those pertaining to electrical, building, zoning, environmental and occupational safety and health requirements) or common law.
“Legal Proceeding” means any action, suit, charge, complaint, petition, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Authority or any arbitrator or arbitration panel, including any Legal Proceeding related to an Insolvency Event.
“Letter Agreement” means that certain Letter Agreement for Essential Activities, entered into by and between Guarantor and Purchaser Guarantor, dated as of the Agreement Date.
“Liability” or “Liabilities” means, with respect to any Person, any debt, duty, liability or obligation of any kind (whether known or unknown, contingent, accrued, due or to become due, secured or unsecured, matured or otherwise), including accounts payable, royalties payable, and other reserves, accrued bonuses and commissions, accrued vacation and any other form of leave, termination payment obligations, employee expense obligations, and all other liabilities and obligations of such Person or any of its Affiliates, regardless of whether such debts, duties, liabilities or obligations are required to be reflected on a balance sheet in accordance with GAAP.
“Lien” means any charge, lien, statutory lien, pledge, mortgage, security interest, Claim, encroachment, encumbrance, restriction on use or transfer or receipt of income, right of first refusal, easement, right of way, option, conditional sale, or other title retention agreement of any kind or nature, including any obligations or restrictions on Seller or imposed by the Innovation Authority or otherwise under the Innovation Law or any other Governmental Authority on Seller or on any of the Acquired Assets.
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“Losses” means any damages, losses, expenses, costs, settlement payments, awards, judgments, fines or penalties, including reasonable attorneys’ fees and any amount payable as Taxes, but except to the extent incurred or paid in connection with a Third-Party Claim, “Losses” shall not include exemplary, punitive, or reasonably unforeseeable speculative damages.
“made available” means that Seller has posted such materials to the virtual data room managed by and on behalf of Seller via Drop Box and made available to Purchaser Guarantor and its Representatives during the negotiation of this Agreement, but only if so posted and made available in the folder directly related to such document’s subject matter, on or prior to the date that is one (1) Business Day prior to the Agreement Date.
“Material Adverse Effect” means any event, change, circumstance, occurrence, effect, result, or state of facts that, individually or in the aggregate, has a materially adverse effect on the Acquired Assets, taken as a whole. Notwithstanding the aforesaid, the occurrence of acts of terrorism within Israel and the existence of a state of war or combat between the State of Israel and Hamas, and/or any other country or group, shall not itself be deemed to be a Material Adverse Effect; provided, in each case, that the foregoing (a) does not materially impact the Physical Conditions of the Rehovot Facility or (b) is not anticipated to impact the operations of the Business (except any temporary suspension of activities of the Business not to exceed 30 consecutive days).
“Material Contracts” means Contracts in effect as of the Agreement Date to which Seller (or any of its Affiliates, if applicable) is a party or by which any of the Acquired Assets are bound, which are necessary for the operation of the Business as conducted as of the Agreement Date and which are either (A) specified in Section 5.1(h) of the Disclosure Schedules or (B) an Additional Material Contract. Material Contracts shall not include ordinary course of business purchase orders for off the shelf products or raw materials.
“Non-Identified Service Providers” means all Business Service Providers who are not Identified Business Service Providers.
“Non-Transferable Assets” has the meaning set forth in Section 2.4.
“Objection Deadline” has the meaning set forth in Section 7.5(a).
“Objection Notice” has the meaning set forth in Section 7.5(a).
“Order” means and includes any writ, law, rule, regulation, executive order or decree, judgment, injunction, ruling, or other order, whether temporary, preliminary, or permanent enacted, issued, promulgated, enforced, or entered into by any Governmental Authority.
“Organizational Document” means, with respect to any Person, (a) the articles or certificate of incorporation, association, or formation and the bylaws of a corporation, (b) operating agreement, limited liability company agreement, or similar document governing a limited liability company, (c) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person and (d) any amendment to any of the foregoing.
“Party” or “Parties” has the meaning set forth in the preamble.
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“Patent Rights” means the rights and interests in and to issued patents and pending patent applications (including certificates of invention, applications for certificates of invention and priority rights) in any country or region, including all provisional applications, substitutions, continuations, continuations-in-part, continued prosecution applications including requests for continued examination, divisional applications and renewals, and all letters patent or certificates of invention granted thereon, and all reissues, reexaminations, extensions (including pediatric exclusivity patent extensions), term restorations, renewals, substitutions, confirmations, registrations, revalidations, revisions and additions of or to any of the foregoing, in each case, in any country.
“Permit” means any federal, state, county, local or foreign governmental consent, license, permit, approval, grant, franchise, qualification, right, variance, permissive use, accreditation, certificate, certificate of occupancy, certification, interim license, establishment registration, product listing, easement, identification and registration number, agreement, waiver or other authorization of any applicable nature of Governmental Authority, including any Governmental Grant.
“Permitted Liens” means Liens for Taxes or similar governmental assessments and charges not yet due and payable.
“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Authority.
“Physical Condition” has the meaning set forth in Section 4.2(ix).
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and the portion through the end of the Closing Date for any Straddle Period.
“Proceeding” means any suit, Claim, complaint, investigation, litigation, audit, proceeding, or arbitration by or before any Person.
“Products” means collectively, (a) the vaccines known as “PreHevbri” (as defined in the PreHevbri License Agreement) (the “PreHevbri Products”) and (b) “VBI-2601” (as defined in that certain Amended and Restated Collaboration and License Agreement between Brii Cayman and an Affiliate of Guarantor, dated July 5, 2023) (the “VBI-2601 Products”).
“Purchaser” has the meaning set forth in the preamble.
“Purchaser Guarantor” has the meaning set forth in the preamble.
“Purchaser Indemnified Parties” has the meaning set forth in Section 7.1(a).
“Purchaser Retention Payments” has the meaning set forth in Section 2.2(d).
“Rehovot Facility” means the commercial scale, GMP-certified, mammalian cell-derived vaccine manufacturing facility located at 13 Gad Feinstein Road, POB 580, Rehovot, Israel 7610303, also known as block 3649, plots 17,25.
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“Rehovot Facility Leases” means, collectively, each of the following agreements: (i) Unprotected Lease Agreement, dated as of June 16, 2006, by and among Africa Israel Properties Ltd, Ayalot Investments (Ramat Vered) 1994 Ltd, Sharda Ltd and SciGen (IL) Ltd, including the addenda dated as of October 20, 2006, June 3, 2007, January, 2012, February 24, 2016, September 5, 2016, February 5, 2018, September 9, 2021, and October, 2022 and (ii) Sublease, dated as of July 11, 2021, by and between EMI Car Wash Systems Ltd. and Seller.
“Related Agreements” means any certificate delivered pursuant to this Agreement and the Escrow Agreement.
“Representatives” means officers, directors, employees, agents, attorneys, accountants, advisors and representatives.
“Seller” has the meaning set forth in the preamble.
“Seller Indemnified Parties” has the meaning set forth in Section 7.1(b).
“Seller Tax Liabilities” means all Liabilities for (a) Taxes of Seller for any Tax period, including any Liability of Seller for the Taxes of any other Person under applicable Laws), as a transferee or successor, by Contract or otherwise, (b) Taxes relating to the Business, the Business Service Providers, the Acquired Assets, or the Assumed Liabilities for any Pre-Closing Tax Period, (c) Taxes related to the Excluded Assets or Excluded Liabilities for any Tax period and (d) Taxes related to the Transactions, including any Transfer Taxes and Transaction Payroll Taxes (if any).
“Service Provider Retained Liabilities” means any and all Liabilities (including all costs and expenses relating thereto) relating to any current or former Business Service Provider, including, for the avoidance of doubt, the Identified Service Providers arising at any time up to and including the Closing Date (or in the case of the Identified Service Providers, arising at any time up to and including the later of the Closing Date and the date such Identified Service Provider is terminated by Seller or its Affiliates or rolled over to Purchaser pursuant to Section 6.11(b)), whether arising under Contract, Law, Order or any award of any Governmental Authority or arbitrator of any kind, Employee Plan, employment Contract, consulting or independent contractor Contract, or otherwise, and including, but not limited to, (a) all wages and other compensation due to current and former Business Service Providers with respect to their services to Seller (including salary, wages, commissions, pro rata bonus payments, and all vacation, holiday and sick time), (b) all change of control payments, retention payments (other than Purchaser Retention Payments), and termination or severance payments to current and former Business Service Providers due as a result of the consummation of the Transactions or otherwise, (c) any advance notice of termination, garden leave, severance, and termination payments, including such benefits and amounts owed to the Identified Service Providers and the Non-Identified Service Providers, (d) the provision of health plan continuation coverage for all current and former Business Service Providers (excluding only the Identified Service Providers), (e) all claims for benefits under any Employee Plan or other Contract with any current or former Business Service Provider, (f) continuing responsibility after the Closing for payment of all workers’ compensation benefits to or on behalf of all current and former Business Service Providers for (i) any and all claims accepted or in process on or prior to the Closing and (ii) related to industrial injuries or occupational diseases for which a right to file for workers’ compensation benefits existed or accrued on or prior to the Closing and (g) the employer portion of any employment, payroll or similar Taxes with respect to any of the foregoing. For the avoidance of doubt, Seller shall retain liability for, and shall make and remit in accordance with past practice, all proper Taxes, deductions, remittances and contributions attributable to such Service Provider Retained Liabilities required under all Contracts and applicable Laws (including for health, hospital and medical insurance, group life insurance, pension plans, workers’ compensation, unemployment insurance, income Tax, social security and social insurance Taxes, and the like).
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“Seller Wrong Pocket Assets” means (a) any Acquired Asset, the right, title and interest in which is not vested in Purchaser as of the Closing in accordance with Section 2.1(a), and (b) any Business Service Providers employed or engaged by Seller or Seller’s Affiliates following the Closing who were not identified as Identified Service Providers.
“Settled Claims” has the meaning set forth in Section 7.5(c).
“Straddle Period” means any taxable period that includes (but does not end on) the Closing Date.
“Supply Agreement” means the supply agreement to be entered into between Purchaser and Guarantor during the Pre-Closing Period related to the manufacturing and supply of the PreHevbri Products following Closing, in a form reasonably satisfactory to Purchaser and Guarantor.
“Tangible Property” means all equipment, fixtures, furnishings, furniture, spare parts, supplies and any other tangible property that is owned or leased by Seller and used in the Business including any express or implied warranty by the manufacturers, lessors or sellers of any item or component part thereof.
“Tax” or “Taxes” means, (a) any and all federal, provincial, territorial, state, municipal, local, foreign or other taxes (including imposts, rates, levies, assessments, and other charges, in each case in the nature of a tax), including all income, excise, franchise, gains, capital, real property, including betterment tax, Israeli municipal real estate tax (Arnona), goods and services, transfer, value added, gross receipts, windfall profits, severance, ad valorem, personal property, escheat, unclaimed property, production, sales, use, license, stamp, documentary stamp, mortgage recording, employment, payroll, social security (including, without limitation, Bituach Leumi, as applicable), national healthcare (including, without limitation, Bituach Briyut, as applicable) contributions, unemployment, disability, estimated or withholding taxes, and all customs and import duties, together with all interest, penalties and additions to tax (and additional amounts imposed with respect to such amounts), whether disputed or not, and any payments made on or in respect thereof (b) any liability for the payment of any amounts of the type described in clause (a) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group (including any arrangement for group or consortium relief or similar arrangement) for any period, and (c) any liability for the payment of any amounts of the type described in clauses (a) or (b) as a result of being a transferee or successor to any Person or as result of any express or implied obligation to assume such Taxes or to indemnify any other Person or as a result of any obligation under any agreement or arrangement with any other Person with respect to such amounts.
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“Tax Authority” means any Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax.
“Tax Return” means all federal, provincial, territorial, state, municipal, local, and foreign tax returns, declarations, claims for refunds, forms, statements, reports, schedules, information returns or similar statements or documents and any amendments thereof (including any related or supporting information or schedule attached thereto) filed or required to be filed with any applicable Governmental Authority in connection with the determination, assessment or collection of any Tax.
“Third Party” means any Person other than a Party or an Affiliate of a Party.
“Third Party Claim” has the meaning set forth in Section 7.6(a).
“Third Party Notice” has the meaning set forth in Section 7.6(a).
“Transaction Payroll Taxes” means the employer portion of any payroll or employment Taxes incurred or accrued by Seller with respect to any bonuses, option exercises or other compensatory payments made or deemed made in connection with the Transactions.
“Transactions” means the transactions contemplated pursuant to this Agreement and the Related Agreements.
“Transfer Taxes” has the meaning set forth in Section 6.10(b).
“U.S.” means the United States of America and its territories and possessions.
“Unobjected Claim” has the meaning set forth in Section 7.5(b).
“Withholding Certificate” has the meaning set forth in Section 3.3.
“Written Joinder” has the meaning set forth in Section 6.13.
| 2. | Purchase and Sale of Assets |
2.1 Acquired Assets.
(a) Purchase and Sale. At and subject to Closing, Seller hereby undertakes, to sell, convey, transfer, deliver and assign to Purchaser all of Seller’s and to the extent applicable, its Affiliates’, right, title and interest in and to the Acquired Assets, free and clear of all Liens other than Permitted Liens. Notwithstanding anything to the contrary contained in this Agreement, the sale, conveyance, transfer, delivery or assignment of the Acquired Assets shall not include the assumption by Purchaser or any Affiliate thereof of any Liability of Seller or Seller’s Affiliates related to the Acquired Assets, unless Purchaser or an Affiliate of Purchaser expressly assumes that Liability as an Assumed Liability pursuant to Section 2.2. “Acquired Assets” shall mean the following properties, assets, and rights of Seller and its Affiliates (to the extent any such assets are held by an Affiliate and not transferred to Seller in accordance with Section 6.12(a) prior to Closing):
(i) all rights in, to, and under each of the Contracts to which Seller (or any of its Affiliates, if applicable) is a party that (A) relate to the operation of the Business or (B) by which any of the Acquired Assets is bound, other than those Contracts that Purchaser Guarantor requests to be excluded from the Acquired Assets in writing no more than ninety (90) days after the Agreement Date; subject to Seller’s compliance with Section 5.1(h) (collectively, the “Acquired Contracts”);
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(ii) to the extent transferrable by applicable Law, all Business Permits;
(iii) all Tangible Property located at the Rehovot Facility (other than the Excluded Tangible Property);
(iv) other than the Excluded Tangible Property, all Inventory;
(v) all VBI-2601 Products;
(vi) subject to applicable Law, copies of all personnel records of all Identified Service Providers;
(viii) the Know-How and goodwill related the to the Business; and
(ix) all rights, Claims, credits, guaranties, warranties, indemnities, causes of action or rights of set-off, and other similar rights against Third Parties to the extent relating to or arising from the Acquired Assets or the Assumed Liabilities, including all rights under or pursuant to all warranties, representations and guarantees made by suppliers in connection with the Acquired Assets or services furnished to Seller or its Affiliates pertaining to the Acquired Assets, to the extent such warranties, representations and guarantees are assignable.
(b) Notwithstanding anything to the contrary contained in this Agreement, the Parties expressly agree and acknowledge that Purchaser is not acquiring any right, title, or interest in any assets that are not Acquired Assets and that the Excluded Assets are explicitly excluded from the Acquired Assets. Other than the Acquired Assets, all of the right, title, or interest in any assets owned or used by Seller or Seller’s Affiliates shall be referred to herein as the “Excluded Assets,” which shall remain the assets of Seller or Seller’s Affiliates after the Closing. Without derogation, Excluded Assets shall include (i) all insurance benefits, including rights and proceeds provided by the Insurance Coverage, solely to the extent Seller made a claim for such benefits with its insurance carrier prior to the Closing Date, (ii) the Cell Banks and the Cell Lines, which may continue to be used at the Rehovot Facility in the production of the Products pursuant to the Collaboration Agreements; and (iii) Excluded Tangible Property.
2.2 Assumed Liabilities. Upon and subject to the terms, conditions, representations and warranties of Seller contained in this Agreement, at the Closing, Purchaser hereby assumes and agrees to pay, perform, and discharge only those Liabilities that are Assumed Liabilities. Except for the Assumed Liabilities, neither Purchaser, nor any of its Affiliates shall, by virtue of Purchaser’s purchase of the Acquired Assets, assume or become responsible for any Liabilities of Seller or Seller’s Affiliates or any other Person. For purposes of this Agreement, “Assumed Liabilities” shall mean only the following liabilities:
(a) all Liabilities (other than Excluded Liabilities) in respect of the Acquired Contracts but only to the extent that such Liabilities, (i) arise solely after the Closing and do not relate to any circumstance, event or occurrence on or prior to the Closing and (ii) do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller or its Affiliates on or prior to the Closing;
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(b) all Liabilities (other than Excluded Liabilities) arising after the Closing Date with respect to the Identified Service Providers for which Purchaser is liable solely as a result of Purchaser’s employment of such Identified Service Provider in accordance with Section 6.11 and does not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller or its Affiliates on or prior to the Closing or any circumstance, event or occurrence on or prior to the Closing; and
(c) all Liabilities (other than Excluded Liabilities) incurred by Purchaser or any of its Affiliates to the extent such Liability arises out of or relates to the post-Closing operation by Purchaser of the Business or the ownership or use by Purchaser of the Acquired Assets on or after the Closing Date and does not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller on or prior to the Closing or any circumstance, event or occurrence on or prior to the Closing.
(d) All Liabilities with respect to any undertaking towards a Business Service Provider to pay retention payments on or after Closing, made at the sole written request of Purchaser or its Affiliates (“Purchaser Retention Payments”).
2.3 Excluded Liabilities. The Parties acknowledge and agree that Purchaser shall not, and in no event will Purchaser assume or be deemed to have assumed or be required to pay, perform, or discharge any Liabilities other than the Assumed Liabilities and that Seller and Guarantor shall, jointly and severally, remain responsible for all such Liabilities. Notwithstanding anything to the contrary contained in this Agreement, and regardless of whether any of the following may be disclosed to Purchaser or any of their Representatives or otherwise or whether Purchaser or any of its Representatives may have knowledge of the same, neither Purchaser nor any of its Affiliates shall assume or be deemed to have assumed, and Seller and Guarantor shall, jointly and severally, pay, perform and discharge when due and remain exclusively liable for, any and all Liabilities of Seller and its Affiliates other than the Liabilities expressly included in the definition of Assumed Liabilities (collectively, the “Excluded Liabilities”), including without limitation:
(a) all Liabilities arising from Seller’s or its Affiliates’ ownership or use of the Acquired Assets as of or prior to the Closing or any circumstance, event or occurrence on or prior to the Closing;
(b) all Liabilities relating to any of the Non-Identified Service Providers;
(c) all Seller Tax Liabilities;
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(d) all Service Provider Retained Liabilities;
(e) all Liabilities arising out of, relating to or resulting from non-compliance with any Law by Seller or its Affiliates on or prior to the Closing, including any Environmental Law, Business Permits and zoning Law, with respect to the Acquired Assets, the Rehovot Facility, or the Business;
(f) all Liabilities of Seller or its Affiliates with respect to any Identified Service Provider who does not accept Purchaser’s or its Affiliates’ offer of employment or is not offered employment by Purchaser or its Affiliate;
(g) all Liabilities of Seller or its Affiliates to pay any fees or commissions to any broker, finder, legal counsel or agent with respect to this Agreement or the Transactions;
(h) all Liabilities arising from or related to (i) the grants provided to Seller by the Innovation Authority under Program 8.16 or (ii) any Non-Transferrable Assets secured by the IIA Lien; and
(i) any Liability set forth on Schedule 2.3(i).
2.4 Assets Incapable of Transfer. Notwithstanding anything herein to the contrary, this Agreement will not constitute (a) an assignment or transfer of, (b) an attempted assignment or transfer of, or (c) an agreement to effect an assignment or transfer of Acquired Assets, in each case ((a)-(c)), that are not assignable or transferable without the consent of or providing notice to another Person (the “Non-Transferable Assets”). As of the Agreement Date, to Seller’s Knowledge, (A) all Non-Transferable Assets and (B) Contracts that relates to both the Business, on the one hand, and the operations of Seller and its Affiliates that are not related to the Business, on the other hand (the “Shared Contracts”) have each been identified by Seller and are listed in Section 2.4 of the Disclosure Schedules. Promptly following the Agreement Date, Seller, Guarantor and Purchaser Guarantor shall cooperate with each other in determining whether any other Non-Transferrable Assets or Shared Contracts exist that were not disclosed on Section 2.4 of the Disclosure Schedules (with the proviso that, as of the Agreement Date, with respect to Contracts that are Non-Transferable Assets, Section 2.4 covers only Material Contracts), and whether any other actions are required to be taken or any consents, approvals, or waivers are required to be obtained from any other Person in connection with the consummation of the Transactions. During the Pre-Closing Period, Seller shall and to the extent necessary, shall cause its Affiliates to, use commercially reasonable efforts to (including cooperating with Purchaser Guarantor and its Affiliates and Representatives and at no cost to Purchaser or Purchaser Guarantor), (i) give notice of the Transactions as may be required with respect to the Non-Transferable Assets set forth on Section 2.4 of the Disclosure Schedules, including as required pursuant to the terms of any Acquired Contracts and (ii) obtain any third party consent, waiver or novation from any Person or Governmental Authority as may be required with respect to the Non-Transferable Assets set forth on Section 2.4 of the Disclosure Schedules. To the extent any third party consent, waiver or novation is not obtained from any Person or Governmental Authority during the Pre-Closing Period in accordance with clause (ii) of the foregoing sentence, for a period of twelve (12) months following the Closing Date, upon Purchaser’s request, Seller shall, at no cost to Purchaser or Purchaser Guarantor, use commercially reasonable efforts to obtain the consent of each Person listed in Section 2.4 of the Disclosure Schedules to the assignment or transfer of any such Non-Transferable Asset to Purchaser or its designated Affiliate in all cases in which such consent is or may be required for such assignment, or transfer. Purchaser will reasonably cooperate with Seller in its efforts to obtain such consents. Notwithstanding anything to the contrary contained herein, in connection with obtaining any third-party consent, waiver or novation from any Person set forth on Section 2.4 of the Disclosure Schedules in accordance with this Section 2.4, neither Seller nor any of its Affiliates shall make or agree to make any material accommodations or accept any material amendment, conditions or obligations to any of the Acquired Contracts, without first seeking Purchaser Guarantor’s consent. To the extent any such consent, amendment or novation cannot be obtained, Seller shall and shall cause each of their Affiliates, at no cost to Purchaser, use commercially reasonable efforts to provide an alternate arrangement reasonably satisfactory to Purchaser designed to provide to Purchaser the same economic benefits intended to be assigned or transferred to Purchaser under the relevant Non-Transferable Asset or Shared Contract; provided, however, that Seller shall not be required to undertake any work or take any action that would constitute a breach of any such Contract included in the Non-Transferable Asset or Shared Contract. Without limiting the generality of the foregoing, the beneficial interest in and to the Acquired Assets, to the fullest extent permitted by the relevant Contract, and applicable Law, will pass to Purchaser as of the Closing Date. Notwithstanding anything to the contrary contained in this Agreement, the failure by Seller to assign or transfer any Acquired Contracts to Purchaser in accordance with Section 2.1(a), which is deemed a Non-Transferable Asset, shall not be deemed a breach of this Agreement.
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| 3. | Consideration |
3.1 Consideration; Escrow Deposit.
(a) Purchase Price. The aggregate consideration for the Acquired Assets shall be $10,000,000 (the “Purchase Price”). In addition to the Purchase Price, as consideration for the sale, conveyance, transfer, delivery and assignment of the Acquired Assets, Purchaser shall assume and shall pay, perform and discharge the Assumed Liabilities. The Purchase Price shall be exclusive of Israeli VAT, which shall be paid by the Purchaser if due and payable, at the applicable rate on the Closing Date, in respect of the sale, transfer or assumption of the Acquired Assets and the Assumed Liabilities. Seller shall issue a valid “tax invoice”, as defined in the Israeli VAT Law, 1975, upon each payment made to them under this Agreement.
(b) Escrow Deposit. Within five (5) Business Days following the Agreement Date, Purchaser shall deliver to the Escrow Agent by wire transfer of immediately available funds, an amount of cash equal to the Purchase Price (the “Escrow Amount”), which shall be held by the Escrow Agent in accordance with the terms of this Agreement and the Escrow Agreement and released by the Escrow Agent to Seller in accordance with Section 4.3 or released to Purchaser in accordance with Section 8.2, as applicable.
3.2 Allocation of Consideration. The Purchase Price and the Assumed Liabilities shall, prior to the Closing Date, be allocated among the Acquired Assets in accordance with applicable Law, including but not limited to, Section 1060 of the Code and the Treasury Regulation thereunder (and any similar provision of state, local or non-U.S. Laws, as applicable) and the methodologies set forth on Schedule 3.2. Within one hundred twenty (120) days after the Closing Date, Purchaser shall deliver to Seller for review a draft allocation (the “Draft Allocation”). If Seller does not object to such Draft Allocation, such allocation shall become the final allocation (any such final agreed allocation, the “Allocation”) for Tax reporting purposes under applicable Law. If Seller objects to such Draft Allocation, Seller shall deliver to Purchaser a statement setting forth their objections and suggested adjustments (an “Allocation Objections Statement”) within thirty (30) days from the delivery of the Draft Allocation. Purchaser agrees to consider any objection set forth in the Allocation Objections Statement in good faith. To the extent Purchaser does not accept the objections set forth on the Allocation Objections Statement, the Parties agree to negotiate in good faith to attempt to resolve the associated dispute within twenty (20) days after Seller provides the Allocation Objections Statement to Purchaser. If Purchaser and Seller are unable to reach an agreement within this timeframe, the matters remaining in dispute shall be submitted to an independent expert to be engaged pursuant to an engagement letter among Purchaser, Seller and the independent expert, with the costs of such independent expert to be split equally by Purchaser and Seller. Purchaser and Seller shall each request that the independent expert make a final determination as to the disputed items within ten (10) days after such submission, with the independent expert acting as an expert and not as an arbitrator If any matter of such dispute is not resolved in this timeframe, Seller on one hand and Purchaser on the other shall be permitted to make such allocation of the Purchase Price and the Assumed Liabilities as they determine appropriate. Neither the Purchaser nor Seller shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with such Allocation unless required to do so by applicable Law.
3.3 Withholding. Purchaser and its Affiliates and agents (as applicable) shall be entitled to deduct and withhold from any amounts payable or otherwise deliverable pursuant to this Agreement or the Transactions such amounts as such Person reasonably determines is required to be deducted or withheld therefrom under any applicable Laws, including any applicable Israeli Tax Law or other applicable Law relating to Taxes, unless Purchaser is provided with a valid withholding certificate issued by the relevant taxing authority, in form and substance reasonably acceptable to Purchaser, which determines an exemption (or reduction) from such withholding tax or other withholding instructions in respect of each payment under this Agreement or the Transactions at least three (3) Business Days prior to the relevant date of payment (each, a “Withholding Certificate.” To the extent such amounts are so deducted or withheld and remitted to the applicable taxing authority, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made. The payor shall provide the payee with a copy of a receipt or other official certificate evidencing the remittance of the withheld amount to the applicable taxing authority. For the purposes of withholding tax under this Section 3.3, the assumption of the Assumed Liabilities shall be considered a payment to Seller by the Purchaser in the amount of the value of the Assumed Liabilities at the Closing Date. Seller will provide Purchaser with any Tax forms or other documentation reasonably necessary for Purchaser to comply with its Tax withholding and reporting obligations with respect to the Transactions, if any. Any withholding made in NIS with respect to payments made hereunder in dollars shall be calculated based on the USD-NIS exchange rate known on the relevant payment date and any currency conversion commissions will be borne by Seller and deducted from payments to be made to Seller.
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| 4. | Closing |
4.1 Closing. Unless this Agreement is earlier terminated pursuant to Section 8, the consummation of the Transactions (the “Closing”) will take place remotely via electronic exchange of documents and signatures at 10:00 a.m. Eastern Standard Time on a date mutually agreed upon by Purchaser and Seller, which shall be no later than the third Business Day after the satisfaction or, to the extent permitted by applicable Law, waiver by the Party (or Parties) entitled to the benefit thereof of the conditions set forth in Section 4.2 (other than the conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction, or the extent permitted by applicable Law, waiver by the Party entitled to the benefit thereof of those conditions at such time); provided that, unless waived by Purchaser in its sole discretion, the Closing shall not occur prior to June 30, 2024, unless another place or time is mutually agreed upon in writing by the Parties. The date upon which the Closing actually occurs will be referred to herein as the “Closing Date.”
4.2 Conditions to Closing.
(a) Conditions to Obligations of Purchaser. The obligations of Purchaser to consummate and effect this Agreement and the Transactions shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, by Purchaser:
(i) Representations, Warranties and Covenants. Each of the Fundamental Representations shall be true and correct in all respects on and as of the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date, except for those representations and warranties that refer to facts existing at a specific date, which shall be so true and correct as of such date. Each of the other representations and warranties of Seller in this Agreement shall be true and correct in all material respects (other than representations and warranties that are qualified as to “materiality”, “Material Adverse Effect,” or similar qualifiers set forth herein or therein, which representations and warranties shall be true in all respects) on and as of the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date, except for those representations and warranties that refer to facts existing at a specific date, which shall be so true and correct as of such date.
(ii) Performance of Obligations. Seller shall have performed and complied in all material respects each of the covenants, agreements, obligations and conditions of this Agreement required to be performed and complied with by it as of the Closing.
(iii) No Material Adverse Change. Since the Agreement Date, there shall not have occurred any event, change or effect that has or is reasonably likely to have had a Material Adverse Effect.
(iv) No Legal Proceeding. There shall not be pending any Legal Proceeding: (A) challenging or seeking to restrain or prohibit the consummation of the Transactions or ownership of the Acquired Assets; (B) relating to the Transactions and seeking to obtain from Purchaser or its Affiliates, or from Seller or its Affiliates any damages or other relief that would be material to Purchaser or the Acquired Assets; (C) that would materially and adversely affect the right of Purchaser to own the Acquired Assets or (D) that is filed under Title 11 of the United States Code or similar foreign laws.
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(v) Closing Documents. Seller shall have delivered to Purchaser, at or prior to Closing, the following documents, in each case, in form and substance reasonably satisfactory to Purchaser:
(1) a certificate validly executed on behalf of Seller by a duly authorized officer of Seller, certifying that the conditions set forth in Section 4.2(a)(i), Section 4.2(a)(ii) and Section 4.2(a)(iii) have been satisfied;
(2) all duly executed Third Party consents, assignments, modifications or terminations set forth on Schedule 4.2(a)(v)(2) shall have been obtained and shall be in full force and effect;
(3) evidence of release and termination of any and all Liens on any of the Acquired Assets, including the [**] (other than Permitted Liens);
(4) to the extent Identified Service Providers are terminated in accordance with Section 6.11, evidence of the resignation or termination by Seller of each Identified Service Provider and satisfaction and disposition of all Liabilities related thereto;
(5) an updated list of Inventory, replacing the list provided in Schedule 2.1(a)(iii);
(vi) Additional Priority Activities. Guarantor shall have completed all of the Priority Activities and the Essential Activities (each as defined in the Letter Agreement).
(vii) Business Permits. The Business Permits shall have either (i) been obtained by Purchaser, effective as of the Closing; and/or (ii) Purchaser has received assurances from the relevant Government Authority, following submission of the requisite application, that pending the issuance of any new Business Permit, the Rehovot Facility can continue its operations immediately following Closing without any interruption.
(viii) Rehovot Facility Lease. Each of the Rehovot Facility Leases shall be assigned to Purchaser subject to the Closing and in full force and effect as of the Closing.
(ix) Rehovot Facility Physical Condition. The physical condition of the Rehovot Facility as of the Closing Date, including without limitation with respect to its roof, interior, including any furniture, fixtures or equipment located therein, mechanical, electrical and plumbing systems, as well as any other utilities servicing the Rehovot Facility (the “Physical Condition”) shall be substantially similar in all material respects as its Physical Condition as of the Agreement Date (other than natural and immaterial deterioration resulting organically over time).
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(b) Conditions to Obligations of Seller. The obligations of Seller to consummate and effect this Agreement and the Transactions shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, by Seller:
(i) Representations, Warranties and Covenants. The representations and warranties of Purchaser in this Agreement shall be true and correct in all material respects (other than representations and warranties that are qualified as to “materiality”, “material adverse effect,” or similar qualifiers set forth herein or therein, which representations and warranties shall be true in all respects) as of the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date, except for those representations and warranties that refer to facts existing at a specific date, which shall be so true and correct as of such date.
(ii) Performance of Obligations. Purchaser shall have performed and complied in all material respects each of the covenants, agreements, obligations and conditions of this Agreement required to be performed and complied with by it as of the Closing.
(c) Closing Certificate. Purchaser shall have delivered to Seller, at or prior to Closing, in form and substance reasonably satisfactory to Seller, a certificate validly executed on behalf of Purchaser by a duly authorized officer of Purchaser, certifying that the conditions set forth in Section 4.2(b)(i) and Section 4.2(b)(ii) have been satisfied.
4.3 Release of Escrow Following Closing. Unless this Agreement is earlier terminated in accordance with Section 8 (which, in such event, the entire Escrow Amount shall be refundable to Purchaser Guarantor in accordance with Section 8), within five (5) Business Days following the Closing, Guarantor, Seller and Purchaser Guarantor shall deliver joint written instructions to the Escrow Agent, directing the Escrow Agent to release the Escrow Amount to an account designated by Guarantor and Seller in accordance with the terms of this Agreement and the Escrow Agreement.
4.4 Possession. Seller shall, subject to Section 6.9 and Section 6.12, deliver possession of all Acquired Assets to Purchaser or its designated Affiliate at the Closing or as soon as reasonably practicable following the Closing. Without limiting the generality of the foregoing, Seller, at no additional cost to Purchaser, shall work with Purchaser to transfer all Acquired Assets stored in electronic form, wherever stored, in an agreed upon format as soon as reasonably practicable following the Closing and shall provide to Purchaser, at no additional cost to Purchaser, access to all such Acquired Assets as requested by Purchaser, prior to the transfer of such electronic data to Purchaser.
| 5. | Representations and Warranties |
5.1 Representations and Warranties of Seller and Guarantor. Except as set forth in the disclosure schedules delivered by Seller to Purchaser on the Agreement Date (the “Disclosure Schedules”), Seller and Guarantor, jointly and severally, represents and warrants to Purchaser and Purchaser Guarantor as follows:
(a) Organization, Qualification and Existence. Seller is a corporation duly organized, validly existing and in good standing under the laws of Israel. Seller has the requisite corporate power and authority to own, use and operate the applicable Acquired Assets as currently conducted by Seller and/or its Affiliates, if applicable. Seller is duly qualified or licensed to do business and in good standing as a foreign corporation in each jurisdiction in which the ownership or operation of the Acquired Assets or the conduct of Seller’s business requires such qualification or license, except for those jurisdictions where the failure to be so qualified or licensed and in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Acquired Assets or the Assumed Liabilities, taken as a whole. Seller is not in violation of any of the provisions of its Organizational Documents.
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(b) Authority; Binding Nature of Agreements. Seller and Guarantor have all requisite power and authority to enter into this Agreement, the Related Agreements and the other agreements, instruments, and documents to be executed and delivered in connection herewith and therewith to which Seller or Guarantor, as applicable, is a party, and to consummate the Transactions. The execution and delivery of this Agreement and the Related Agreements and the consummation of the Transactions by each of Seller and Guarantor, including the applicable sale of the Acquired Assets, have been duly authorized by all necessary corporate and stockholder action, if required, and no further corporate or stockholder action is required on the part of Seller and Guarantor to authorize this Agreement or any Related Agreement or the Transactions or for Seller or Guarantor to perform its obligations under this Agreement or any Related Agreements. This Agreement and each Related Agreement have been duly executed and delivered by each of Seller and Guarantor, and, assuming the due execution and delivery of this Agreement and the Related Agreements by Purchaser and Purchaser Guarantor and other counterparties thereto, this Agreement and the Related Agreements will each constitute a valid and legally binding obligation of Seller and Guarantor, enforceable against it in accordance with their respective terms, subject to the laws relating to bankruptcy and insolvency.
(c) No Conflict. The execution and delivery of this Agreement by Seller and Guarantor and the Related Agreements do not, and Seller’s and Guarantor’s compliance with the terms and conditions hereof and thereof, and the consummation of the Transactions will not, conflict with or result in any violation of or default under (with or without notice or lapse of time, or both) or give rise to, any payment obligation, or a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (any such event, a “Conflict”): (i) any provision of its Organizational Documents, (ii) any Law or Order applicable to the Acquired Assets, or (iii) any Acquired Contract. Neither the execution and delivery of this Agreement and the Related Agreements, nor the consummation of the Transactions, will result in the creation or imposition of any Lien on the Acquired Assets. Section 5.1(c) of the Disclosure Schedules sets forth: (A) all necessary notices, consents, waivers and approvals of any parties to any Material Contracts that are required thereunder in connection with the Transactions, or for any such Material Contracts to remain in full force and effect without limitation, modification, or alteration after the Closing so as to preserve all rights of, and benefits to, Purchaser or its designated Affiliate under such Material Contracts from and after the Closing, other than any limitation, modification, or alteration by Purchaser and (B) all necessary notices, consents, waivers and approvals of any Third Parties required in order to consummate the Transactions or in order to prevent the termination of any right, privilege, license or qualification of or affecting any of the Acquired Assets (that are not Contracts). Following the Closing, Purchaser or its designated Affiliate will be permitted to exercise all of Purchaser’s or such designated Affiliate’s rights under the Acquired Contracts without the payment of any additional amounts or consideration other than ongoing fees, royalties, or payments that the applicable Seller or Affiliate would otherwise have been required to pay pursuant to the terms of such Acquired Contracts had the Transactions not occurred.
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(d) Governmental Authorization. Other than as set forth in Section 5.1(d) of the Disclosure Schedule, no consent, notice, waiver, approval, Order, or authorization of, or registration, declaration, or filing with, any Governmental Authority is required by, or with respect to, Seller in connection with the execution and delivery of this Agreement or the Related Agreements, or the consummation of the Transactions, except for filings under applicable securities laws or rules of the applicable stock exchange.
(e) Taxes.
(i) Seller has collected or withheld and timely paid to the proper Tax Authority all Taxes required to have been collected or withheld and paid with respect to the Business or Acquired Assets, including any amounts paid or owing to or from any Business Service Provider or other Third Party.
(ii) There are no Liens for Taxes on any of the Acquired Assets.
(iii) No claim has been made by any Tax Authority in a jurisdiction in which Seller, with respect to the Acquired Assets or the Business, did not file a particular type of Tax Return or pay a particular type of Tax that Seller is or may be subject to taxation by that jurisdiction.
(iv) No audit, inquiry or other Proceeding by any Tax Authority with respect to Taxes owed by any Seller, with respect to the Acquired Assets or the Business, is pending or outstanding, and no Tax Authority has given notice of any intention to commence an audit, inquiry or other Proceeding or assert any deficiency or claim for additional Taxes against any Seller, with respect to the Acquired Assets or the Business.
(v) All Tax Returns required to be filed by Seller or its Affiliates with respect to the Acquired Assets and the Business have been timely filed with the proper Tax Authority, and such Tax Returns are true and correct in all respects. All Taxes due and owing by Seller (whether or not shown on a Tax Return) attributable or related to the Acquired Assets or the Business have been timely paid to the proper Tax Authority.
(vi) All Taxes that relate to the Identified Service Providers or to the Acquired Assets or any activity which utilized or otherwise involved the Acquired Assets that Seller is and has been required by any applicable Laws to withhold, deduct or collect on or prior to the date hereof have been duly withheld, deducted and collected and timely paid to the appropriate Governmental Authority.
(vii) The Acquired Assets are not subject to any restrictions or limitations pursuant to Part E2 of the Israeli Income Tax Ordinance or pursuant to any tax ruling made with reference to the provisions of Part E2 or any similar provision in any other jurisdiction that may be violated as a result of the consummation of this Agreement.
(viii) None of the Acquired Assets constitutes a real property right (“זכות במקרקעין”) pursuant to the Real Estate Tax Law (Gain and Acquisition) of 1963.
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(ix) Purchaser will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any prepaid amount received or deferred revenue accrued by Seller on or prior to the Closing Date with respect to the Acquired Assets or the Business.
(f) Title to Assets; Condition and Sufficiency of Assets.
(i) Other than as set forth in Section 5.1(f) of the Disclosure Schedule, Seller has and to the extent applicable, its Affiliates will have at or prior to the Closing transferred to Seller, good and valid title to all of the Tangible Property included in the Acquired Assets, free and clear of all Liens (except for Permitted Liens). The Tangible Property constitutes all of the tangible property owned or leased by Seller that is used in and sufficient for the conduct of the Business as currently conducted, except for the Excluded Assets. Each material item of Tangible Property (excluding the Excluded Assets) is in operating condition and reasonable repair and is usable as of the Agreement (wear and tear expected) and at Closing, will be conveyed, transferred and assigned to Purchaser on an “As-is Basis.” Other than with respect to Non-Transferable Assets and Shared Contracts that are listed on Section 2.4 of the Disclosure Schedules and to the extent that such Non-Transferrable Assets and Shared Contracts have not been transferred to Purchaser, Purchaser will have good and valid title to or a valid leasehold interest in all of the Acquired Assets, free and clear of any Lien (except for Permitted Liens) including any pending third party claim that the acquisition of such property would constitute a fraudulent conveyance by any Seller. The Cell Banks and the Cell Lines, when in the use of Purchaser immediately following the Closing and contingent upon receiving any applicable consent required under the Ferring License, will be sufficient for Purchaser’s operation of the Business following Closing.
(ii) The Acquired Assets constitute and will constitute all of the assets, properties, rights, Contracts, and Intellectual Property necessary and sufficient for the operation of the Business as conducted as of the Agreement Date, other than with respect to the Business Permits to be obtained by the Purchaser in accordance with Section 6.14 and the Cell Banks and the Cell Lines. Other than the Business Permits to be obtained by the Purchaser in accordance with Section 6.14, none of the Excluded Assets are necessary for the material operations of the Business, other than the Cell Banks and the Cell Lines. To the Knowledge of Seller, all of the Acquired Assets are currently held by Seller other than as set forth on Section 5.1(f) of the Disclosure Schedules.
(iii) The Business Service Providers set forth on Section 5.1(p)(i) of the Disclosure Schedules constitute all of the employees, consultants, advisors, and independent contractors, employed or engaged by Seller or the extent applicable, its Affiliates, providing services necessary for the operation of the Business as of the Agreement Date.
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(g) Compliance with Laws.
(i) Other than as set forth in Section 5.1(g) of the Disclosure Schedules, Seller and its Affiliates are in compliance with, and during the past five (5) years has complied in all material respects with all Laws and Orders applicable to the Business and the Acquired Assets, including any contractual requirements to which Seller or its Affiliates are subject that relate to any of the foregoing. The Business Permits constitute all Permits that are required for Seller’s and to the extent applicable, its Affiliates’ (i) use and ownership of the Acquired Assets and (ii) operation of the Business as conducted by Seller as of the Agreement Date. Other than as set forth in Section 5.1(g) of the Disclosure Schedule, during the past five (5) years, neither Seller nor its Affiliates have received any written notification or communication from any Governmental Authority or from the Lessor of the Rehovot Facility Leases (1) asserting that Seller or to the extent applicable, its Affiliates, are not in compliance with any Law or Order with respect to the Business or Acquired Assets or (2) threatening to revoke or suspend any Business Permit. Seller and to the extent applicable, its Affiliates, are and at all times have been in material compliance with all Business Permits, and all Business Permits are in full force and effect.
(ii) For the past five (5) years, neither Seller nor any of its Affiliates have received any notice of any such Action or any Liability to undertake or to bear all or any portion of the cost of remedial action of any nature in connection with the conduct of the Business. For the past five (5) years, neither Seller nor any of its Affiliates has conducted any internal investigation with respect to any actual, potential or alleged material violation of any Law or Order by any director, officer or employee of Seller or any of its Affiliates in connection with the conduct of the Business.
(iii) Seller and its Affiliates are not in material violation of any applicable Environmental Law relating to the Business, and no material expenditures are required in order to comply with such existing Environmental Laws.
(iv) Seller has at all times, conducted the Business in material compliance with (i) all applicable U.S. export, re-export and import controls, including the regulations administered by the Office of Foreign Assets Control and (ii) all applicable export controls in other countries in which each Seller conducts business, including the Israeli Control of Products and Services Declaration (Engagement in Encryption), 1974, as amended and the Israeli Law of Regulation of Security Exports, 2007 and the regulations promulgated thereunder. Seller does not use or develop, or engage in, encryption technology, technology with military applications, or other technology, in each case, whose development, commercialization or export which requires a license for Seller’s business as now conducted or as currently proposed to be conducted from the Israeli Ministry of Defense or an authorized body thereof pursuant to Section 2(a) of the Control of Products and Services Declaration (Engagement in Encryption), 1974, as amended or Control of Products and the regulations promulgated thereunder.
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(h) Acquired Contracts. Seller has delivered to Purchaser a true and accurate list of all Material Contracts in effect as of the Agreement Date, which are set forth on Section 5.1(h) of the Disclosure Schedules. During the Pre-Closing Period, Seller shall (i) use its commercially reasonable efforts to locate any other Contract within 45 days of the Agreement Date that is (A) related to the Business or (B) by which an Acquired Asset is bound, that was not previously made available to Purchaser (a “Later Discovered Contract”), (ii) promptly notify Purchaser Guarantor upon the discovery of such Later Discovered Contact and provide a copy thereof and (iii) amend Section 5.1(h) of the Disclosure Schedules to disclose any Later Discovered Contracts that Purchaser agrees should be listed on Section 5.1(h) of the Disclosure Schedules (each, an “Additional Material Contract”). All of the Acquired Contracts are valid and binding agreements of Seller or to the extent applicable, its Affiliates, enforceable in accordance with their terms. Seller has made available or delivered to Purchaser a correct and complete copy of each written Acquired Contract (other than purchase orders), together with all amendments, modifications and supplements thereto, as well as written description of each oral Acquired Contract, if any. Seller or to the extent applicable, its Affiliate, is not in material breach or material default of any of the Acquired Contracts, and no event has occurred that with notice or lapse of time, or both, would constitute a material default by Seller or its Affiliate, if applicable, under any Acquired Contract. To the Knowledge of Seller, no other party to an Acquired Contract is in material breach or material default of such Acquired Contract and no event has occurred that with notice or lapse of time, or both, would constitute a material default by such other party under any Acquired Contract. No party has repudiated in writing or, to the Knowledge of Seller, otherwise provided notice of its intention to repudiate any provision of an Acquired Contract. To the knowledge of Seller, none of the Acquired Contracts are subject to any Claims, charges, set offs, or defenses. No Seller or to the extent applicable, its Affiliate, has given to or received from any other Person any written, or to the Knowledge of Seller other, notice regarding any material violation or breach of, or default under, any Acquired Contract.
(i) Litigation. Except as set forth on Section 5.1(i) of the Disclosure Schedules, there are no Actions pending, or to the Knowledge of Seller, threatened (a) that are against, related to or affecting (i) Seller or its Affiliate relating to the Business or the Acquired Assets (including with respect to Environmental Laws, consumer protection laws and intellectual property laws), or (ii) any officers or directors of Seller or its Affiliate that are involved in the operations of the Business, (b) seeking to delay, limit or enjoin the transactions contemplated by this Agreement or the Related Agreements, or (c) in which Seller or its Affiliate is a plaintiff and relating to the Business and Acquired Assets. Neither Seller nor any of its Affiliates is in default with respect to or subject to any Order relating to the Business or the Acquired Assets, and there are no unsatisfied judgments against Seller or its Affiliates relating to the Business or the Acquired Assets. There is no Order to which Seller or its Affiliates are subject or that is pending or, to the Knowledge of Seller, threatened, that relates to any of the Acquired Assets or Assumed Liabilities, including any Environmental Law which regulates, obligates, binds or in any way affects Seller or its Affiliates relating to the Business or the Acquired Assets.
(j) Insurance. Section 5.1(j) of the Disclosure Schedules contains a complete and accurate list of all policies or binders of fire, liability, title, worker’s compensation, product liability and other forms of insurance maintained by Seller or its Affiliates as of the date of this Agreement with respect to or that covers the Business, the Acquired Assets or the Rehovot Facility (the “Insurance Coverage”). True and correct copies of all such policies or binders have been made available to Purchaser. Such Insurance Coverage is in full force and effect, insures the Acquired Assets, the Rehovot Facility and the Business in reasonably sufficient amounts against all risks usually insured against by persons operating similar businesses or properties of similar size in the localities where such businesses or properties are located, provides coverage as may be required by applicable Law and by any and all Acquired Contracts. There is no material default under any such coverage nor has there been any failure to give notice or present any claim under any such coverage in a due and timely fashion, the failure of which would have a material adverse effect on Seller or its Affiliates and relating to the Business, the Acquired Assets or the Rehovot Facility. There are no outstanding unpaid premiums except in the ordinary course of business and no written notice of cancellation or nonrenewal of any such coverage has been received. No insurer has advised any Seller or its Affiliates in writing that it intends to reduce coverage, increase premiums or fail to renew existing policy or binder relating to the Business or Acquired Assets.
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(k) Intellectual Property.
(i) At no time during the conception of or reduction to practice of any of the Know-How, was Seller (or any developer or other contributor to such Know-How) operating under any grants from any public or private source, including from the Innovation Authority, performing research sponsored by any public or private source, or subject to any employment agreement or invention assignment or nondisclosure agreement or other obligation with any third party that could adversely affect, restrict or in any manner encumber each Seller’s rights in the Know-How.
(ii) The Business Service Providers expressly and irrevocably waived any rights they may have had to compensation or royalties in respect of any inventions arising as a consequence of service to Seller, including (in the context of employees) but not limited to service inventions (as defined in Section 132 of the Israeli Patents Law, 5727-1967), including under Section 134 of the Israeli Patent Law.
(iii) There are no forbearances to sue, consents, settlement agreements, judgments, orders or similar litigation-related, inter partes or adversarial-related, or government-imposed obligations, including without limitation by the Innovation Authority, to which Seller is a party or is otherwise bound, other than outbound licenses, nor does the Innovation Authority or any other Governmental Authority have any ownership interest in or right that (i) restrict the rights of Seller to use, transfer, license or enforce any Know-How, (ii) restrict the conduct of the Business in order to accommodate a third party’s Intellectual Property, or (iii) grant any third party any right with respect to any Know-How. The Know-How is freely transferable, conveyable and/or assignable by Seller to any entity located in any jurisdiction in the world without any restriction, constraint, control, supervision or limitation that could be imposed on Seller by the Innovation Authority or any other Governmental Authority.
(l) No Brokers. No broker, finder, or investment banker is entitled to any brokerage commission, finder’s fee or similar payment in connection with the Transactions based upon arrangements made by or on behalf of Seller or any of its Affiliates.
(m) Affiliate Transactions. Neither Seller, nor, to the Knowledge of Seller, any Affiliate of Seller or any current director, officer, or employee of Seller or any Affiliate of Seller, has any direct or indirect financial interest (excluding in their capacity as an employee or stockholder of Seller), (A) in, or is a director or officer of, any Person that is a material client, customer, supplier, lessor, lessee, debtor, creditor or competitor of any Seller in respect of the Acquired Contracts or (B) in any material property, asset, or right that is owned or used by or on behalf of a Seller or any Affiliate of Seller exclusively in the conduct of the Business.
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(n) Certain Business Activities. For the past five (5) years, neither Seller nor any Affiliate of Seller, nor their officers, directors, and to the Knowledge of Seller, employees, agents or Representatives, nor any Affiliate of or any Person associated with or acting for or on behalf of Seller or any Affiliate of Seller, has directly or indirectly, acting for or on behalf of any Seller or any Affiliate of Seller, in each case, in connection with the Business or Acquired Assets:
(i) used any funds for unlawful contributions, gifts, or entertainment or other unlawful payments, including having made or attempted to make any improper contribution or gift, bribe, rebate, payoff, influence payment, kickback, or other improper payment to any Person, private or public, regardless of what form, whether in money, property, or services to (A) obtain favorable treatment for business or Contracts secured, (B) pay for favorable treatment for business or Contracts secured, or (C) obtain special concessions or for special concessions already obtained, in each of clauses (A), (B), and (C) in violation of any requirement of applicable Law;
(ii) made or attempted to make any such contribution or gift, bribe, rebate, payoff, influence payment, kickback, or other improper payment in violation of any applicable written policy of Seller; or
(iii) established or maintained any fund or asset for the purpose of making any such contribution or gift, bribe, rebate, payoff, influence payment, kickback, or other improper payment in violation of any applicable Law or applicable written policy of Seller or its Affiliates. To the extent required by applicable Law (and as applicable to the Business), Seller has established and maintains a compliance program and reasonable internal controls and procedures that, for all periods prior to the Closing, were appropriate to satisfy the requirements of applicable Anti-Corruption Laws.
(o) Employee Benefit Plans.
(i) Section 5.1(o)(i) of the Disclosure Schedules sets forth a true and complete list of all material Employee Plans that cover any Business Service Provider.
(ii) Except as otherwise set forth in Section 5.1(o)(ii) of the Disclosure Schedules, neither the execution, delivery or performance of this Agreement or any Related Agreement, nor the consummation of the Transactions (either alone or in connection with any other event) will (A) entitle any Business Service Provider or other current or former service provider of any Seller or its Affiliates to any payment or benefit, including any change of control, transaction, retention, stay, severance, termination, or similar payments or benefits or (B) result in the acceleration or creation of any rights of any Business Service Provider under any Employee Plan (including the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock, and the acceleration or creation of any rights under any severance, parachute or change in control agreement).
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(p) Labor and Employment Matters.
(i) Section 5.1(p)(i) of the Disclosure Schedules sets forth a complete and accurate list of the names of all current Business Service Providers, specifying for each, as applicable, their (A) status as an employee, consultant, or independent contractor, (B) position and description of the areas of responsibility with respect to the Business, (C) annual base salary, hourly wage rate, or contract rate, as applicable, (D) date of hire or engagement, (E) entity with which they are employed or engaged, (F) location of employment or business location, (G) target commission, bonus and incentive entitlements, (H) whether absent from active employment on a leave of absence and their anticipated date of return to active employment, (J) annual entitlement for vacation and sick days and accrued vacation and sick days, (I) social contribution rates (pension and severance) and (J) whether the Business Service Provider is subject to the arrangement set out in Section 14 of the Israeli Severance Pay Law 1963. Except as otherwise set forth in Section 5.1(p)(i) of the Disclosure Schedules, no Business Service Provider has terminated his or her employment or engagement at any time during the twelve (12) months prior to the Agreement Date, and, as of the Agreement Date, no current Business Service Provider has expressed any intention to terminate his or her employment or service within the twelve (12)-month period following the Agreement Date (including, if applicable, with Purchaser or an Affiliate of Purchaser). Except as otherwise set forth in Section 5.1(p)(i) of the Disclosure Schedules, the employment or engagement of all such Business Service Providers is terminable “at-will” or upon the minimum notice and/or severance requirement required by applicable Law, and will not result in any additional payment or benefit, including any change of control, transaction, retention, stay, severance, termination, or similar payments or benefits under any Contract with such Business Service Provider or under any Employee Plan. Notwithstanding anything to the contrary contained in this Section 5.1(p), no current or former Business Service Provider is owed any deferred compensation, has or will have any claims or demands with regard to or in connection with the deferred compensation agreement signed thereby, nor was any deferred compensation amount a salary component for any purpose whatsoever.
(ii) Neither Seller nor any of its Affiliates is or was a party to any labor or collective bargaining Contract or other Contract with any labor union, works council, or similar organization that pertains to any current or former Business Service Providers. There are no, and during the past five (5) years have been no, organizing activities or collective bargaining arrangements that could affect the Business pending or under discussion with any current or former Business Service Providers or any labor organization. There is no, and during the past five (5) years there has been no, labor dispute, strike, controversy, slowdown, work stoppage or lockout pending or, to the Knowledge of Seller, threatened, against or affecting the Business or Seller or its Affiliates in connection with the Business, nor is there any basis for any of the foregoing. Neither Seller nor its Affiliates has not breached or otherwise failed to comply with the provisions of any collective bargaining or union Contract affecting any current or former Business Service Provider. There are no pending or, to the Knowledge of Seller, threatened, union grievances or union representation questions involving any Business Service Provider. There are no collective bargaining, consultation, or notification requirements with respect or applicable to any Business Service Providers required or imposed by applicable Law with respect to the Transactions.
(iii) Except as set forth in Section 5.1(p)(iii) of the Disclosure Schedules, Seller is and during the past five (5) years has been in compliance in all material respects with all applicable Laws respecting labor, employment, and employment practices applicable to all current and former Business Service Providers, including, but not limited to, those pertaining to discrimination or harassment in employment, terms and conditions of employment, termination of employment, wages, overtime classification, hours, occupational safety and health, employee whistle-blowing, immigration, employee privacy, and classification of employees, consultants and independent contractors.
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(iv) Seller or its applicable Affiliate has withheld and paid to the appropriate Governmental Authority, or is holding for payment not yet due to such Governmental Authority, all amounts required to be withheld from current and former Business Service Providers and is not liable for any arrears of wages, Taxes, penalties or other sums for failure to comply with any applicable Laws relating to such Business Service Providers or the employment of labor in connection with the Business. Seller has paid in full to all current and former Business Service Providers all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf thereof.
(v) Neither Seller nor any Affiliate of Seller is a party to, and is not otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to or affecting any current or former Business Service Provider or employment practices in connection with the Business. Neither Seller nor any Affiliate of Seller nor any of Seller their executive officers has received within the past five (5) years any notice of intent by any Governmental Authority responsible for the enforcement of labor or employment laws to conduct an investigation relating to the Business and/or current or former Business Service Providers and, to the Knowledge of Seller, no such investigation is in progress.
(vi) Except as set forth in Section 5.1(p)(vi) of the Disclosure Schedules, in the past five (5) years, (A) no allegations of workplace harassment, sexual harassment, retaliation, discrimination or other misconduct have been made, initiated, filed or, to the Knowledge of Seller, threatened by or against any current or former Business Service Provider in their capacities as such, (B) to the Knowledge of Seller, no incidents of any such workplace harassment, sexual harassment, retaliation, discrimination or other misconduct have occurred, and (C) no Seller or any Seller Affiliate has entered into any settlement agreement related to allegations of harassment, sexual harassment, retaliation, discrimination or other misconduct by any current or former Business Service Provider or other Person in connection with the Business.
(vii) All former and current employees in positions of trust ((משרת אימון constituting Business Service Providers have executed an agreement with Seller, which includes a confidentiality, non-competition, and assignment of inventions undertaking. No such current or former Business Service Provider is or was engaged by Seller without a written contract nor did any such person fail to execute an undertaking concerning confidentiality, non-competition, and assignment of inventions. Seller has delivered to the Purchaser: (i) accurate and complete copies of all the agreements with current Business Service Providers and (ii) to the extent existing, complete copies of all manuals and handbooks, disclosure materials, policy statements and guidelines with regard to engagement terms and procedures and other material documents relating to the engagement of Business Service Providers.
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(q) Rehovot Facility Leases. Seller holds a valid lease right, and a “right to use” with respect to the use of certain safe areas in the area specified in Section 5.1(q) of the Disclosure Schedule, free and clear of all Liens (other than Permitted Liens), until January 31, 2027 pursuant to the terms of the Rehovot Facility Leases. Other than as specified Section 5.1(q) of the Disclosure Schedule, there are no options, agreements to sell, liens, sub-leases, agreements to lease, conditions, or restrictive covenants with respect to the Rehovot Facility other than those mentioned in the Rehovot Facility Leases. In the past five (5) years, neither Seller nor its Affiliates have received any written notifications from any Person or entity regarding material violations of the provisions of the Planning and Building Law - 1965 or any other applicable Laws related to the Rehovot Facility. Seller’s current use of the Rehovot Facility complies with the provisions of the Rehovot Facility Leases. Seller does not owe any local Governmental Authority, including the Local Committee for Planning and Construction, any indebtedness for borrowed money. Seller’s possession, quiet enjoyment, use and access of the premises which are the subject of the Rehovot Facility Leases has not been disturbed in any manner and there has been no interruption to the utilities or any other service required for the continued use of the Rehovot Facility pursuant to the permitted uses of the Rehovot Facility Leases. Other than as specified Section 5.1(q) of the Disclosure Schedule, Seller has no Knowledge of any existing, threatened or potential interference with the possession, quiet enjoyment, use of or access to the premises which are the subject of the Rehovot Facility Leases. Neither Seller, nor, to the Knowledge of Seller, the applicable landlord or sublandlord is in default under any Rehovot Facility Lease, nor has any event occurred that, with the giving of notice or passage of time, would become a default under any Rehovot Facility Lease. The Physical Condition of the Rehovot Facility is in good operating condition and is usable.
(r) Government Grants. Section 5.1(r) of the Disclosure Schedules identifies each Governmental Grant that has been provided to Seller (each, a “Business Governmental Grant”). Except as set forth on Section 5.1(r) of the Disclosure Schedule, neither Seller nor its Affiliates have applied for and has not received any other Governmental Grants that are necessary for Seller’s or its Affiliates’ operation of the Business as currently conducted. Except as set forth on Section 5.1(r) of the Disclosure Schedule, no event has occurred, and no circumstance or condition exists, that would reasonably be expected to give rise to or serve as the basis for: (a) the annulment, revocation, withdrawal, suspension, cancellation, recapture or modification of any Business Governmental Grant, (b) the imposition of any limitation on any Business Governmental Grant or any benefit available in connection with any Business Governmental Grant, (c) a requirement that Seller return or refund any benefits provided under any Business Governmental Grant or (d) the applicability of any Business Governmental Grant (and any limitation or requirement arising therefore) on Seller or its Affiliates, their business or assets. Seller and to the extent applicable, its Affiliates, are in material compliance with the terms, conditions, requirements and criteria of all Business Governmental Grants (including any reporting requirements) and have duly fulfilled all conditions, undertakings and other material obligations relating thereto. Seller has made available to Purchaser accurate and complete copies, of (i) all applications and related documents and correspondence submitted by Seller or its Affiliates to the Innovation Authority or to any other Governmental Authority in connection with a Business Governmental Grant or application therefore and (ii) all certificates of approval and letters of approval (and supplements thereto) granted to Seller or to the extent applicable, its Affiliates, by any such Governmental Authority in connection with a Business Governmental Grant or application therefore.
(s) Schedule 5.1(s) of the Disclosure Schedules contains a complete list of all of the Business Permits.
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5.2 Representations and Warranties of Purchaser and Purchaser Guarantor. Purchaser and Purchaser Guarantor, jointly and severally, represents and warrants to Seller and Guarantor as follows:
(a) Organization and Existence. Purchaser, once incorporated in accordance with Section 6.13, will be a company organized under the laws of Israel, duly organized, validly existing and in good standing under the laws of the Israel, with full power and authority to own, lease, and operate its business and properties, except for those jurisdictions where the failure to be so qualified or licensed and in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Purchaser to consummate the Transactions.
(b) Authority; Binding Nature of Agreements. Purchaser Guarantor has the power to enter into this Agreement and each of the Related Agreements to which it is to be a party and to perform its obligations hereunder and thereunder. Purchaser, once incorporated in accordance with Section 6.13, will have the power to enter into the Written Joinder and the Related Agreements to which it is to be a party. The execution, delivery, and performance by Purchaser of the Written Joinder and the Related Agreements to which it is to be a party and Purchaser Guarantor of this Agreement and the Related Agreements to which it is to be a party, and the consummation by Purchaser and Purchaser Guarantor of the Transactions, have been duly authorized by all required action on the part of Purchaser and Purchaser Guarantor, as applicable. This Agreement and each Related Agreement to which it is to be a party have been duly executed and delivered by Purchaser and Purchaser Guarantor, and, assuming the due execution and delivery of this Agreement and each such Related Agreement by Seller and other counterparties thereto, this Agreement and such Related Agreements will each constitute a valid and legally binding obligation of Purchaser and Purchaser Guarantor, as applicable, enforceable against Purchaser and Purchaser Guarantor in accordance with their respective terms, subject to the laws relating to bankruptcy and insolvency.
(c) No Conflict. The execution and delivery by Purchaser of the Written Joinder and each of the Related Agreements to which it is to be a party and by Purchaser Guarantor of this Agreement and each of the Related Agreements to which it is to be a party, and Purchaser’s and Purchaser Guarantor’s compliance with the terms and conditions hereof and thereof, and the consummation by Purchaser and Purchaser Guarantor of the Transactions, do not and will not (i) conflict with any of, or require any consent of any Person that has not been obtained under, Purchaser’s or Purchaser Guarantor’s Organizational Documents, (ii) violate any provision of, or require any consent, authorization, or approval under, any Law or any Order applicable to Purchaser or Purchaser Guarantor, (iii) conflict with, result in a breach of, constitute a default under (whether with or without notice or the lapse of time or both), accelerate or permit the acceleration of the performance required by, or require any consent, authorization, or approval under, any material Contract to which Purchaser or Purchaser Guarantor is a party or by which it is bound or to which any of its assets or property is subject, or (iv) result in the creation of any Lien upon the assets or property of Purchaser or Purchaser Guarantor, except in each case as would not reasonably be expected to have a material adverse effect on Purchaser or Purchaser Guarantor or materially adversely affect the validity or enforceability of this Agreement against Purchaser or Purchaser Guarantor or materially adversely affect the ability of Purchaser or Purchaser Guarantor to consummate the Transactions.
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(d) Governmental Approvals and Filing. No consent, authorization, approval, or action of, filing with, notice to, or exemption from any Governmental Authority on the part of Purchaser or Purchaser Guarantor is required in connection with the execution, delivery and performance of this Agreement or any Related Agreements to which Purchaser is to be a party or the consummation of the Transactions, except for any other consent, approval or action where the failure to obtain any such consent, approval, or action, to make any such filing, to give any such notice or obtain any such exemption would not be reasonably expected to (A) have a material adverse effect on Purchaser or Purchaser Guarantor or (B) materially adversely affect the validity or enforceability against Purchaser or Purchaser Guarantor of this Agreement or such Related Agreements or materially adversely affect the ability of Purchaser or Purchaser Guarantor to consummate the Transactions.
(e) Legal Proceedings. There are no Actions pending, or to the Knowledge of Purchaser, threatened, against Purchaser that would reasonably be expected to prevent or delay the ability of Purchaser to enter into and perform its obligations under this Agreement or any Related Agreement, or the Transactions. There is no Order to which Purchaser is subject or that is pending or, to the Knowledge of Purchaser, threatened, that would reasonably be expected to prevent or delay the ability of Purchaser to enter into and perform Purchaser’s obligations under this Agreement or any Related Agreements, or the Transactions.
(f) Purchaser Acknowledgment. Purchaser acknowledges that neither Seller nor anyone acting on behalf of Seller has made any representation, guarantee or warranty whatsoever, either written or oral, with regard to the Acquired Assets, Rehovot Facility or the Business, except as specifically set forth in Section 5.1.
(g) No Brokers. No broker, finder, or investment banker is entitled to any brokerage commission, finder’s fee or similar payment in connection with the Transactions based upon arrangements made by or on behalf of Purchaser or its Affiliates.
| 6. | Additional Agreements |
6.1 Conduct of the Business.
(a) During the period from the date of this Agreement and continuing until and through the earlier of the termination of this Agreement in accordance with Section 8 and the Closing (the “Pre-Closing Period”), Seller shall and shall cause its Affiliates to (except to the extent expressly contemplated by this Agreement or as consented to in writing by Purchaser Guarantor) use its commercially reasonable efforts to: (i) carry on the Business in the usual regular and ordinary course in substantially the same manner as heretofore conducted, including complying with all material applicable Laws and complying with the Rehovot Facility Leases, and to pay or perform other obligations when due, (ii) preserve intact the present Business, keep available the services of the Identified Service Providers, keep and preserve the Cell Banks, the Cell Lines and the Acquired Assets and preserve the relationships of Seller and its Affiliates with landlords, customers, suppliers, distributors, licensors, licensees, and others having dealings with Seller and its Affiliates that are necessary for the operations of the Business and (iii) promptly repair, restore or replace any Tangible Property constituting Acquired Assets that are destroyed or damaged and promptly notify the landlord under each of the Rehovot Facility Leases to remediate any deficiencies discovered at the Rehovot Facility.
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(b) Without limiting the foregoing, except as expressly contemplated by this Agreement, during the Pre-Closing Period, Seller shall not and shall cause its Affiliates not to, and shall not permit any of the following, without the prior written consent of Purchaser Guarantor (such consent not to be unreasonably withheld, delayed or conditioned):
(i) Sell, lease, license or otherwise transfer, or agree or commit to sell, lease, license or otherwise transfer any interest in the Acquired Assets or the Business or any interest in or right relating to any such interest, or dispose any of the Inventory (other than in the ordinary course of business);
(ii) permit, or agree, commit or offer (in writing or otherwise) to permit, any interest in the Acquired Assets or the Business to become subject, directly or indirectly, to any Lien;
(iii) terminate the employment of any Identified Service Provider (other than for good reason);
(iv) amend the terms of, or enter in to, any Contract with any labor union, works council, or similar organization;
(v) amend the terms of, or enter in to, any employment agreement, consulting agreement, or independent contractor agreement; grant, agree to grant, pay or modify the terms of any existing discretionary bonus, retention award, change in control award, special remuneration or special noncash benefit unless such bonus, award, etc. would be the responsibility of Seller and not Purchaser, and would not obligate Purchaser to make any payments on a going-forward basis; or (other than annual increases to annual base salary and wages in the ordinary course of business consistent with past practice), materially increase the benefits, salaries, wage rates or other annual compensation, of any Business Service Provider;
(vi) (i) terminate (other than by expiration) or amend or modify (other than by automatic extension or renewal if deemed an amendment or modification of any such Contract) in any respect any Material Contract or (ii) enter into any Contract that may constitute an Acquired Contract at Closing, other than in the ordinary course of business and does not result in material Liability to be assumed by Purchaser (or its Affiliates) following Closing;
(vii) commence any Action relating to the Business or the Acquired Assets or settle any Action relating to the Business or the Acquired Assets;
(viii) enter into any transaction or take any other action in the conduct of or otherwise relating to the Business or the Acquired Assets outside the ordinary course of business consistent with Seller’s past practices that would have a Material Adverse Effect on the Business or the Acquired Assets;
(ix) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
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(x) make, change or revoke any material Tax election; change an annual accounting period; adopt or change any accounting method with respect to Taxes; file any amended Tax Return; enter into any closing agreement; settle or compromise any Tax claim or assessment; or consent to any extension or waiver of the limitation period applicable to any claim or assessment with respect to Taxes, in each case to the extent such action would adversely affect the Acquired Assets or the Business in any Tax period (or portion thereof) beginning after the Closing Date; or
(xi) agree, commit or offer (in writing or otherwise) to take any of the actions described in this Section 6.1(b) or any action that would cause a material breach of Seller’s or Guarantor’s representations or warranties contained in this Agreement or prevent Seller from materially performing or causing its Affiliates not to materially perform its covenants hereunder.
6.2 Acquisition Proposal. Seller or Guarantor shall as promptly as practicable advise Purchaser Guarantor of any inquiries or proposals that constitute, or would reasonably be expected to lead to, a proposal or offer relating to a Competing Transaction other than the Transaction (an “Acquisition Proposal”) that is submitted during the Pre-Closing Period, directly or indirectly, to Seller or any of its Affiliates or Representatives, including, to the extent such disclosure does not conflict with any existing confidentiality obligations of Seller, the identity of the party making such Acquisition Proposal and any other information Purchaser Guarantor may reasonably request with respect to such Acquisition Proposal. In the event that the board of directors of Seller determines that it is in the best interests of Seller and its stockholders to enter into an agreement to consummate the transactions contemplated by, in the good faith determination of Purchaser Guarantor, a potential superior Acquisition Proposal (the “Superior Acquisition Proposal”) in lieu of the Transactions, Seller shall (a) provide Purchaser Guarantor with (i) written notice that an Acquisition Proposal received by Seller or its Affiliates potentially constitutes a Superior Acquisition Proposal and to the extent such disclosure does not conflict with any existing confidentiality obligations of Seller, the identity of the Person offering such Superior Acquisition Proposal and (ii) written copies of a summary of the material terms and conditions of the potential Superior Acquisition Proposal and any relevant proposed transaction agreements, to the extent available, (b) negotiate in good faith with Purchaser Guarantor with respect to proposed revisions or other proposals related to this Agreement and (c) in the event that Purchaser Guarantor and Guarantor agree to terminate this Agreement in accordance with Section 8.1(a) and Seller enters into an agreement to consummate a Superior Acquisition Proposal (the “Acquisition Proposal Agreement”) within twelve (12) months following the termination of this Agreement, Seller or its Affiliates shall complete all of the Essential Activities and the Priority Activities (each as defined in the Letter Agreement) by the later of (A) the time set for completion thereof in the Letter Agreement and (B) fifteen (15) Business Days following the date of entering into such Acquisition Proposal Agreement. Notwithstanding the foregoing, the Parties agree and acknowledge to comply with their obligations contained in Section 6.9(a).
6.3 Access to Information. During the Pre-Closing Period, Seller and its Affiliates shall afford Purchaser Guarantor and its accountants, counsel and other Representatives, reasonable access to (i) the Acquired Assets, the Rehovot Facility, personnel, books, contracts, commitments and records, (ii) Identified Service Providers and (iii) other information concerning the Business, the Rehovot Facility, and personnel of Seller and to the extent applicable, its Affiliates, as Purchaser Guarantor may reasonably request, including for purposes of verifying (x) the accuracy of any Schedules and Disclosure Schedules provided by Seller and Guarantor in accordance with this Agreement and (y) the Physical Condition of the Rehovot Facility; provided that such access is conducted (a) during normal business hours and in a manner that is not unreasonably disruptive to Seller and (b) at Purchaser Guarantor’s expense. Any non-public information obtained by Purchaser Guarantor during such investigation shall be held in confidence pursuant to Section 6.6. Notwithstanding anything to the contrary in this Agreement, neither Seller nor its Affiliates shall be required to disclose any information to Purchaser Guarantor if such disclosure would: (i) contravene any applicable Law, fiduciary duty, or binding agreement entered into prior to the date of this Agreement or (ii) jeopardize any attorney-client or other privilege; provided, however, Seller shall use commercially reasonable efforts to find alternative ways to disclose information, including without limitation by entering into a common interest agreement with Purchaser Guarantor.
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6.4 Access to Information regarding Taxes. Following Closing, Seller shall afford Purchaser, its Affiliates and their accountants, counsel and other Representatives, to the extent reasonably necessary for purposes of Purchaser’s or its Affiliates’ obligations with respect to the payment of Taxes or the filing of Tax Returns (if any) on or with respect to the Acquired Assets, reasonable access to books, records and documents held by Seller, its Affiliates or their counsel, with respect to the payment of such Taxes or the filing of such Tax Returns (if any).
6.5 Notification of Certain Matters. Seller shall give prompt notice to Purchaser Guarantor if any of the following occurs during the Pre-Closing Period; provided, that the delivery of any notice by Seller pursuant to this Section 6.5 shall not modify any representation or warranty of Seller, cure any breaches thereof or limit or otherwise affect the rights or remedies available hereunder to Purchaser Guarantor and the failure of Purchaser Guarantor to take any action with respect to such notice shall not be deemed a waiver of any breach or breaches to the representations or warranties of Seller, and provided, further, that an unintentional failure to give any such notice shall not constitute a breach of this Agreement other than to the extent it materially prejudices Purchaser Guarantor:
(i) receipt of any notice of, or other communication relating to, a default, or event which with notice or lapse of time or both would become a default, under any Acquired Contracts;
(ii) receipt of any notice or other communication in writing from any Person alleging that the consent of such Person is or may be required in connection with the Transactions;
(iii) receipt of any notice or other communication from any Governmental Authority in connection with the Transactions;
(iv) receipt of any notice or other communication from any landlord under the Rehovot Facility Leases or any other Person relating to Seller’s or its Affiliate’s alleged breach, noncompliance or default in any respect with the terms of the Rehovot Facility Leases,
(v) the occurrence or non-occurrence of any fact or event, to the Knowledge of Seller, which could reasonably be expected to cause any covenant, condition or agreement hereunder not to be complied with or satisfied such that Section 4.2(a)(ii) would not be satisfied;
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(vi) the commencement or threat of any Action involving or affecting the Rehovot Facility or the Business, including any Actions involving an Insolvency Event;
(vii) the occurrence of any fact or event of which Seller or its Affiliates becomes aware that results in the inaccuracy in any representation or warranty of Seller in this Agreement such that Section 4.2(a)(i) would not be satisfied;
(viii) the occurrence of any material damage or deficiencies to the Physical Condition of the Rehovot Facility; and
(ix) the occurrence of any event that, had it occurred prior to the date of this Agreement without any additional disclosure hereunder, would have constituted a Material Adverse Effect.
6.6 Confidentiality.
(a) From and after the Closing, subject to Section 6.7, all information relating to Seller, and its Affiliates, the Transaction Information (as defined below), the Excluded Assets and the Excluded Liabilities (collectively, the “Seller’s Confidential Information”) shall be kept confidential and shall not be disclosed by Purchaser in any manner, in whole or in part, to any other Person without the prior written consent of Seller; provided that Purchaser may, without the written consent of Seller, provide the Transaction Information to its respective investors, potential investors, strategic partners, Affiliates and advisors to the such Persons to whom such information is disclosed are made aware of the confidential nature of the information, are directed by Purchaser to keep such information confidential and are bound by confidentiality restrictions with respect to the information shared. The “Transaction Information” shall mean all information regarding the terms of this Agreement (other than any such information disclosed in accordance with the requirements of Section 6.5.) The Parties acknowledge that “Seller’s Confidential Information” shall not be deemed to include any information which was in, or comes into, the public domain through no breach of this Agreement by Purchaser.
(b) From and after the Closing, subject to Section 6.7, all information relating to Purchaser and its Affiliates, the Transaction Information, the Business, the Acquired Assets and the Assumed Liabilities (collectively, the “Purchaser Confidential Information” and together with Seller’s Confidential Information, the “Parties Confidential Information”) shall be kept confidential and shall not be disclosed by Seller in any manner, in whole or in part, to any other Person without the prior written consent of Purchaser; provided that that Seller may, without the written consent of Purchaser, provide the Transaction Information to its investors, strategic partners, Affiliates and advisors to the extent such Persons to whom such information is disclosed are made aware of the confidential nature of the information, are directed by such Party to keep such information confidential and are bound by confidentiality restrictions with respect to the information shared. The Parties acknowledge that Purchaser Confidential Information shall not be deemed to include any information which was in, or comes into, the public domain through no breach of this Agreement by Seller.
(c) The prohibitions against disclosure of Parties Confidential Information recited herein are in addition to, and not in lieu of, any rights or remedies that Purchaser may have available pursuant to applicable Laws of any jurisdiction or at common law to prevent the disclosure of trade secrets or proprietary information, and the enforcement by Purchaser of its rights and remedies pursuant to this Agreement shall not be construed as a waiver of any other rights or available remedies that it may possess in law or equity absent this Agreement.
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6.7 Public Disclosure.
(a) Subject to the rest of this Section 6.7, no disclosure of the terms of this Agreement may be made by either Party, and neither Party shall use the name, trademark, trade name or logo of the other Party, its Affiliates or their respective employee(s) in any publicity, promotion, news release or disclosure relating to this Agreement or its subject matter, without the prior express written permission of the other Party, except as may be required by Law. Following the initial joint press release announcing this Agreement, which will be mutually agreement upon by Seller and Purchaser, either Party shall be free to disclose or publicize, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party, and those terms of the Agreement which have already been publicly disclosed in accordance herewith.
(b) A Party and/or its Affiliates may disclose this Agreement and its terms in securities filings with the Securities Exchange Commission or other Governmental Authority but only to the extent required by Law after complying with the procedure set forth in this Section 6.7. In such event, Seller or Purchaser seeking such disclosure (on its own behalf or on behalf of an Affiliate) will prepare a draft confidential treatment request and proposed redacted version of this Agreement to request confidential treatment for this Agreement, and the other Party agrees to promptly (and in any event, no less than seven (7) days after receipt of such confidential treatment request and proposed redactions) give its input in a reasonable manner in order to allow the Party seeking disclosure to file its request within the time lines proscribed by applicable Laws. The Party seeking such disclosure shall exercise commercially reasonable efforts to obtain confidential treatment of the Agreement as represented by the redacted version reviewed by the other Party.
(c) Each Party acknowledges that the other Party (or Parties) and/or such Parties’ Affiliates, may be legally required to make public disclosures (including in filings with the Securities Exchange Commission or pursuant to rules or regulations of a stock exchange on which such entity’s stock is listed) of certain material developments or material information generated under this Agreement and agrees that each Party (or Parties, and including the Affiliates of each Party) may make such disclosures as required by Law, provided that the Party seeking such disclosure first provides the other Party a copy of the proposed disclosure, and provided further that (except to the extent that the Party seeking disclosure is required to disclose such information to comply with Law) if a Party demonstrates to the reasonable satisfaction of the Party seeking disclosure, within three (3) business days of such Party’s providing the copy, that the public disclosure of previously undisclosed information will materially adversely affect the Business, the Party seeking disclosure will remove from the disclosure such specific previously undisclosed information as the other Party shall reasonably request to be removed.
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6.8 Cell Banks and Cell Lines. Purchaser, Seller and Guarantor hereby acknowledge and agree that as of the Agreement Date, the Cell Banks and the Cell Lines are licensed to Seller and Guarantor pursuant to the terms of the Ferring License and sublicensed by Guarantor to Purchaser Guarantor and its Affiliates pursuant to the Collaboration Agreements, Purchaser undertakes not to utilize the Cell Banks and the Cell Lines for any purpose other than as permitted in accordance with the terms of the Ferring License. Seller and Guarantor acknowledge and agree that, contingent upon Seller and Guarantor obtaining any applicable consent required under the Ferring License, Purchaser shall be permitted to transfer the Cell Banks and Cell Lines from the Rehovot Facility . In the event that Purchaser utilizes the Cell Banks or the Cell Lines for any purpose other than for as permitted in accordance with the terms of the Ferring License, Purchaser shall immediately return the Cell Banks and Cell Lines in accordance with the Collaboration Agreements.
6.9 Further Assurances and Cooperation.
(a) Further Assurances. Upon the terms and subject to the conditions set forth in this Agreement, Seller on the one hand and Purchaser on the other hand agree to use their respective reasonable best efforts, and to cooperate with the other Party, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, appropriate or advisable to consummate and make effective, in the most expeditious manner practicable, the Transactions, including the following: (i) the obtaining of all necessary actions or non-actions, waivers, consents, and approvals from Governmental Authorities and the making of all necessary registrations and filings (including filings with Governmental Authorities, if any); (ii) the obtaining of all necessary consents, approvals, or waivers from Third Parties required in accordance with the transfer of any Acquired Asset from any Seller to Purchaser pursuant to Section 2.1; (iii) the execution and delivery of any additional agreements or instruments necessary to consummate the Transactions and to fully carry out the purposes of, this Agreement and the Related Agreements; and (iv) following the Closing, the identification and delivery of all Acquired Assets not previously identified and delivered pursuant to Section 6.12.
(b) Cooperation. If, in order to properly prepare any documents or reports required to be filed with any Governmental Authority, it is necessary that either Purchaser, on the one hand, or Seller, on the other hand, be furnished with additional information, documents, or records relating to the Business, the Acquired Assets, the Excluded Liabilities, or the Assumed Liabilities, and such information, documents, or records are in the possession or control of the other Party (or Affiliates thereof), such other Party shall use its respective commercially reasonable efforts to furnish or make available such information, documents, or records (or copies thereof) at the recipient’s reasonable request and at recipient’s cost and expense; provided, that, the Parties agree that any such materials received pursuant to this Section 6.9(b) shall constitute and be treated as Confidential Information.
6.10 Tax Matters.
(a) All personal property and similar ad valorem Taxes that relate to the Acquired Assets and are applicable to a Straddle Period shall be prorated based on the number of days in such Straddle Period that occur on or before the Closing Date, on the one hand, and the number of days in such Straddle Period that occur after the Closing Date, on the other hand, with the amount of such Taxes allocable to the portion of the Straddle Period ending on the Closing Date being the responsibility of Seller and the remainder being the responsibility of Purchaser.
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(b) Notwithstanding anything in this Agreement to the contrary, Seller shall be liable for and pay, and agrees to indemnify and hold harmless Purchaser and its Affiliates from and against, any and all real property transfer or gains, sales, use, stamp, value added, goods and services, stock transfer or other similar Taxes (including penalties and interest) imposed on the Transactions (collectively, “Transfer Taxes”). The Party responsible under applicable Law for submitting payment of such Transfer Taxes to the proper Tax Authority shall file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes. If required by applicable Law, Purchaser or Seller shall join in the execution of any such Tax Returns and other documentation.
(c) Purchaser and its Affiliates shall not bear any cost of interest or penalties arising as a result of late filings, late payment, or any other negligence of Seller with regard to the Israeli VAT liability arising as a result of the transactions contemplated hereby.
(d) Purchaser and its Affiliates shall have the right to control the conduct, through counsel of its own choosing, of any audit, claim for refund or administrative or judicial proceeding involving any asserted Tax liability or refund with respect to any Israeli VAT liability it is required to bear pursuant to this Agreement.
(e) After the Closing, Seller and Purchaser shall, to the extent related to the Business, the Acquired Assets or the Assumed Liabilities:
(i) provide the other Party (or Parties) with such assistance as may be reasonably requested in connection with the preparation of any Tax Return;
(ii) cooperate to the extent reasonably requested by the other Party (or Parties) in preparing for any audits of, or disputes with any Tax Authority regarding Taxes or Tax Returns;
(iii) make available to the other Party (or Parties) and to any Tax authority as reasonably requested all information, records and documents relating to Taxes or Tax Returns; and
(iv) timely sign and deliver such certificates or forms as may be reasonably requested by the other Party (or Parties) to the extent necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or other reports with respect to any Transfer Taxes.
(f) Seller shall not permit to exist any Tax deficiencies (including penalties and interest) assessed against or relating to Acquired Assets or the Business with respect to Pre-Closing Tax Periods of a character or nature that would reasonably be expected to result in Liens or claims on any of the Acquired Assets or the Business or on the Purchaser’s title or use of the Acquired Assets or the Business following the Closing Date or that would reasonably be expected to result in any claim for Taxes against the Purchaser or its Affiliates.
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6.11 Service Provider Matters.
(a) Section 6.11 of the Disclosure Schedules lists a true and complete list of key employees necessary for the operation of the Business (the “Key Employees”). During the Pre-Closing Period, Seller shall use its commercially reasonable efforts to (or to the extent applicable, cause its Affiliates to) retain the employment of Key Employees and fill any open positions after seeking Purchaser’s consent (not to be unreasonably withheld, unconditioned or delayed).
(b) As soon as possible following the Agreement Date, but in any event, no later than thirty (30) days thereafter, Purchaser Guarantor shall notify Seller, in writing, of the identify of those Business Service Providers Purchaser intends to engage or employ following Closing in accordance with this Section 6.11 (the “Identified Service Providers”). Purchaser shall use its commercially reasonable efforts to engage or employ the identified Service Providers (on an employee-by-employee basis) in their current positions following Closing and to ensure a continuation of the same, equivalent or better rights of such Identified Service Providers as under their current engagement or employment. Seller shall be responsible for any Liabilities and/or Service Provider Retained Liabilities incurred as a result of the termination of their engagement or employment in accordance with this Section 6.11(b), including depositing any amounts of severance, accrued prior to or on Closing Date required by applicable Law into the employees’ fund on or prior to the Closing Date. Purchaser shall provide offer letters to the Identified Service Providers which offer letters will be conditional upon the Closing occurring and provide for (i) at least the same level of base salary and wage rates, as applicable, as were provided to such Identified Service Provider immediately prior to the Closing and (ii) employee benefits that are substantially similar in the aggregate to such benefits that were provided to such Identified Service Provider immediately prior to the Closing (the “fire and rehire method”) . Nothing in this Section 6.11(b) shall create any third-party beneficiary rights in any Identified Service Provider; confer upon any Identified Service Provider any right to continued employment or engagement for any period or continued receipt of any specific employee or other benefit; constitute an amendment to or any other modification of any benefit plan; or alter or limit Purchaser’s or its Affiliates’ ability to amend, modify or terminate any particular benefit plan, program, agreement or arrangement.
(c) Seller shall terminate the engagement or employment of the Identified Service Providers prior to and contingent upon the Closing and shall have fully satisfied any and all Liabilities with respect to each of the Identified Service Provider which are due and payable on or before the date each Identified Service Provider is terminated. Seller shall be responsible for all Service Provider Retained Liabilities incurred as a result of the termination of the Service Providers in accordance with this Section 6.11(b). Prior to Closing, Seller shall satisfy all requirements under applicable Laws and Contracts necessary to effect the termination of such Identified Service Providers, including employees having a hearing with notice provided all in accordance with the Israeli law, if applicable and providing all such Identified Service Providers with notice of termination of employment satisfying all notice requirements applicable to such Identified Service Providers. Seller hereby covenants and agrees with Purchaser that effective as of the Closing (i) all non-competition, confidentiality, non-solicitation and other restrictive covenants granted by any Identified Service Provider in favor of Seller, if any, shall be fully waived with respect to Purchaser and its Affiliates and (ii) Seller releases all claims it may have against such Identified Service Provider.
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(d) Engagement or employment with Purchaser of the Identified Service Providers shall be effective as of the day following the Closing, or as otherwise agreed between Purchaser and the applicable Identified Service Provider. Seller’s termination of its engagement or employment of Identified Service Providers shall be effective as of the Closing or as otherwise agreed between the Parties. Seller and Purchaser shall cooperate to ensure an orderly transition of the Identified Service Providers. For the avoidance of any doubt, Identified Service Providers will commence their employment with Purchaser with no accrued balance of vacation and/or sick days.
6.12 Reconciliation.
(a) During the Pre-Closing Period, Seller, Guarantor and its Affiliates shall in good faith determine if there are any Acquired Assets, including any Business Service Providers, held, employed or engaged by any of Seller’s Affiliates (other than Seller) that would constitute Seller Wrong Pocket Assets if held, employed or engaged by such Seller’s Affiliate following Closing, and upon becoming aware of such Acquired Asset, shall (a) promptly notify Purchaser Guarantor in writing thereof, (b) cause such Acquired Asset to be transferred, terminated (and rehired by Seller), or assigned from such Affiliate to Seller prior to Closing, in accordance with its terms and pursuant to instruments of conveyance in form and substance reasonably acceptable to Purchaser Guarantor and (c) at the Closing, Seller shall convey, transfer and assign such Acquired Asset to Purchaser in accordance with Section 2.1.
(b) For six (6) months after the Closing Date, either Seller or Purchaser, may notify the other Party of any Seller Wrong Pocket Assets that either Seller or Purchaser becomes aware of and reasonably believe should have been transferred to Purchaser or its designated Affiliate under this Agreement as part of the Acquired Assets. If Seller or Purchaser determine in good faith that such asset was intended to be transferred to Purchaser or its designated Affiliate as part of the Acquired Assets under this Agreement, such asset shall be assigned by Seller or its Affiliate to Purchaser or its designated Affiliate without any additional consideration, and Seller agrees to use commercially reasonable efforts during such period to promptly deliver, or cause to be delivered, any such asset to any Purchaser or its designated Affiliate, as applicable.
(c) For six (6) months after the Closing Date, either Seller or Purchaser may notify the other Party of any asset transferred to Purchaser or its designated Affiliate in connection with the Transactions that either Seller or Purchaser reasonably believes should have been retained by Seller under this Agreement as part of the Excluded Assets. If Seller or Purchaser determine in good faith that such asset was intended to be retained by Seller or any of its Affiliates as part of the Excluded Assets under this Agreement, such asset shall be assigned by Purchaser or its Affiliate, as applicable, to Seller or its Affiliate without additional consideration, and Purchaser agrees to use commercially reasonable efforts during such period to promptly deliver, or cause to be delivered, any such asset to Seller or its Affiliate, as applicable.
6.13 Formation of Purchaser; Joinder. During the Pre-Closing Period, Purchaser Guarantor or its Affiliates shall incorporate Purchaser in Israel and following its incorporation, Purchaser shall execute a written joinder reasonably acceptable to Seller (the “Written Joinder”) to assume all of its rights and obligations hereunder as “Purchaser” and to be bound by all of the terms of this Agreement as “Purchaser.”
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6.14 Business Permits. Notwithstanding anything to the contrary of this Agreement, including the provisions of Section 6.9, during the Pre-Closing Period, (a) Purchaser shall use its commercially reasonable efforts to apply for and obtain each Business Permit and (b) Seller shall use its commercially reasonable efforts to cooperate with Purchaser to obtain each such Business Permit, including, to the extent practicable, providing the services of Key Employees to assist Purchaser in applying for such Business Permits and executing any documentation necessary for expedited processing.
6.15 Repurchase . If Seller determines, following the Closing, but prior to December 31, 2024 (the “Repurchase End Date”), that it desires to repurchase the Acquired Assets from Purchaser (the “Repurchase”), Seller and Purchaser shall discuss in good faith (a) the conditions to be satisfied to allow for the conveyance, transfer and assignment of Purchaser’s rights, title and interest in such Acquired Assets then owned or held by Purchaser to Seller, which shall include (but not necessarily be limited to): (i) any lease agreements entered into by Purchaser with respect to the Rehovot Facility then in effect (subject to Purchaser obtaining any required consent required in accordance with the terms of such lease agreements), (ii) such part of the Acquired Assets then owned or held by Purchaser (as such term may be amended to reflect what is actually then owned or held by Purchaser as of such date) as determined by Purchaser as being necessary for the conduct of the Business (to the extent transferrable), and (iii) such Business Service Providers as may be chosen by Seller (the “Repurchased Assets”), (b) the assumption by Seller of liabilities associated with the Repurchased Assets, (c) certain assets and liabilities to be excluded from the Repurchase (provided that in no event will the liabilities retained by Purchaser include Excluded Liabilities) and (d) the consideration for the Repurchase, which shall be an aggregate amount of cash to be wired by Seller to Purchaser or an Affiliate of Purchaser equal to the sum of the Purchase Price plus costs and expenses and Taxes payable as a result of the Repurchase to the extent they would have been payable by the Purchaser pursuant to this Agreement, mutatis mutandis . Anytime following Closing, including specifically following the Repurchase End Date and prior to December 31, 2025 (such period, the “Second Repurchase Period”), Purchaser shall have the right in its sole discretion to (1) assign the Rehovot Facility Lease to a third-party Person that is not an Affiliate of Purchaser or (2) cease operations of the Business at the Rehovot Facility (both (1) and (2) being the “Purchaser Facility Cessation Rights”); provided that if Purchaser intends to exercise either of its Purchaser Facility Cessation Rights during the Second Repurchase Period, prior to exercising its first Purchaser Facility Cessation Right, Purchaser shall (A) provide Seller with [**] advanced written notice of such intent and (B) for a period of [**] following the date that such notice is provided to Seller, allow Seller the option to exercise the Repurchase as envisaged in this Section 6.15. Seller and Guarantor acknowledge and agree that at any time following Closing, notwithstanding anything to the contrary contained herein, Purchaser shall have the right in its sole discretion to exercise either of its Purchaser Facility Cessation Rights.
6.16 IIA Consent. Seller shall use its reasonable commercial efforts to take such actions necessary to obtain the IIA Consent promptly following the Agreement Date and in any event prior to the Closing. In connection with the release of the IIA Lien and procurement of the IIA Consent, Seller shall, and shall cause its Representatives to permit Purchaser to review (and Seller shall consider in good faith the views of Purchaser in connection with) any documents before submitting such documents to the IIA; and (ii) promptly provide any responses or communications received from the IIA in connection with the IIA Lien and IIA Consent.
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6.17 Supply Agreement. During the Pre-Closing Period, Purchaser and Guarantor shall each use its respective commercially reasonable efforts to negotiate and enter into the Supply Agreement, to be effective subject to and contingent upon the Closing.
6.18 Release from Securities. During the Pre-Closing Period, Purchaser shall use its commercially reasonable efforts cooperate with Seller to obtain, effective contingent upon Closing (i) the release of the Landlord Securities and (ii) the release of any deposit or other security provided by Seller under any Acquired Contract listed on Schedule 6.18 to be provided by Seller to Purchaser Guarantor within 30 days of the Agreement Date (as agreeable by Purchaser Guarantor), it being understood and agreed, in relation to all of the foregoing, that Purchaser shall be required to provide substitute deposits and securities.
| 7. | Indemnification |
7.1 Indemnification by Seller, Guarantor, Purchaser and Purchaser Guarantor.
(a) Indemnification by Seller and Guarantor. Subject to the terms and conditions of this Agreement, Seller and Guarantor will, jointly and severally, indemnify and hold harmless Purchaser, its Affiliates, and their respective officers, directors, managers, employees, agents, representatives, successors, and permitted assigns (each, a “Purchaser Indemnified Party” and collectively, the “Purchaser Indemnified Parties”) against and in respect of any Losses suffered or incurred by any Purchaser Indemnified Party resulting from or arising out of any of the following, in each case, directly or indirectly, and whether rising out of a Third-Party Claim or a direct claim:
(i) any misrepresentation or breach of any of the representations and warranties given or made by Seller and Guarantor in Section 5.1 of this Agreement or any Related Agreement as of the date of this Agreement and as of the Closing Date (as though such representation or warranty were made as of the Closing Date), except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case such representations and warranties shall have been true and correct on and as of such specified date or dates;
(ii) any breach of any covenant or agreement made by Seller under this Agreement or any Related Agreement;
(iii) any Excluded Assets;
(iv) any Excluded Liabilities;
(v) any matter set forth on Schedule 7.1(v);
(vi) the IIA Lien, release of the IIA Lien and/or obtaining the IIA Consent; or
(vii) any fraud committed by Seller in connection with this Agreement or any Related Agreement.
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(b) Indemnification by Purchaser and Purchaser Guarantor. Subject to the terms and conditions of this Agreement, Purchaser and Purchaser Guarantor will, jointly and severally, indemnify and hold harmless Seller and its Affiliates and their respective officers, directors, managers, employees, agents, representatives, successors, and permitted assigns (each, a “Seller Indemnified Party” and collectively, the “Seller Indemnified Parties”) against and in respect of any Losses suffered or incurred by any Seller Indemnified Party resulting from or arising out of any of the following, in each case, directly or indirectly, and whether rising out of a Third-Party Claim or a direct claim:
(i) any misrepresentation or breach of any of the representations and warranties given or made by Purchaser and Purchaser Guarantor in Section 5.2 of this Agreement or any Related Agreement as of the date of this Agreement and as of the Closing Date (as though such representation or warranty were made as of the Closing Date), except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case such representations and warranties shall have been true and correct on and as of such specified date or dates;
(ii) any breach of any covenant or agreement made by Purchaser under this Agreement or any Related Agreement; and
(iii) the Assumed Liabilities.
7.2 Survival. All representations and warranties made by Seller in this Agreement, the Disclosure Schedules or any certificate delivered pursuant to this Agreement will survive the execution and delivery of this Agreement and the Closing until the date that is twelve (12) months following the Closing Date; provided, however, that any claims for indemnification (i) arising with respect to the Fundamental Representations (other than pursuant to the last sentence of Section 5.1(q)) shall survive until sixty (60) days after the expiration of the applicable statute of limitations or (ii) involving fraud shall survive until the expiration of the applicable statute of limitations. All representations and warranties made by Purchaser in this Agreement shall survive the execution and delivery of this Agreement and the Closing until the date that is twelve (12) months following the Closing Date. All covenants and agreements of the Parties in this Agreement and the Related Agreements shall survive Closing and continue in effect and expire in accordance with their respective terms. Notwithstanding anything to the contrary contained in this Section 7.2, any claim which any Indemnified Party shall have delivered to the Indemnifying Party prior to the termination of the applicable survival period in accordance with this Agreement shall survive until the resolution of such claim.
7.3 Limits on Indemnification.
(a) No claim for Losses shall be made under Section 7.1(a)(i) or under Section 7.1(b)(i) unless the aggregate of Losses exceeds $[**] for which claims are made hereunder (the “Threshold”), in which case Seller Indemnified Party or Purchaser Indemnified Party, as applicable, shall be entitled to seek compensation for all Losses, including the amount of the Threshold; provided, however, that the Threshold shall not apply to any Losses arising from fraud or the Fundamental Representations.
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(b) The aggregate amount of Losses pursuant to Section 7.1(a)(i) or under Section 7.1(b)(i) shall not exceed an amount equal $[**] (the “Cap”); provided, however, that the Cap shall not apply to and the aggregate amount of Losses shall not exceed an amount equal to (i) $[**] with respect to any misrepresentation or breach of the representation and warranty made in Section 5.1(q) and (ii) the Purchase Price with respect to any misrepresentation or breach of a Fundamental Representation; provided, further, that the foregoing caps and the Cap shall not apply to any Losses arising from fraud. There shall not be any multiple recovery for any Losses or multiple recovery for duplicate Losses under this Agreement or any other Related Agreement; provided, however, that the foregoing limitation shall not prevent a Indemnified Party from recovering all Losses to which it is entitled hereunder arising out of the same set of facts and circumstances notwithstanding the fact that an indemnification claim for such Losses is based upon more than one representation, warranty, agreement or covenant. Each Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate Losses if and to the extent required by applicable Law.
(c) Notwithstanding anything to the contrary contained in this Agreement or otherwise, the Indemnified Parties expressly intend and agree that the amount of any Losses incurred by the Indemnified Party shall be reduced by any amount actually recovered by such Indemnified Party with respect thereto under any insurance coverage (net any costs and expenses, including deductibles, costs of recovery and the amount of any insurance premium increases).
(d) For the purposes of determining the amount of Losses and whether a breach of a representation or warranty made by an Indemnifying Party has occurred, all qualifications or exceptions in any representation or warranty relating to or referring to the term “material,” “materiality,” “in all material respects,” “Material Adverse Effect” or any similar term or phrase shall be disregarded.
(e) The right to indemnification, payment of Losses or for other remedies based on any representation, warranty, covenant or obligation contained in or made pursuant to this Agreement shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation.
7.4 Exclusive Remedy. The Parties acknowledge and agree that, from and after the Closing, other than in the case of fraud, the indemnification provisions provided for in this Section 7 will be the exclusive remedy of the Purchaser Indemnified Parties against Seller and Seller Indemnified Parties against Purchaser for any breach of any representation, warranty, covenant, or agreement contained in this Agreement or other Claim arising out of or relating to this Agreement or the Related Agreements. Nothing in this Section 7.4 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled to pursuant to Section 9.3.
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7.5 Resolution of Indemnification Disputes. In order to seek indemnification under this Section 7, the Indemnified Party shall deliver a certificate signed by a duly authorized officer of the Indemnified Party (each, a “Claim Notice”) to the Indemnifying Party which contains: (a) a description and the amount, if known, of any Losses incurred or reasonably expected to be incurred by the Indemnified Party (which, if known, shall be calculated and estimated by the Indemnified Party in good faith), (b) a statement that the Indemnified Party is entitled to indemnification under this Section 7 for such Losses and a reasonable explanation of the basis therefor, and (c) a demand for payment in the amount of such Losses. Upon reasonable request, the Indemnified Party shall furnish the Indemnifying Party with any information to the extent that such information is reasonably necessary in order to evaluate the Claim Notice and the underlying Claims. Notwithstanding the foregoing, failure to notify the Indemnifying Party in accordance with this Section 7.5 will not relieve the Indemnifying Party of any obligation that it may have to the Indemnified Party except to the extent the Indemnifying Party is actually and materially prejudiced by the Indemnified Party’s failure to give such timely notice. If an Indemnifying Party disputes or contests the basis or amount of any Claim set forth in a Claim Notice delivered by an Indemnified Party in accordance with the provisions of Section 7, the dispute will be resolved as set forth below:
(a) The Indemnifying Party may object to a Claim for indemnification set forth in Claim Notice by delivering to the Indemnified Party seeking indemnification a written statement of objection to the Claim made in the Claim Notice (an “Objection Notice”); provided, however, that, to be effective, such Objection Notice must (i) be delivered to the Indemnified Party within thirty (30) days following the receipt of the applicable Claim Notice (such deadline, the “Objection Deadline” for such Claim Notice and the Claims for indemnification contained therein) and (ii) set forth in reasonable detail the nature of the objections to the Claims in respect of which the objection is made.
(b) To the extent the Indemnifying Party does not object in writing (as provided in Section 7.5(a)) to the Claims contained in such Claim Notice prior to the Objection Deadline for such Claim Notice, such failure to so object shall be an irrevocable acknowledgment and agreement by the Indemnifying Party that the Indemnified Party is entitled to the full amount of the Claims for Losses set forth in such Claim Notice (and such entitlement shall be conclusively and irrefutably established) (or, in the case of any Claim Notice in which the Losses (or any portion thereof) are estimated, the amount of such Losses (or such portion thereof) as finally determined) from the Indemnifying Party (any such Claim, an “Unobjected Claim”). Within thirty (30) days of a Claim becoming an Unobjected Claim, the Indemnifying Party shall make the applicable payment to such Indemnified Party, subject to the limitations set forth in this Section 7.
(c) In case an Indemnifying Party timely delivers an Objection Notice in accordance with Section 7.5(a), the Parties shall attempt in good faith to agree upon the rights of the Indemnifying Party with respect to each of such Claims. If the Parties reach an agreement, a memorandum setting forth such agreement shall be prepared and signed by both Parties (any Claims covered by such an agreement, a “Settled Claim”). Any amounts required to be paid as a result of a Settled Claim shall be paid by the Indemnifying Party to the Indemnified Party pursuant to the Settled Claim within thirty (30) days of the applicable Claim becoming a Settled Claim.
(d) If no such agreement can be reached after good faith negotiation within forty-five (45) days after delivery of an Objection Notice, then upon the expiration of such forty-five (45)-day period, Seller or Purchaser may seek to resolve such dispute pursuant to Section 9.2.
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7.6 Third Party Claims.
(a) Notice. If an Indemnified Party shall become aware of an indemnifiable matter arising from any pending or threatened Legal Proceeding by or against a Third Party (each such action or suit being a “Third Party Claim”), the Indemnified Party shall promptly give written notice (a “Third Party Notice”) to the Indemnifying Party of the basis for such Third Party Claim, which notice shall set forth the nature of the Third Party Claim, including, if known, the estimated amount of such claim in reasonable detail and include copies of any documents served on the Indemnified Party with respect to such Third Party Claim. Notwithstanding the foregoing, failure to notify the Indemnifying Party in accordance with this Section 7.6(a) will not relieve the Indemnifying Party of any obligation that it may have to the Indemnified Party except to the extent the defense of such Third Party Claim is actually and materially prejudiced by the Indemnified Party’s failure to give such notice.
(b) Control. The Indemnifying Party, shall have the right to assume and control the defense of such Third Party Claim for which the Indemnifying Party is obligated to indemnify pursuant to this Section 7 at the Indemnifying Party’s sole cost and expense and through counsel reasonably acceptable to the Indemnified Party; provided, however that the Indemnifying Party may not assume control of defense to a Third Party Claim (i) involving criminal liability or in which equitable relief other than monetary damages is sought, (ii) if the Indemnifying Party has not notified the Indemnified Party in writing that it will be liable to indemnify the Indemnified Party with respect to all Losses relating to such Third Party Claim, (iii) the amount in dispute is reasonably likely to exceed the Cap or the Indemnifying Party is reasonably expected to not have the financial wherewithal to indemnify the Indemnified Party for the estimated Losses associated with such Third Party Claim, (iv) involving (a) the Rehovot Facility Leases or (b) release of the IIA Lien, or (v) where the Indemnifying Party failed to actively pursue the defense of such Third Party Claim in good faith. If the Indemnifying Party elects to assume and control the defense of such Third Party Claim which relates to any Losses indemnified by it hereunder, it shall within seven (7) days (or sooner, if the nature of the Third Party Claim so requires) notify the Indemnified Party in writing of its intent to do so. If the Indemnifying Party elects not to assume and control the defense of such Third Party Claim or is not permitted to assume the defense of a Third Party Claim pursuant to the foregoing proviso, the Indemnified Party may assume and control the defense of such Third Party Claim, subject to the provisions below. The Party controlling the defense (the “Controlling Party”) shall from time to time apprise the non-controlling Party (the “Non-Controlling Party”) of the status of the Third Party Claim and any resulting Legal Proceeding and shall furnish the Non-Controlling Party with such documents and information filed or delivered in connection with such Third Party Claim as the Indemnified Party may reasonably request. The Controlling Party shall not admit any liability to any Third Party in connection with any matter which is the subject of a Third Party Notice.
(c) Indemnified Party. Notwithstanding anything herein stated to the contrary, the Non-Controlling Party shall at all times have the right to fully participate in such defense at its own expense directly or through counsel; provided, however, that the Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (A) so requested by the Indemnifying Party to participate or (B) in the reasonable opinion of outside counsel to the Indemnified Party a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable; and provided, further, that the Indemnifying Party shall not be required to pay for more than one such counsel for all Indemnified Parties in connection with any Third Party Claim. The Controlling Party shall have the right to compromise or settle such Third Party Claim with the consent of the Non-Controlling Party (which consent shall not be unreasonably withheld, conditioned, or delayed). For the avoidance of doubt, it shall be reasonable for an Indemnified Party to withhold, condition or delay its consent: (1) unless the claimant provides to such Party an unqualified release of the Indemnified and Indemnifying Parties from all liability in respect of such Third Party Claim, (2) where the Indemnifying Party is the Controlling Party, such settlement involves any injunctive relief binding upon the Indemnified Party or any of its Affiliates, (3) where the Indemnifying Party is the Controlling Party, such settlement encumbers any of the material assets of any Indemnified Party or imposes any restriction or condition that would apply to or materially affect any Indemnified Party or the conduct of any Indemnified Party’s business and (4) where the Indemnifying Party is the Controlling Party, such settlement involves any admission of liability or wrongdoing by any Indemnified Party or any of its Affiliates. Each Party shall furnish the other Party with such information as it may have with respect to such Third Party Claim (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the other Party in the defense of such Third Party Claim.
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7.7 Payments; Tax Treatment. Once the amount of Losses are agreed to by the Indemnifying Party or finally determined to be payable pursuant to this Section 7, the Indemnifying Party shall satisfy its obligations within ten (10) Business Days of such final determination by wire transfer of immediately available funds to the Indemnified Party. To the extent permitted by applicable Law, any amounts payable pursuant to this Section 7 shall be treated by Purchaser and Seller as an adjustment to the Purchase Price for Tax purposes to the extent permitted by applicable Laws
| 8. | Termination |
8.1 Termination Rights. Subject to Section 8.2, this Agreement may be terminated and the Transactions abandoned at any time prior to the Closing (with respect to Sections 8.1(b) through (e) by written notice by the terminating Party to the other Party):
(a) by the mutual written consent of Purchaser and Seller;
(b) by either Purchaser or Seller if the Transactions shall not have been consummated before 12:01 a.m. Pacific time on December 31, 2024; provided, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of or resulted in the failure of the consummation of the Closing to occur on or before such date;
(c) by either Purchaser or Seller if a court of competent jurisdiction or other Governmental Authority shall have issued a non-appealable final order, decree or ruling or taken any other action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Transactions, unless the Party relying on such order, decree or ruling or other action has not complied in all material respects with its obligations under this Agreement;
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(d) by either Purchaser or Seller, if there has been a breach of any representation, warranty, covenant or agreement on the part of Seller (in the case of Purchaser) or Purchaser (in the case of Seller) as set forth in this Agreement, which breach (i) causes the conditions set forth in Section 4.2(a) (in the case of termination by Purchaser) or Section 4.2(b) (in the case of termination by Seller) not to be satisfied and (ii) shall not have been cured within ten (10) Business Days following receipt by Purchaser (in the case of a breach by Seller) or by Seller (in the case of a breach by Purchaser); or (e)
(e) by Purchaser, if Seller has provided Purchaser Guarantor with notice in accordance with Section 6.4(a)(viii) of any material damage or deficiency to the Physical Condition of the Rehovot Facility and Purchaser Guarantor reasonably determines that there has been material damage or deficiency to the Physical Condition of the Rehovot Facility.
8.2 Effect of Termination; Release of Escrow. In the event of termination of this Agreement as provided in Section 8.1, this Agreement will forthwith become void and there shall be no liability or obligation on the part of Purchaser, Purchaser Guarantor, Seller or Guarantor, or their respective officers, directors, or stockholders; provided, that each Party will remain liable for any willful breaches of this Agreement or in any certificate or other instruments delivered pursuant to this Agreement; provided, further however, that the provisions of Sections 6.6, 6.7, 8.2 and 9 shall remain in full force and effect and survive any termination of this Agreement pursuant to the terms of this Section 8. Upon the valid termination of this Agreement in accordance with Section 8.1, Purchaser and Seller shall provide joint written instructions to the Escrow Agent directing the Escrow Agent to release the Escrow Amount to an account provided by Purchaser in accordance with the terms of the Escrow Agreement.
8.3 Extension; Waiver. At any time prior to the Closing, Seller on the one hand, and Purchaser on the other, by action taken or duly authorized by all requisite corporate action, may, to the extent legally allowed: (a) extend the time for the performance of any of the obligations or other acts of the other Party; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto; and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such Party.
| 9. | Miscellaneous |
9.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, without regard applicable principles of conflicts of law. Each of the Parties irrevocably consents to the exclusive jurisdiction of the courts of Tel Aviv, Jaffa, in connection with any matter based upon or arising out of this Agreement or the matters contemplated hereby or thereby and agrees that process may be served upon it in any manner authorized by the laws of Israel for such Persons and waives and covenants not to assert or plead any objection which it might otherwise have to such jurisdiction and such process.
9.2 Remedies Cumulative. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy.
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9.3 Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the terms or provisions of this Agreement were not performed in accordance with their specific wording or were otherwise breached. The Parties accordingly agree that, in the event of any breach or threatened breach by Seller or Guarantor (in the case of Purchaser) or Purchaser or Purchaser Guarantor (in the case of Seller) of any covenant, obligation or other provision set forth in this Agreement, for the benefit of any of the other Party: such other Party shall be entitled (in addition to any other remedy that may be available to it) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (ii) an injunction restraining such breach or threatened breach.
9.4 Entire Agreement; Severability. This Agreement, together with the Disclosure Schedules, Related Agreements, all Exhibits and Schedules hereto and thereto constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof and thereof. If any term, condition or other provision of this Agreement is found to be invalid, illegal or incapable of being enforced by virtue of any rule of law, public policy or court determination, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect. If the final determination of a court of competent jurisdiction, to the extent in accordance with the terms of this Agreement, declares that any term or provision hereof is invalid or unenforceable, the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.
9.5 Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by email (receipt requested), courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
If
to Seller or Guarantor, to:
VBI Vaccines Inc.
160 Second Street, floor 3,
Cambridge, MA 02142
Attention: Nell Beattie
Email: [**]
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with required copies to:
Pearl Cohen Zedek Latzer Baratz
121 Menachem Begin Rd, 53rd floor
Tel-Aviv 6701203, Israel
Attention: Yael Baratz
Email:
[**]
If to Purchaser or Purchaser Guarantor, to:
Brii Biosciences, Inc.
One City Center, Suite 5-110
110 Corcoran Street
Durham, NC 27701
Attention: Zhi Hong
Email: [**]
with
required copies to:
IFC - Tower 2, Level 35, Unit 3510
8 Century Avenue
Pudong New Area
Shanghai, China 200120
Attention:
Yiming Liu
Email: [**]
Cooley
LLP
10265 Science Center Drive
San Diego, CA 92121
Attention: Rama Padmanabhan
Email: [**]
Meitar Law Offices
Abba Hillel Silver Road
Ramat Gan 5250608 Israel
Attention: David S. Glatt
Email: [**]
9.6 No Assignment; Binding Effect. This Agreement is not assignable by any Party without the prior written consent of Purchaser (in the case of Seller) and Guarantor (in the case of Purchaser); provided, however, for the avoidance of doubt, each Party may, without such consent, (a) at any time, sell, assign, contribute, or otherwise transfer this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate or (b) in the case of Purchaser, Seller or Guarantor assign all or any part of its rights or obligations hereunder to any Person (whether or not an Affiliate of Purchaser) in connection with a merger or consolidation of Purchaser, Seller or Guarantor (as the case may be) or the sale of all or substantially all of Purchaser’s, Seller’s or Guarantor’s (as the case may be) operations or assets. This Agreement will be binding upon and will inure to the benefit of the Parties hereto and their respective successors and permitted assigns.
9.7 Third Person Beneficiaries. Except as provided in Section 7, this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the Parties and their respective successors and permitted assigns and nothing herein, whether express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
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9.8 Relationship of the Parties. Nothing contained in this Agreement shall be deemed or construed to create a partnership, joint venture, employment, franchise, agency or fiduciary relationship between Purchaser, on the one hand, and Seller, on the other hand. None of the Parties shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of Purchaser (in the case of Seller) or Seller (in the case of Purchaser) or to bind Purchaser to any Contract, agreement or undertaking with any Third Party entered into, created or undertaken by Seller.
9.9 Headings; Interpretation. The headings in this Agreement are intended solely for convenience of reference and will be given no effect in the construction or interpretation of this Agreement. Unless the context otherwise requires, the singular includes the plural, and the plural includes the singular. Whenever the words “include”, “includes”, or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”. Unless otherwise specified, references in this Agreement to any Section shall include all subsections, and paragraphs in such Section, references to any Section shall include all subsections and paragraphs in such Section, and references in this Agreement to any subsection shall include all paragraphs in such subsection. The word “or” means “and/or” unless the context dictates otherwise because the subjects of the conjunction are mutually exclusive. The words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision. All references to days in this Agreement mean calendar days, unless otherwise specified. Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either Party, irrespective of which Party may be deemed to have caused the ambiguity or uncertainty to exist. Any reference in this Agreement to “dollars” or “$” shall be to U.S. dollars.
9.10 Counterparts; Signatures. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party (or Parties). This Agreement may be executed by an electronic scan delivered by electronic mail.
9.11 Expenses. Except as otherwise expressly provided in this Agreement, whether or not the Transactions are consummated, each Party will pay its own costs and expenses incurred incident to its negotiation and preparation of this Agreement and the Related Agreements and to its performance and compliance with all agreements and conditions contained herein and therein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and accountants.
9.12 Amendments. This Agreement may be amended only by a written instrument executed by the Parties, Purchaser Guarantor and Guarantor.
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9.13 Guarantee by Guarantor. Guarantor shall cause Seller to comply with the terms and conditions of, and perform all of its obligations under this Agreement and the Related Agreements, and hereby unconditionally and irrevocably guarantees the full and prompt performance, or discharge when due of all liabilities and obligations of Seller under this Agreement (collectively, the “Guaranteed Obligations”). All performance, and discharge of the Guaranteed Obligations by Guarantor under this Section 9.13 shall be subject to the same terms and conditions applicable to Seller under this Agreement. The obligations of Guarantor under this Section 9.13 shall be enforceable against Guarantor to the extent enforceable against Seller under this Agreement. Without derogation, Guarantor reserves the right to assert any defense that Seller may have under this Agreement. Purchaser shall not be obligated to file any claim arising out of, relating to, in connection with or based upon the Guaranteed Obligations in the event that Seller or its Affiliates becomes subject to an Insolvency Event, and Seller irrevocably waives the requirement for Purchaser to file any such claim in such event, and the failure of Purchaser to so file shall not affect Seller’s obligations or Purchaser’s rights hereunder. The guarantee of Guarantor of the Guaranteed Obligations is an absolute, irrevocable, primary, continuing, unconditional and unlimited guarantee of the due and punctual payment and performance in full of the Guaranteed Obligations, not merely a guaranty of collection, and a separate action or actions may be brought and prosecuted against Guarantor to enforce the guarantee of Guarantor pursuant to this Section 9.13, irrespective of whether any action is brought against Seller or Guarantor, or whether Seller or Guarantor is joined in any such action or actions.
9.14 Guarantee by Purchaser Guarantor. Purchaser Guarantor shall cause Purchaser to comply with the terms and conditions of, and perform all of its obligations under this Agreement and the Related Agreement, and hereby unconditionally and irrevocably guarantees the full and prompt performance, or discharge when due of all liabilities and obligations of Purchaser under this Agreement (collectively, the “Purchaser Guaranteed Obligations”). All performance, and discharge of the Purchaser Guaranteed Obligations by Purchaser Guarantor under this Section 9.14 shall be subject to the same terms and conditions applicable to Purchaser under this Agreement. The obligations of Purchaser Guarantor under this Section 9.14 shall be enforceable against Purchaser Guarantor to the extent enforceable against Guarantor under this Agreement. Without derogation, Purchaser Guarantor reserves the right to assert any defense that Purchaser may have under this Agreement. The guarantee of Purchaser Guarantor of the Purchaser Guaranteed Obligations is an absolute, irrevocable, primary, continuing, unconditional and unlimited guarantee of the due and punctual payment and performance in full of the Purchaser Guaranteed Obligations, not merely a guaranty of collection, and a separate action or actions may be brought and prosecuted against Purchaser Guarantor to enforce the guarantee of Purchaser Guarantor pursuant to this Section 9.14, irrespective of whether any action is brought against Purchaser, or whether Purchaser is joined in any such action or actions.
[Signature Page to Follow]
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| Cooley Draft of [_] June 2022 |
In Witness Whereof, the Parties, Purchaser Guarantor and Guarantor intending legally to be bound, have caused this Asset Purchase Agreement to be duly executed and delivered as of the Agreement Date.
| SciVac Ltd. | ||
| By: | /s/ J.R. Baxter | |
| Print Name: | J.R. Baxter |
| Title: | CEO |
In Witness Whereof, the Parties, Purchaser Guarantor and Guarantor intending legally to be bound, have caused this Asset Purchase Agreement to be duly executed and delivered as of the Agreement Date.
VBI Vaccines Inc. Read and Agreed as Purchaser Guarantor |
||
| By: | /s/ J.R. Baxter | |
| Print Name: | J.R. Baxter |
| Title: | CEO |
In Witness Whereof, the Parties, Purchaser Guarantor and Guarantor intending legally to be bound, have caused this Asset Purchase Agreement to be duly executed and delivered as of the Agreement Date.
| Brii Biosciences Inc. on behalf of Purchaser and read and agreed as Purchaser Guarantor | ||
| By: | /s/ Zhi Hong | |
| Print Name: | Zhi Hong |
| Title: | Chief Executive Officer |
Exhibit 10.8
[**] Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.
LETTER AGREEMENT
This LETTER AGREEMENT (the “Agreement”) is entered into as of February 13, 2024 (the “Effective Date”) between VBI VACCINES INC., a British Columbia corporation (“VBI”) and BRII BIOSCIENCES LIMITED, a Cayman Islands company (“Brii” and together with VBI, each a “Party” and together the “Parties”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the License Agreement (as defined below).
WHEREAS
A. Whereas VBI and certain of its affiliates and K2 HealthVentures LLC (“K2”) are parties to that certain Loan and Guaranty Agreement dated as of May 22, 2020, as amended by (a) that certain First Amendment to Loan and Guarantee Agreement and Affirmation of Pledge and Security Agreement, dated as of May 17, 2021, (b) that certain Second Amendment to Loan and Guarantee Agreement and Affirmation of Pledge and Security Agreement, dated as of September 14, 2022, (c) that certain Third Amendment to Loan and Guarantee Agreement and Affirmation of Pledge and Security Agreement, dated as of July 5, 2023, and (d) that certain Fourth Amendment to Loan and Guaranty Agreement, Waiver and Forbearance Agreement dated as of the date hereof (such amendment described in clause (d), the “Loan Amendment” and collectively, the “Loan Agreement”).
B. Whereas the Loan Amendment requires VBI and its Affiliates to use commercially reasonable efforts to achieve the essential activities set forth on Exhibit A (the “Essential Activities”) by the applicable deadlines set forth on Exhibit A.
C. Whereas Section 4.2(a) of that certain Asset Purchase Agreement, dated as of the date hereof (the “Rehovot Purchase Agreement”) entered into by affiliates of Brii, SciVac Ltd. and VBI provides that the obligation of Purchaser (as defined therein) to consummate and effect the Rehovot Purchase Agreement and the transactions contemplated therein is subject to the satisfaction on or prior to the closing date of the following conditions (amongst other conditions set forth therein), which may be waived in writing by Purchaser (as defined therein): (i) the completion by VBI of all of the Additional Priority Activities set forth on Exhibit B (the “Priority Activities”) and (ii) the completion by VBI of all of the Essential Activities.
D. Whereas VBI is a party to that certain License Agreement with Ferring International Center S.A. (“Ferring”), dated as of September 1, 2021 (the “Ferring License”).
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
| 1. | Essential Activities. VBI shall use commercially reasonable efforts to complete the Essential Activities set forth on Exhibit A by the dates set forth therein. |
| 2. | Priority Activities. VBI shall use commercially reasonable efforts to complete the Priority Activities set forth on Exhibit B by the dates set forth therein. |
| -1- |
| 3. | Ferring Consent. VBI shall use commercially reasonable efforts to obtain consent under the Ferring License in the form attached hereto as Exhibit C (the “Ferring Consent Letter”). Until VBI has obtained such consent, VBI shall (a) communicate with Ferring in writing no less than [**] regarding the status of the Ferring Consent Letter and (b) provide Brii with an update on the status of the Ferring Consent Letter and copies of any such communication sent to or received from Ferring on a [**] basis . Neither VBI nor any of its Affiliates shall make or agree to make any accommodations, amendments to the Ferring Consent Letter, conditions, or increase any obligation of Brii Bio or its affiliates in any matter, without first obtaining Brii’s written consent. VBI agrees to bear all such costs and expenses associated with or related to obtaining Ferring’s consent. Promptly after obtaining such consent, VBI shall provide written notice and a copy of the executed Ferring Consent Letter to Brii. |
| 4. | License Agreement. Upon completion of the Essential Activities by VBI and receipt of the executed Ferring Consent Letter by Brii in accordance with Section 3 above, in each case, prior to December 31, 2024, VBI and Brii shall within five (5) business days enter into a license agreement in the form attached as Exhibit D (the “License Agreement”) pursuant to which VBI will grant Brii a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to the GBM Program (VBI-1901) (the “VBI-1901 License”) for development and commercialization in the Asia-Pacific (APAC) region (excluding Japan). Prior to the earlier of (i) the date that VBI and Brii enter into the License Agreement and (ii) December 31, 2024 (the “License Cancellation End Date”), VBI may (with the consent of K2 HealthVentures LLC, and its successors and assigns, as administrative agent under the Loan Agreement) cancel its obligation to enter into the VBI-1901 License (the “License Cancellation Right”) by providing Brii with advanced written notice of its intent to not grant Brii the VBI-1901 License and, if applicable, paying the License Cancellation Fee (as defined herein) to Brii by wire transfer of immediately available funds within five (5) business days of the termination date specified in the notice provided to Brii in accordance with this Section 4. For purposes hereof, the “License Cancellation Fee” means if VBI exercises the License Cancellation Right at any time during the period beginning on July 1, 2024 and ending on December 31, 2024, five million dollars ($5,000,000). |
| 5. | Information Rights. VBI will deliver to Brii, (a) within five (5) business days after delivery to K2, the items required pursuant to Sections 5.1(a)(ii) and 5.1(b) of the Loan Amendment and (b) immediately, notice of the occurrence of any Additional Specified Default (as defined in the Loan Amendment) or the breach of any Forbearance Condition (as defined in the Loan Amendment). In addition, VBI acknowledges and agrees that Brii’s information rights under Section 3.2 of the Letter Agreement, dated July 5, 2023, among VBI, Variation Biotechnologies, Inc., SciVac Ltd and Brii continue in full force and effect and shall survive the execution of this Agreement and any of the transactions contemplated hereby and are incorporated by reference herein. |
| 6. | Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right. |
| 7. | Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT, AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE PARTIES HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE PARTIES, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY. |
[Signature Page Follows]
| -2- |
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
| VBI VACCINES INC. | ||
| By: | /s/ J. R. Baxter | |
| Name: | J. R. Baxter | |
| Title: | CEO | |
| BRII BIOSCIENCES LIMITED | ||
| By: | /s/ Zhi Hong | |
| Name: | Zhi Hong | |
| Title: | Chief Executive Officer | |
Signature Page to Side Letter to Essential Activities Letter Agreement
Exhibit
A
Timetable for Essential Activities
| [**] |
Schedule
A
BRII-179 Document Transfers
[**]
Schedule B
[**]
Exhibit
B
Timetable for Additional Manufacturing Activities
[**]
Exhibit
C
Ferring Consent Letter
[**]
Exhibit
D
License Agreement
[**]
Exhibit 10.9
SIF Project No. 812-815774
STRATEGIC INNOVATION FUND
AMENDMENT AGREEMENT NO. 2
This Amendment Agreement made
Between:
HIS MAJESTY THE KING IN RIGHT OF CANADA
(“His 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”)
Each a “Party” to this Amendment Agreement and collectively referred to as the “Parties”.
SIF Project No. 812-815774
Amendment No. 2
RECITALS
WHEREAS
| A- | The Minister, the Recipient and the Guarantor entered into a contribution agreement dated September 16, 2020 under the Strategic Innovation Fund for which was subsequently amended on March 28, 2022. The contribution agreement and the amendment agreements are collectively referred to as the “Contribution Agreement”; |
| B- | The Minister, the Recipient and the Guarantor have agreed to amend, inter alia, the project completion date and the statement of work under the terms of the Contribution Agreement. |
NOW THEREFORE in consideration of their respective obligations set out below, the Parties hereto acknowledge and agree as follows:
Interpretation
| 1. | All capitalized terms not otherwise defined herein have the same meaning ascribed to them in the Contribution Agreement. |
Execution
| 2. | This Amendment Agreement must be signed by the Parties and received by the Minister within thirty (30) days of its signature on behalf of the Minister, failing which it shall be null and void. |
Amendment
| 3. | Section 2 – Interpretation, sub-section 2.1 Definitions – shall be amended by deleting the definition of “Project Completion Date” in section 2.1. Definitions, and replacing it with the following: |
““Project Completion Date” means March 31, 2027.”
| 4. | Schedule 1 – The Statement of Work (SOW) of the Contribution Agreement, section 2 (Activities), Forms A(Master Schedule), B(Milestones), C1 (Eligible Cost Breakdown), C2 (Estimated Cost Breakdown by Fiscal Year) and D (Project Locations) are hereby deleted in their entirety and replaced with the new section 2 Activities, and Forms A, B, C1, C2 and D attached hereto as Annex A. |
| 2 |
SIF Project No. 812-815774
Amendment No. 2
General
| 5. | Each of the Parties shall, at the request of the other Party to this Amendment Agreement, execute such documents and do such acts as may be reasonably required to carry out the terms of this Amendment Agreement. |
| 6. | This Amendment Agreement may be executed in as many counterparts as are necessary, and when executed by all Parties hereto, such counterparts shall constitute one agreement. |
| 7. | Except as amended by this Amendment Agreement, all of the provisions of the Contribution Agreement shall continue in full force and effect until such time as the Contribution Agreement is terminated. |
| 8. | The Contribution Agreement and this Amendment Agreement will henceforth be read together and will have the effect as if all the provisions of such agreements were contained in one instrument. |
| 9. | No modification, supplement or amendment to this Amendment Agreement shall be binding unless executed in writing by all of the Parties hereto. |
[Remainder of this page intentionally left blank]
| 3 |
SIF Project No. 812-815774
Amendment No. 2
IN WITNESS WHEREOF the Parties hereto have executed this Amendment Agreement through duly authorized representatives.
HIS MAJESTY THE KING IN RIGHT OF CANADA as represented by the Minister of Industry |
| |||
| Per: | /s/ Sean Letourneau | Date: | March 27, 2024 | |
| Name: | Sean Letourneau | |||
| Title: | Director | |||
Life science, COVID and Biomanufacturing |
||||
| Variation Biotechnologies Inc. | ||||
| Per: | /s/ Adam Buckley | Date: | March 28, 2024 | |
| Name: | Adam Buckley | |||
| Title: | Senior Vice President, Business Development | |||
| I have authority to bind the Corporation. | ||||
| VBI Vaccines Inc. | ||||
| Per: | /s/ Jeff Baxter | Date: | March 28, 2024 | |
| Name: | Jeff Baxter | |||
| Title: | Chief Executive Officer | |||
| I have authority to bind the Corporation. | ||||
| 4 |
SIF Project No. 812-815774
Amendment No. 2
Attachment: Annex A
Annex A
Revised Statement of Work
[**]
FORM A – Master Schedule (Gantt Chart)
[**]
FORM B – MILESTONES
[**]
FORM C1 – PROJECT COSTS BREAKDOWN
[**]
FORM C2 – ESTIMATED COST BREAKDOWN BY FISCAL YEAR
[**]
FORM D – PROJECT LOCATION AND COSTS
[**]
| 5 |
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: May 15, 2024 | |
| /s/ Jeffrey Baxter | |
| Jeffrey Baxter | |
| President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Nell Beattie, 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: May 15, 2024 | |
| /s/ Nell Beattie | |
| Nell Beattie | |
| Chief
Financial Officer and Head of Corporate 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 March 31, 2024, 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: May 15, 2024 | |
| /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 March 31, 2024, as filed with the Securities and Exchange Commission (the “Report”), I, Nell Beattie, Chief Financial Officer and Head of Corporate 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: May 15, 2024 | |
| /s/ Nell Beattie | |
| Nell Beattie | |
| Chief Financial Officer and Head of Corporate Development (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Statement of Financial Position [Abstract] | ||
| Common stock, shares authorized | Unlimited | Unlimited |
| Common stock, no par value | $ 0 | $ 0 |
| Common stock, shares issued | 25,236,766 | 23,918,983 |
| Common stock, shares outstanding | 25,236,766 | 23,918,983 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Income Statement [Abstract] | ||
| Revenues, net | $ 1,214 | $ 485 |
| Operating expenses: | ||
| Cost of revenues | 2,724 | 3,559 |
| Research and development | 2,571 | 3,151 |
| Sales, general and administrative | 7,671 | 13,284 |
| Total operating expenses | 12,966 | 19,994 |
| Loss from operations | (11,752) | (19,509) |
| Interest expense, net of interest income | (1,818) | (1,429) |
| Foreign exchange loss | (4,330) | (6,813) |
| Loss before income taxes | (17,900) | (27,751) |
| Income tax expense | ||
| NET LOSS | (17,900) | (27,751) |
| Other comprehensive income | 3,484 | 6,599 |
| COMPREHENSIVE LOSS | $ (14,416) | $ (21,152) |
| Net loss per share of common shares, basic | $ (0.73) | $ (3.22) |
| Net loss per share of common shares, diluted | $ (0.73) | $ (3.22) |
| Weighted-average number of common shares outstanding, basic | 24,584,798 | 8,608,539 |
| Weighted-average number of common shares outstanding, diluted | 24,584,798 | 8,608,539 |
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (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, 2022 | $ 442,312 | $ 90,020 | $ 21,440 | $ (489,609) | $ 64,163 |
| Beginning balance, shares at Dec. 31, 2022 | 8,608,539 | ||||
| Stock-based compensation | $ 10 | 2,001 | 2,011 | ||
| Net loss | (27,751) | (27,751) | |||
| Currency translation adjustments | 6,599 | 6,599 | |||
| Ending balance, value at Mar. 31, 2023 | $ 442,322 | 92,021 | 28,039 | (517,360) | 45,022 |
| Ending balance, shares at Mar. 31, 2023 | 8,608,539 | ||||
| Beginning balance, value at Dec. 31, 2023 | $ 454,214 | 107,431 | 28,327 | (582,445) | 7,527 |
| Beginning balance, shares at Dec. 31, 2023 | 23,918,983 | ||||
| Common shares issued for cash, net of issuance costs | $ 843 | 843 | |||
| Common shares issued in financing transactions, net of issuance costs, shares | 1,317,783 | ||||
| Stock-based compensation | 579 | 579 | |||
| Net loss | (17,900) | (17,900) | |||
| Currency translation adjustments | 3,484 | 3,484 | |||
| Ending balance, value at Mar. 31, 2024 | $ 455,057 | $ 108,010 | $ 31,811 | $ (600,345) | $ (5,467) |
| Ending balance, shares at Mar. 31, 2024 | 25,236,766 |
NATURE OF BUSINESS AND CONTINUATION OF BUSINESS |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| 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 the wholly owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd., an Israeli company (“SciVac”); SciVac Hong Kong Limited, a company incorporated pursuant to the Companies Ordinance (Chapter 622 of the Laws of HongKong) and a wholly owned subsidiary (“SciVac HK”); and VBI Vaccines B.V, a Netherlands company and a wholly owned subsidiary (“VBI BV”), are collectively referred to as the “Company”, “we”, “us”, “our”, or “VBI”.
The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 160 Second Street, Floor 3, Cambridge, MA 02142. In addition, the Company has manufacturing facilities located in Rehovot, Israel and research facilities located in Ottawa, Ontario, Canada.
Principal Operations
VBI is a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.
Partnership with Brii Bio
On July 5, 2023, the Company announced the expansion of its hepatitis B partnership with Brii Biosciences Limited (“Brii Bio”). Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between the Company and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between the Company and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in Asia Pacific (“APAC”), excluding Japan. As part of this collaboration, Brii Bio paid the Company an upfront payment of $15,000 consisting of a $3,000 equity investment in a concurrent registered direct offering, $5,000 as an advance payment for the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023, by and between the Company and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement (the “Letter Agreement”), dated July 5, 2023, by and among the Company, SciVac, and Brii Bio, the Company also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2 HealthVentures LLC (“K2HV”), in all of its respective right, title, and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of the Company’s obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (each as defined herein).
On February 13, 2024, the Company entered into a series of agreements with Brii Bio, pursuant to which, subject to achievement of certain activities, we would receive up to $33,000 in consideration from Brii Bio, consideration which will be used to correspondingly reduce our obligations due under the Loan and Guaranty Agreement (“Loan Agreement”).
Rehovot Purchase Agreement
On February 13, 2024, the Company and SciVac entered into a purchase agreement (the “Rehovot Purchase Agreement”) with Brii Bio Israel Ltd (“Brii Israel”), a wholly-owned subsidiary of Brii Bio, prior to the closing, and joined as a party to the agreement prior to the closing as the purchaser, and Brii Biosciences, Inc, a Delaware corporation, pursuant to which, upon achievement of certain activities and closing of the transactions contemplated by the Rehovot Purchase Agreement, subject to the terms and conditions therein, SciVac will sell to Brii Israel certain assets, including SciVac and its affiliates’ interest and rights in certain leases with respect to the vaccine manufacturing facility in Israel, for an aggregate purchase price of $10,000, which is then required to be paid to K2 HealthVentures (“K2HV”) pursuant to the terms of the Fourth Amendment (as defined below).
The Rehovot Purchase Agreement contains representations and warranties of SciVac and Brii Israel that are typical for transactions of this type. The Rehovot Purchase Agreement also contains covenants on the part of the Company that are typical for transactions of this type.
The closing of the transactions pursuant to the Rehovot Purchase Agreement are subject to the terms and conditions therein, including closing conditions that are typical for transactions of this type and the Company’s completion of the Essential Activities (as defined below). Closing will not occur prior to June 30, 2024.
Brii Purchase Agreement
On February 13, 2024, the Company and VBI Cda entered into a Purchase Agreement with Brii Bio (the “Brii Purchase Agreement”), pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for a secured promissory note in the principal amount up to $10,000 (the “Note”) to be issued by Brii Bio, which is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment (as defined below), in exchange for a reduction in the Company’s obligations under the Loan Agreement equal to the initial principal amount of the Note. The Note was issued to Brii Bio on February 13, 2024. The initial principal amount of the Note is $2,500, which shall be increased by an aggregate amount equal to $7,500 upon the Company’s obtaining applicable consents under the license agreement between Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004 and subsequently amended and restated effective September 1, 2021 (the “Amended and Restated Ferring License Agreement”).
Brii Side Letter
On February 13, 2024, the Company and Brii Bio entered into a side letter (the “Side Letter”) setting forth certain essential and additional priority activities to transfer manufacturing responsibility for clinical supply and commercial supply of VBI-2601 and PreHevbri for the Brii Territories set forth in the Side Letter (the “Essential Activities”) the Company is required to complete as a condition to the entry into the License Agreement (as defined below) and consummation of the transactions pursuant to the Rehovot Purchase Agreement. As of March 31, 2024, the Essential Activities were still in progress and not yet completed. The principal amount of the Note shall increase up to $18,000 upon completion of the Essential Activities and the Company’s obligations under the Loan Agreement shall be reduced by a corresponding amount.
Brii License Agreement
Upon completion of the Essential Activities pursuant to the Side Letter, VBI Cda and Brii Bio will enter into a license agreement (the “Brii License Agreement”) pursuant to which Brii Bio shall issue a secured promissory note in the amount of $5,000 as consideration for a perpetual, royalty-free, milestone-free, sublicensable, fully-paid, and exclusive license to the GBM program (VBI-1901) for development and commercialization in the APAC region (excluding Japan), which such note is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment. The entry by VBI Cda and Brii Bio into the Brii License Agreement is subject to the Company completing the Essential Activities.
Loan Agreement and Forbearance Agreement with K2HV
On each of January 9, 2024, January 23, 2024, and February 6, 2024, as discussed in Note 9, the Loan Parties entered into extensions to the Forbearance Agreement. Additionally, on February 13, 2024, as discussed in Note 9, the Loan Parties entered into the Fourth Amendment.
Liquidity and Going Concern
The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development and commercialization of its products.
The Company has an accumulated deficit of $600,345 and cash of $12,595 as of March 31, 2024. Cash flows used in operating activities were $11,770 for the three months ended March 31, 2024.
The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and commercially launch and sell our approved products. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. Based on available cash at March 31, 2024, together with the net proceeds from the April 2024 Offering (defined below), in order to continue to fund our operations, we must raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so. If we are unable to obtain additional financing in the near future, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.
ATM Program
On August 26, 2022, the Company 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which the Company may offer and sell its common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal (the “Jefferies ATM Program”). During the three months ended March 31, 2024, the Company issued common shares under the Jefferies ATM Program, for total gross proceeds of $868 at a weighted average price of $per share. The Company incurred $25 in sales agent commissions and share issuance costs related to the common shares issued during the three months ended March 31, 2024, resulting in net proceeds of $843. The Company terminated the Jefferies ATM Program on May 9, 2024, effective as of May 10, 2024.
On April 16, 2024, upon filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company became subject to General Instruction I.B.6 of Form S-3, pursuant to which in no event will the Company sell its common shares in a registered primary offering using Form S-3 with a value exceeding more than one-third of our public float in any 12 calendar month period so long as our public float remains below $75,000.
April 2024 Registered Direct Offering
On April 9, 2024, the Company entered into a securities purchase agreement (the “April 2024 Purchase Agreement”) with certain institutional investors named therein pursuant to which the Company issued and sold common shares and accompanying warrants to purchase up to 2,272,728 common shares (the “April 2024 Warrants”) at a combined offering price of $ per common share and accompanying April 2024 Warrant in a registered direct offering (the “April 2024 Offering”). The April 2024 Offering closed on April 11, 2024. The April 2024 Warrants have an exercise price of $ per share, are immediately exercisable on the date of issuance, and expire five years following the date of issuance. Net proceeds to us from the April 2024 Offering, after deducting placement agent fees and estimated offering expenses payable by us, were approximately $1,700. In connection with the April 2024 Offering, the Company also issued to H.C. Wainwright & Co., LLC or its designees, placement agent warrants to purchase up to 136,364 common shares (the “April 2024 Placement Agent Warrants”) as compensation in connection with the April 2024 Offering. The April 2024 Placement Agent Warrants have substantially the same terms and conditions as the April 2024 Warrants, except that the April 2024 Placement Agent Warrants have an exercise price of $1.10 per share, which represents 125% of the offering price per common share and accompanying April 2024 Warrant and expire five years following the commencement of sales pursuant to the April 2024 Offering.
Nasdaq Minimum Bid Price Requirement – Extension of Compliance Period
As previously reported, on November 1, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023, through October 31, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
On April 30, 2024, the Company received a letter from the Nasdaq Stock Market notifying the Company that the Company has been granted an additional 180-day period, or until October 28, 2024, to regain compliance with the Minimum Bid Price Requirement. The new compliance period is an extension of the initial Compliance Period provided for in Nasdaq’s deficiency notice to the Company, dated November 1, 2023. The Nasdaq Stock Market’s determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
If compliance with the Minimum Bid Price Requirement cannot be demonstrated by October 28, 2024, the Nasdaq Stock Market will provide written notification that the Company’s common shares could be delisted. In such event, Nasdaq rules permit the Company to appeal any delisting determination to a Nasdaq Hearings Panel. Accordingly, there can be no assurance that the Company will be able to regain compliance with the Nasdaq listing rules or maintain its listing on Nasdaq. The Company has not regained compliance as of the date of this Form 10-Q, and if it fails to regain compliance by October 28, 2024, its common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.
Financial instruments recognized in the condensed consolidated balance sheet consist of cash, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.
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SIGNIFICANT ACCOUNTING POLICIES |
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Mar. 31, 2024 | |
| 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 U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2023 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), as filed with the SEC on April 16, 2024.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.
In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.
Significant Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2023 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2024.
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NEW ACCOUNTING PRONOUNCEMENTS |
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Mar. 31, 2024 | |
| Accounting Changes and Error Corrections [Abstract] | |
| NEW ACCOUNTING PRONOUNCEMENTS | 3. NEW ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements, not yet adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires incremental annual and quarterly disclosures about segment measures of profit or loss as well as significant segment expenditures. It also requires public entities with a single reportable segment to provide all segment disclosures required by the amendments and all existing segment disclosures in Topic 280. ASU 2023- 07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. As we have a single reportable segment, we expect the adoption of this standard to result in increased disclosures in the notes to our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) which enhances the transparency and decision usefulness of income tax disclosures. The amendments under ASU 2023-09 require public business entities to annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for fiscal years beginning after December 15, 2024. Public business entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. The Company will apply this ASU for year ended December 31, 2025, and we do not anticipate that this new guidance will have a material impact on the note disclosures going forward.
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INVENTORY, NET |
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| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY, NET | 4. INVENTORY, NET
Inventory consists of the following:
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OTHER CURRENT ASSETS |
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| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| OTHER CURRENT ASSETS | 5. OTHER CURRENT ASSETS
Other current assets consisted of the following:
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INTANGIBLE ASSETS, NET, AND GOODWILL |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS, NET, AND GOODWILL | 6. INTANGIBLE ASSETS, NET, AND GOODWILL
The change in carrying value for IPR&D assets from December 31, 2023, relates to currency translation adjustments which decreased by $765 for the three months ended March 31, 2024.
The change in carrying value for goodwill from December 31, 2023, relates to currency translation adjustments which decreased by $23 for the three months ended March 31, 2024.
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OTHER CURRENT LIABILITIES |
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| Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER CURRENT LIABILITIES | 7. 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, Long-Term Debt and Note 10, Stockholders’ Equity (Deficit) and Additional Paid-in Capital.
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LONG-TERM DEBT |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT | 9. LONG-TERM DEBT
As of March 31, 2024, and December 31, 2023, the Company’s long-term debt is as follows:
On May 22, 2020, the Company, along with its subsidiary VBI Cda (collectively, the “Borrowers”), entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders, converted $2,000 of the secured term loan into common shares at a conversion price of $43.80 per share.
On May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the Lenders and received additional loan advances of $12,000.
On September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $100,000 from $50,000, which term loans are available in additional tranches subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants, (iii) extend the final maturity date for the term loans to September 14, 2026, which may be extended to September 14, 2027, under certain circumstances, and (iv) to the extent that the maturity date is extended, the term loans will begin amortizing on a monthly basis on September 14, 2026.
On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.
Pursuant to the Second Amendment, the Lenders have the ability to convert $7,000 into common shares, by which $ of the term loans shall be convertible into common shares at a conversion price of $ per share and $ of the term loans shall be convertible into common shares at a conversion price of $ per share (“K2HV conversion feature”).
In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08 per share. If and/or when additional tranches are advanced pursuant to the Second Amendment, the Company will issue additional warrants to purchase up to 72,680 common shares pursuant to the Second Amendment Warrant.
The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.
The Company is required to make a final payment equal to 6.95% of the aggregate term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Second Amendment (the “Second Amendment Final Payment”). The final payment related to the refinanced $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment of $2,224 remains and is due the earlier of June 1, 2024 or the earlier prepayment of the term loans in accordance with the Second Amendment (the “Original Final Payment”).
Upon receipt of additional funds, issuable pursuant to the various tranches, under the Second Amendment, additional common shares will be issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the applicable tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $24.08, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.
On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.
The secured term loan maturity date is September 14, 2026, until which the Company is required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, included both financial and non-financial covenants, including quarterly minimum Net Revenue (as defined in the Loan Agreement) targets. The Company was not in compliance with the minimum Net Revenue covenant for the measurement periods ended September 30, 2023 and December 31, 2023, and did not qualify for an exception for this covenant, which constituted an Event of Default (as defined in the Loan Agreement). In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, the Company began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023.
On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement periods ended September 30, 2023, from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. On each of November 28, 2023, December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, and February 6, 2024, the Loan Parties entered into extensions to the Forbearance Agreement pursuant to which the Lenders agreed to extend the Forbearance Period through and including December 12, 2023, December 26, 2023, January 9, 2024, January 23, 2024, February 6, 2024, and February 20, 2024, respectively, subject to compliance by the Borrowers with the same terms and conditions as set forth in the Forbearance Agreement.
The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.
On February 13, 2024, the Loan Parties entered into an amendment (the “Fourth Amendment”) to the Loan Agreement, effective upon entry into certain transactions with Brii Bio, pursuant to which the parties have agreed to, among other things, (i) remove a financial covenant requiring us to maintain minimum net revenue of 75% of projections, (ii) the forbearance by K2HV and the other lenders party thereto, prior to the earlier of (A) December 31, 2024, (B) the date the Side Letter (as defined below) ceases to be in full force and effect prior to the completion of the Essential Activities (as defined below) and (C) the date the Essential Activities (as defined below) are complete (the “Forbearance Expiration Date”) from exercising their remedies with respect to the occurrence of Events of Default (as defined in the Loan Agreement) subject to certain exceptions, and (iii) following the Forbearance Expiration Date, add a financial covenant requiring us to maintain a minimum cash amount equal to our obligations under the Loan Agreement at all times.
The effectiveness of the Fourth Amendment was conditioned upon entry into the Brii Purchase Agreement, the Rehovot Purchase Agreement and the Side Letter, each of which were entered into by us and the respective parties thereto on February 13, 2024, as described above. As discussed in Note 1, on February 13, 2024 the obligations under the Loan Agreement were reduced by the initial principal amount of the Note of $2,500.
The total principal amount of the loan under the Loan Agreement, as amended by the Fourth Amendment, outstanding at March 31, 2024, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $5,699 in connection with the Fourth Amendment, is $53,199. The principal amount of the loan made under the Loan Agreement as amended by the Fourth Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4%. The interest rate as of March 31, 2024 was 12.50%. The effective interest rate on the loan of $47,500, excluding the Original Final Payment and Second Amendment Final Payment, is 20.39%.
The total initial debt discount related to the Second Amendment is $7,359. As of March 31, 2024, and December 31, 2023, the unamortized debt discount was $4,454 and $4,930, respectively. The debt discount is being charged to interest expense, net in the condensed consolidated statement of operations and comprehensive loss using the effective interest method over the term of the debt.
At March 31, 2024 and December 31, 2023, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be $46,456 and $48,077, respectively.
Interest expense, net recorded in the three months ended March 31, 2024 and 2023 was as follows:
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STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL | 10. STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL
Stock option plans
The Company’s stock option plans are approved by and administered by the Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.
2006 VBI US Stock Option Plan
The 2006 VBI US Stock Option Plan (the “2006 Plan”), was approved by and was previously administered by the VBI US board of directors which designated eligible participants to be included under the 2006 Plan, and designated the number of options, exercise price and vesting period of the new options. The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan (as defined below) following the PLCC Merger and no further options will be issued under the 2006 Plan. As of March 31, 2024, there were options outstanding under the 2006 Plan.
2014 Equity Incentive Plan
On May 1, 2014, the VBI DE board of directors adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the VBI DE’s shareholders on July 14, 2014. The 2014 Plan was superseded by the 2016 Plan (as defined below) and no further options will be issued under the 2014 Plan. As of March 31, 2024, there were options outstanding under the 2014 Plan.
2016 VBI Equity Incentive Plan
The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of % of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”), performance share units (“PSUs”), shares of restricted stock, or other such award as may be permitted under the 2016 Plan. As of March 31, 2024, there were options outstanding and no RSUs unvested under the 2016 Plan.
The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled at March 31, 2024.
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REVENUES, NET AND DEFERRED REVENUE |
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| REVENUES, NET AND DEFERRED REVENUE | 11. REVENUES, NET AND DEFERRED REVENUE
Revenues, net comprises 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 March 31, 2024:
The following table presents changes in the deferred revenue balance for the three months ended March 31, 2024:
Brii Collaboration Agreements – VBI-2601
On December 4, 2018, the Company entered into a Collaboration and License Agreement (the “Brii Collaboration and License Agreement”) with Brii Bio, as amended on April 8, 2021, pursuant to which:
On December 20, 2021, the Company and Brii Bio further amended the Brii Collaboration and License Agreement (the “Brii Second Amendment Collaboration and License Agreement”) whereby:
Pursuant to the Brii Collaboration and License Agreement, as amended by the Brii Second Amendment Collaboration and License Agreement, the Company was responsible for the R&D Services and Brii Bio was responsible for costs relating to the clinical trials for the Licensed Territory.
The initial consideration of the Brii Collaboration and License Agreement consisted of an $11,000 non-refundable upfront payment. As part of the Brii 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 of its common shares valued at $3,626 (based on the Company’s common share price on December 4, 2018). The remaining $7,374, deemed to be the initial transaction price, was allocated to two performance obligations: (i) the VBI-2601 license and (ii) R&D services. The R&D services were allocated $4,737 of the transaction price using an estimated selling price based on an expected cost plus a margin approach and the remaining transaction price of $2,637 was allocated to the VBI-2601 license using the residual method.
There was no additional consideration contemplated in the Brii Second Amendment Collaboration and License Agreement.
On July 5, 2023, the Company and Brii Bio entered into the A&R Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the A&R Collaboration Agreement, expand the Licensed Territory to the entire world (the “New Licensed Territory”) for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI-2601 (“VBI-2601 Licensed Product”). Pursuant to the A&R Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the VBI-2601 Licensed Products in the New Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in the New Licensed Territory. Except for the rights and licenses expressly granted in the A&R Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property. Additionally, the A&R Collaboration Agreement constituted the entire agreement between the VBI and Brii Bio relating to VBI-2601 and superseded all previous agreements, including the Brii Collaboration and License Agreement and the Brii Second Amendment Collaboration and License Agreement. As a result of the A&R Collaboration Agreement, the unsatisfied performance obligation of $1,925 under the Brii Collaboration and License Agreement prior to the amendment and restatement was immediately recognized as R&D service revenues during the year ended December 31, 2023.
The initial consideration of the A&R Collaboration Agreement consisted of a $5,000 non-refundable upfront payment. In addition, prior to the purchase agreement, dated February 13, 2024 (see details below and Note 1), by and between the Company and Brii Bio (the “Brii Purchase Agreement”), the Company was also eligible to receive up to an additional $227,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the New 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 were recognized under the A&R Collaboration Agreement or have been recognized under the A&R Collaboration Agreement. The $5,000 of initial consideration of the A&R Collaboration Agreement was allocated to three performance obligations: (i) the VBI-2601 license for the New Licensed Territory; (ii) R&D services related to VBI-2601; and (iii) the technology transfer of VBI-2601. The initial consideration of $5,000 was allocated as follows: R&D services were allocated $43, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $3,360 was allocated to the VBI-2601 license for the New Licensed Territory.
The A&R Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) expiration, invalidation or lapse of the last Company patent claiming such VBI-2601 Licensed Product, (ii) 10 years from the date of first commercial sale of such VBI-2601 Licensed Product in the applicable region, or (iii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such VBI-2601 Licensed Product in such region. Upon expiration (but not an earlier termination) of the A&R Collaboration Agreement in each region of the New Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license, which such license, pursuant to the Brii Purchase Agreement (as defined herein), shall also be irrevocable under the Company’s technology related to the VBI-2601 Licensed Products in such region to make and sell VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.
On February 13, 2024, the Company and VBI Cda entered into the Brii Purchase Agreement, pursuant to which, upon achievement of certain activities, the Company and VBI Cda will sell, transfer, convey and assign to Brii Bio, substantially all of the intellectual property related to VBI-2601 owned by the Company and VBI Cda, for the Note to be issued by Brii Bio, which is then required to be assigned to K2HV pursuant to the terms of the Fourth Amendment, in exchange for a reduction in the Company’s obligations under the Loan Agreement equal to the initial principal amount of the Note. The Note was issued by Brii Bio on February 13, 2024 for the initial principal amount of $2,500, and is included in deferred revenue as of March 31, 2024, subsequently, the activities required to confirm the $2,500 have been achieved. In addition, pursuant to the Brii Purchase Agreement, subject to achievement of certain activities set forth in the A&R Collaboration Agreement, the Company and Brii Bio agreed to amend the A&R Collaboration Agreement to, among other things, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for research studies and development of VBI-2601 to be “perpetual and irrevocable,” (ii) omit the requirement for Brii Bio to obtain marketing approval and commercialize VBI-2601 in the United States and China, (iii) revise the indemnity requirements such that Brii Bio indemnifies the Company with respect to certain transferred intellectual property after the effective date of the Brii Purchase Agreement and the Company indemnifies Brii Bio prior to such date, (iv) omit the requirement for Brii Bio to make royalty and milestone payments to the Company and (v) omit certain rights of the Company to terminate the A&R Collaboration Agreement and certain other effects of termination of the A&R Collaboration Agreement.
Brii Collaboration Agreements – PreHevbri
On July 5, 2023, the Company and Brii Bio also entered into the Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the Collaboration Agreement, acquired an exclusive license for PreHevbri in APAC, excluding Japan (“PreHevbri Licensed Territory”), for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import PreHevbri (“PreHevbri Licensed Product”). Pursuant to the Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the PreHevbri Licensed Products in the PreHevbri Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in the PreHevbri Licensed Territory. Except for the rights and licenses expressly granted in the Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property.
The initial consideration of the Collaboration Agreement consisted of a $2,000 non-refundable upfront payment. In addition, the Company was also eligible to receive up to an additional $195,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the PreHevbri Licensed Territory, prior to the Brii Purchase Agreement. 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 were recognized under the Collaboration Agreement or have been recognized under the Collaboration Agreement. The $2,000 of the initial consideration of the Collaboration Agreement was allocated to three performance obligations: (i) the PreHevbri license for the PreHevbri Licensed Territory; (ii) R&D services related to PreHevbri; and (iii) the technology transfer of PreHevbri. The initial consideration of $2,000 was allocated as follows: the R&D services were allocated $88, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $315 was allocated to the PreHevbri license for the PreHevbri Licensed Territory.
The Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) 10 years from the date of first commercial sale of such PreHevbri Licensed Product in the applicable region, or (ii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such PreHevbri Licensed Product in such region. Upon expiration (but not an earlier termination) of the Collaboration Agreement in each region of the PreHevbri Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license, which such license, pursuant to the Brii Purchase Agreement, shall also be irrevocable, under the Company’s technology related to the PreHevbri Licensed Products in such region to make and sell PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.
Pursuant to the Brii Purchase Agreement, on February 13, 2024, the Company and Brii Bio agreed to amend the Collaboration Agreement to, among other things, subject to the terms and conditions set forth in the Collaboration Agreement, (i) amend the terms of the royalty bearing license granted by the Company to Brii Bio for the global development activities of the Licensed Product to be “perpetual and irrevocable”, (ii) omit the requirement for Brii Bio to obtain marketing approval for the Licensed Product in certain territories and (iii) omit the requirement for Brii Bio to make royalty and milestone payments to the Company.
The R&D services and technology transfer for the Brii Collaboration Agreements 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.
Upon termination of the Brii Collaboration Agreements 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.
Supply Agreement
On July 5, 2023, in connection with the Brii Collaboration Agreements, the Company and Brii Bio entered into the Supply Agreement related to the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures, as negotiated. Pursuant to the Supply Agreement, the Company received an advance payment of $5,000 from Brii Bio. The advance payment of $5,000 will be allocated to the following performance obligations, depending on which performance obligation is requested by Brii Bio, until the advance payment of $5,000 has been fully utilized: (i) units of VBI-2601 and/or PreHevbri; and (ii) manufacturing expenditures. The advance payment of $5,000 is included in deferred revenue as of March 31, 2024.
The performance obligation of a unit of VBI-2601 and/or PreHevbri will be satisfied at a point in time using the prices set out in the Supply Agreement and revenue will be recognized upon transfer of control of the performance obligation.
The manufacturing expenditures 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 March 31, 2024, performance obligations related to the Brii Collaboration Agreements, Brii Purchase Agreement and the Supply Agreements that remain unsatisfied were $10,758.
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COLLABORATION ARRANGEMENTS |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| COLLABORATION ARRANGEMENTS | 12. COLLABORATION ARRANGEMENTS
The Company has entered into, and expects to enter into from time to time in the future, license agreements, funding agreements, collaboration agreements, and similar agreements related to the advancement of its product candidates and research and development efforts. Significant agreements (collectively, the “Collaboration Agreements”) are described in detail in the Company’s 2023 10-K. While specific amounts will fluctuate from quarter to quarter based on clinical trials progress, advancement and completion of research studies and manufacturing projects, and other factors, the Company believes its overall activities regarding Collaboration Agreements are materially consistent with those described in the 2023 10-K, other than described below.
Set forth below are the approximate amounts expensed for Collaboration Agreements during the three months ended March 31, 2024 and 2023, respectively. These expensed amounts are included under Research and Development expenses in the accompanying condensed consolidated statements of operations.
CEPI
The Company has $3,166 recorded as deferred funding, recorded in other current liabilities on the condensed consolidated balance sheet.
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GOVERNMENT GRANTS |
3 Months Ended |
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Mar. 31, 2024 | |
| Government Grants | |
| GOVERNMENT GRANTS | 13. GOVERNMENT GRANTS
Strategic Innovation Fund (“SIF”)
On September 16, 2020, we signed the Contribution Agreement (as amended, the “Contribution Agreement”) with Her Majesty the Queen in Right of Canada, as represented by the Minister of Industry (the “Minister”), whereby the Minister agreed to contribute an amount not exceeding the lesser of (i) 75% of VBI Cda’s costs incurred in respect of the Project, subject to certain eligibility limitations as set forth in the Contribution Agreement and (ii) CAD $55,976 from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). We initially agreed to complete such project, to be conducted exclusively in Canada except as permitted otherwise under certain circumstances, in or before the first quarter of 2022 (“Project Completion Date”). On March 28, 2024, we and the Minister signed an amendment to the Contribution Agreement, the main purpose of which was to broaden the scope of the collaboration to accelerate development of VBI’s novel, mRNA-launched eVLP platform technology, and extend the Project Completion Date from December 31, 2023 to March 31, 2027. In consideration of such contribution, we agreed to guarantee the complete performance and fulfillment of VBI Cda’s obligations under the Contribution Agreement. In the event VBI Cda fails to perform or otherwise satisfy any of its obligations related to the Contribution Agreement, we will become a primary obligor under the Contribution Agreement.
Costs associated with the Contribution Agreement are expensed as incurred in Research and Development expenses and overhead charges are included in Sales, General and Administrative. For the three months ended March 31, 2024 and 2023, the Company recognized $399 and $1,707 respectively, as a reduction in expenses. As of March 31, 2024 and 2023, the Company had $68 and $0 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | 14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($510,595). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) 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.
The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023, and July 13, 2023. The next preliminary hearing is scheduled to be held on June 20, 2024.
On December 5, 2022, another tort claim was filed in the District Court of the central district in Israel naming our subsidiary, SciVac, as a defendant. The claim was filed by a minor and his parents against SciVac, the IMoH, and Prof. Arieh Raziel, requesting compensation due to bodily injury of the minor, who was diagnosed as suffering from an Autism Spectrum Disorder. The plaintiffs allege that the minor’s disabilities and the syndrome from which he suffers were caused due to a combination of several factors, including negligent pregnancy monitoring, negligent labor and delivery procedure, and administration of the alleged defective vaccine (Sci-B-Vac vaccine). Preliminary hearings have not yet been scheduled.
SciVac intends to defend these claims vigorously.
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LEASES |
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| LEASES | 15. 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 U.S. expires on October 31, 2024 with no option to extend. Our manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027. A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional years and June 30, 2027 with an option to extend the term for five additional years. In September 2022, the Company extended the term of our lease for our research facility in Canada, which comprises office and laboratory space, for three additional years, which now has a term ending on December 31, 2025.
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 G&A expenses in the statement of operations and comprehensive loss.
The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
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SEGMENT INFORMATION |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT INFORMATION | 16. SEGMENT INFORMATION
The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.
Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:
There was no revenue attributed to our country of domicile, Canada, for the three months ended March 31, 2024 and 2023.
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SUBSEQUENT EVENTS |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 17. SUBSEQUENT EVENTS
Jefferies ATM Program
Subsequent to March 31, 2024 the Company sold and issued common shares under the Jefferies ATM Program for total gross proceeds of $567 at a weighted average price of $ per share. On May 9, 2024, the Company terminated the Jefferies ATM Program, effective as of May 10, 2024.
April 2024 Offering
On April 9, 2024 the Company entered into the April 2024 Purchase Agreement, as discussed in Note 1, and issued to the investors named therein an aggregate of common shares and the April 2024 Warrants at a combined offering price of $ per common share and accompanying April 2024 Warrant in a registered direct offering.
Exercised Warrants
Subsequent to March 31, 2024, upon exercise of certain outstanding warrants at an exercise price of $0.6057, the Company issued 376,250 common shares for gross proceeds of $228. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Mar. 31, 2024 | |
| 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 U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2023 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), as filed with the SEC on April 16, 2024.
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.
In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.
Significant Accounting Policies
The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2023 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2024. |
INVENTORY, NET (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INVENTORY | Inventory consists of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||
OTHER CURRENT ASSETS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OTHER CURRENT ASSETS | Other current assets consisted of the following:
|
||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET, AND GOODWILL (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF GOODWILL |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER CURRENT LIABILITIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Liabilities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OTHER CURRENT LIABILITIES | Other current liabilities consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOSS PER SHARE OF COMMON SHARES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LONG-TERM DEBT | As of March 31, 2024, and December 31, 2023, the Company’s long-term debt is as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INTEREST EXPENSE | Interest expense, net recorded in the three months ended March 31, 2024 and 2023 was as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK OPTIONS ACTIVITY |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUES, NET AND DEFERRED REVENUE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF REVENUE COMPRISED | Revenues, net comprises the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 March 31, 2024:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF CHANGES IN DEFERRED REVENUE | The following table presents changes in the deferred revenue balance for the three months ended March 31, 2024:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COLLABORATION ARRANGEMENTS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE | Set forth below are the approximate amounts expensed for Collaboration Agreements during the three months ended March 31, 2024 and 2023, respectively. These expensed amounts are included under Research and Development expenses in the accompanying condensed consolidated statements of operations.
|
|||||||||||||||||||||||||||||||||||||||||||||
LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LEASE COST AND OTHER INFORMATION |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES | The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS | Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCHEDULE OF INVENTORY (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Finished goods | $ 899 | $ 1,661 |
| Work-in-process | 3,398 | 2,734 |
| Raw materials | 5,647 | 4,104 |
| Inventory, net | $ 9,944 | $ 8,499 |
SCHEDULE OF OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
| Government receivables | $ 1,508 | $ 1,268 |
| Other current assets | 486 | 495 |
| Total other current assets | $ 1,994 | $ 1,763 |
SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION (Details) - Inprocess Research and Development Assets [Member] - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Indefinite-Lived Intangible Assets [Line Items] | ||
| Gross Carrying Amount | $ 61,500 | $ 61,500 |
| Accumulated Amortization | ||
| Cumulative Impairment Charge | (22,900) | (22,900) |
| Cumulative Currency Translation | (2,866) | (2,101) |
| Net Book value | $ 35,734 | $ 36,499 |
SCHEDULE OF GOODWILL (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Goodwill, Gross Carrying Amount | $ 8,714 | $ 8,714 |
| Goodwill, Cumulative Impairment Charge | (7,292) | (7,292) |
| Goodwill, Cumulative Currency Translation | (315) | (292) |
| Goodwill, Net Book value | $ 1,107 | $ 1,130 |
INTANGIBLE ASSETS, NET, AND GOODWILL (Details Narrative) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
USD ($)
| |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Intangible asset foreign currency translation adjustment | $ 765 |
| Goodwill foreign currency translation adjustment | $ 23 |
SCHEDULE OF OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Other Liabilities Disclosure [Abstract] | ||
| Accrued research and development expenses (including clinical trial accrued expenses) | $ 1,570 | $ 2,018 |
| Accrued professional fees | 1,815 | 1,674 |
| Payroll and employee-related costs | 1,972 | 1,934 |
| Deferred funding | 3,166 | 3,601 |
| Other current liabilities | 1,005 | 1,057 |
| Total other current liabilities | $ 9,528 | $ 10,284 |
SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 16,312,871 | 1,128,106 |
| Warrant [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 14,467,566 | 118,816 |
| Stock Options and Restricted Stock Units [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 1,639,909 | 803,894 |
| K2HV Conversion Feature [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 205,396 | 205,396 |
SCHEDULE OF LONG-TERM DEBT (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Debt Disclosure [Abstract] | ||
| Long-term debt, net of debt discount of $4,454 ($4,930 at December 31, 2023) | $ 48,745 | $ 50,769 |
| Current portion, net of debt discount of $4,454 ($4,930 at December 31, 2023) | (48,745) | (50,769) |
| Long-term debt, net of current portion |
SCHEDULE OF LONG-TERM DEBT (Details) (Parenthetical) - Long-Term Debt [Member] - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Extinguishment of Debt [Line Items] | ||
| Debt instrument, unamortized discount | $ 4,454 | $ 4,930 |
| Debt instrument, unamortized discount, current | $ 4,454 | $ 4,930 |
SCHEDULE OF INTEREST EXPENSE (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Debt Disclosure [Abstract] | ||
| Interest expense | $ 1,538 | $ 1,461 |
| Amortization of debt discount | 476 | 470 |
| Interest income | (196) | (502) |
| Total interest expense, net of interest income | $ 1,818 | $ 1,429 |
SCHEDULE OF STOCK OPTIONS ACTIVITY (Details) - Equity Option [Member] |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
$ / shares
shares
| |
| Offsetting Assets [Line Items] | |
| Number of Stock Options Outstanding, Beginning Balance | shares | 1,650,288 |
| Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 30.53 |
| Number of Stock Options, Forfeited | shares | (10,379) |
| Weighted Average Exercise Price, Forfeited | $ / shares | $ 2.30 |
| Number of Stock Options Outstanding, Ending Balance | shares | 1,639,909 |
| Weighted Average Exercise Price, Ending Balance | $ / shares | $ 30.69 |
| Number of Stock Options, Exercisable | shares | 802,615 |
| Weighted Average Exercise Price, Exercisable | $ / shares | $ 58.66 |
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Total stock-based compensation expense | $ 579 | $ 2,011 |
| Research and Development Expense [Member] | ||
| Total stock-based compensation expense | 81 | 266 |
| General and Administrative Expense [Member] | ||
| Total stock-based compensation expense | 483 | 1,718 |
| Cost of Sales [Member] | ||
| Total stock-based compensation expense | $ 15 | $ 27 |
STOCKHOLDERS’ EQUITY (DEFICIT) AND ADDITIONAL PAID-IN CAPITAL (Details Narrative) |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
shares
| |
| 2006 Plan [Member] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Options outstanding | 28,038 |
| 2014 Plan [Member] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Options outstanding | 17,195 |
| 2016 Plan [Member] | |
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
| Share-based compensation arrangement by share-based, percentage | 10.00% |
| Unvested stock | 1,594,676 |
| Number of common shares remaining available for issuance for awards | 825,789 |
SCHEDULE OF REVENUE COMPRISED (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 1,214 | $ 485 |
| Product [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | 979 | 478 |
| Service [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Revenues | $ 235 | $ 7 |
SUMMARY OF CHANGES IN DEFERRED REVENUE (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Contract with customer liability,beginning | $ 9,108 | $ 2,613 |
| Revenue deferred | 2,500 | |
| Recognition of deferred revenue | (244) | |
| Currency translation | (137) | |
| Contract with customer liability,ending | 11,227 | 9,108 |
| Contract with customer, liability, current | 9,619 | 7,276 |
| Contract with customer, liability, non-current | $ 1,608 | $ 1,832 |
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
| Research and Development Expenses | $ 2,571 | $ 3,151 |
| Collaboration Agreement [Member] | ||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
| Research and Development Expenses | 365 | 829 |
| Collaboration Agreement [Member] | Coalition For Epidemic Preparedness Innovations [Member] | ||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
| Research and Development Expenses | $ 365 | $ 829 |
COLLABORATION ARRANGEMENTS (Details Narrative) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
| Deferred funding | $ 3,166 | $ 3,601 |
| CEPI Funding Agreement [Member] | Other Current Liabilities [Member] | ||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
| Deferred funding | $ 3,166 |
GOVERNMENT GRANTS (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Sep. 16, 2020 |
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
| Contribution agreement description | 75% of VBI Cda’s costs incurred in respect of the Project, subject to certain eligibility limitations as set forth in the Contribution Agreement and (ii) CAD $55,976 from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). | ||
| Contribution Agreement [Member] | |||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
| Reduction expenses | $ 399 | $ 1,707 | |
| Deferred government grants | $ 68 | $ 0 | |
COMMITMENTS AND CONTINGENCIES (Details Narrative) - Sci B Vac [Member] ₪ in Thousands, $ in Thousands |
Sep. 13, 2018
USD ($)
Integer
|
Sep. 13, 2018
ILS (₪)
Integer
|
|---|---|---|
| Product Liability Contingency [Line Items] | ||
| Children vaccinated | 428,000 | 428,000 |
| Loss contingency, damages seeking, value | $ 510,595 | ₪ 1,879,500 |
SCHEDULE OF LEASE COST AND OTHER INFORMATION (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Leases | ||
| Operating lease cost | $ 452 | $ 491 |
| Weighted average discount rate | 12.00% | 13.00% |
| Weighted average remaining lease term | 2 years 2 months 12 days | 2 years 8 months 26 days |
SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Leases | ||
| Remaining 2024 | $ 836 | |
| 2025 | 663 | |
| 2026 | 584 | |
| 2027 | 160 | |
| Total | 2,243 | |
| Effect of discounting | (276) | |
| Total lease liability | 1,967 | |
| Current portion | (831) | $ (976) |
| Lease liability, net of current portion | $ 1,136 | $ 1,295 |
LEASES (Details Narrative) |
1 Months Ended | 3 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Mar. 31, 2024 |
|
| ISRAEL | Manufacturing Facility Lease Agreement [Member] | ||
| Lessee, operating lease, option to extend | Our manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027. | |
| ISRAEL | Lease Agreement [Member] | ||
| Lessee, operating lease, option to extend | A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional years and June 30, 2027 with an option to extend the term for five additional years. | |
| CANADA | Lease Agreement [Member] | ||
| Lessee, operating lease, option to extend | In September 2022, the Company extended the term of our lease for our research facility in Canada, which comprises office and laboratory space, for three additional years, which now has a term ending on December 31, 2025. |
SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues, net | $ 1,214 | $ 485 |
| UNITED STATES | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues, net | 961 | 322 |
| ISRAEL | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues, net | 20 | |
| China and Hong Kong [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues, net | 32 | 7 |
| Europe [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenues, net | $ 201 | $ 156 |
SEGMENT INFORMATION (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenue | $ 1,214 | $ 485 |
| CANADA | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Revenue | $ 0 | $ 0 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
May 15, 2024 |
Apr. 09, 2024 |
Mar. 31, 2024 |
|
| Subsequent Event [Line Items] | |||
| Common shares issued for cash, net of issuance costs | $ 843 | ||
| Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Warrant Exercise price | $ 0.6057 | ||
| Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | 376,250 | ||
| Proceeds from Warrant Exercises | $ 228 | ||
| Subsequent Event [Member] | April 2024 Registered Direct Offering [Member] | |||
| Subsequent Event [Line Items] | |||
| Number of shares issued | 2,272,728 | ||
| Shares issued price | $ 0.88 | ||
| Warrant Exercise price | $ 0.76 | ||
| Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | 2,272,728 | ||
| Subsequent Event [Member] | Jefferies ATM Program [Member] | |||
| Subsequent Event [Line Items] | |||
| Number of shares issued | 796,531 | ||
| Common shares issued for cash, net of issuance costs | $ 567 | ||
| Shares issued price | $ 0.7119 |