10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2018

OR

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

For the transition period from _______ to

Commission file number: 001-37769

VBI VACCINES INC.

(Exact name of registrant as specified in its charter)

British Columbia, Canada	N/A
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

222 Third Street, Suite 2241 Cambridge, Massachusetts	02142
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 617-830-3031

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]

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

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

Common Shares, no par value per share	64,215,727
(Class)	Outstanding at April 25, 2018

VBI VACCINES INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2018

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION		5
Item 1.	Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets - March 31, 2018 (unaudited) and December 31, 2017	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2018 and 2017 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION		28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosure	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
Signatures		30

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 2017 annual report on the Form 10-K filed with the Securities and Exchange Commission on February 26, 2018. 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 product candidates;

● the timing and results of our ongoing and planned clinical trials for products and product candidates;

● the amount of funds we require for our immuno-oncology and infectious disease vaccine candidate pipeline;

● the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements;

● our ability to effectively execute and deliver our plans related to commercialization, marketing and manufacturing capabilities and strategy;

● our ability to license our intellectual property;

● our ability to maintain a good relationship with our employees;

● the suitability and adequacy of our office, manufacturing and research facilities and our ability to secure term extensions or expansions of leased space;

● our ability to manufacture, or to have manufactured, any products we develop to the standards and requirements of regulatory agencies;

● the ability of our vendors to manufacture and deliver materials that meet regulatory agency and our standards and requirements in order to meet planned timelines and milestones;

● any disruption in the operations of our manufacturing facility where we manufacture all of our clinical and commercial supplies of Sci-B-Vac™;

● 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 products and product candidates;

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

● general economic conditions and events and the impact they may have on us and our potential customers;

● our ability to obtain adequate financing in the future on reasonable terms, as and when we need it;

● our ability to implement network systems and controls that are effective at preventing cyber-attacks, malware intrusions, malicious viruses and ransomware threats;

● our ability to secure and maintain protection over our intellectual property;

● changes to legal and regulatory processes for biosimilar approval and marketing could reduce the duration of market exclusivity for our products;

● our ability to maintain our existing licenses for intellectual property;

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

● other factors discussed in this Form 10-Q.

3

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 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, 2018			December 31, 2017
	(unaudited)
CURRENT ASSETS
Cash	$	58,094		$	67,694
Accounts receivable, net		167			143
Inventory, net		783			788
Prepaid expenses		371			951
Other current assets		937			850
Total current assets		60,352			70,426
NON-CURRENT ASSETS
Other long-term assets		1,196			675
Property and equipment, net		2,942			2,245
Intangible assets, net		61,600			63,336
Goodwill		8,731			8,974
Total non-current assets		74,469			75,230
TOTAL ASSETS	$	134,821		$	145,656
CURRENT LIABILITIES
Accounts payable	$	2,537		$	1,810
Other current liabilities		11,202			9,826
Deferred revenues		74			-
Current portion of long-term debt – related party		2,200			1,600
Total current liabilities		16,013			13,236
NON-CURRENT LIABILITIES
Long-term debt, net of debt discount – related party		11,236			11,538
Liabilities for severance pay		442			426
Deferred revenues, net of current portion		669			669
Total non-current liabilities		12,347			12,633
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS’ EQUITY
Common shares (unlimited authorized; no par value) (2018 issued – 64,215,727 2017 - issued 64,078,781)		201,899			201,806
Additional paid-in capital		61,625			60,891
Accumulated other comprehensive (loss) income		(837	)		1,065
Accumulated deficit		(156,226	)		(143,975	)
Total stockholders’ equity		106,461			119,787
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	134,821		$	145,656

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)

	For the Three Months Ended March 31
	2018			2017
Revenues	$	178		$	127
Operating expenses:
Cost of revenue		1,413			1,275
Research and development		6,964			4,654
General and administration		3,425			3,045
Total operating expenses		11,802			8,974
Loss from operations		(11,624	)		(8,847	)
Interest expense, net of interest income of $202 and $12 (including related party – see Note 8)		(539	)		(704	)
Foreign exchange (loss) gain		(88	)		482
Loss before incomes taxes		(12,251	)		(9,069	)
Income tax benefit		-			431
NET LOSS	$	(12,251	)	$	(8,638	)
Net loss per share of common shares, basic and diluted	$	(0.19	)	$	(0.22	)
Weighted-average number of common shares outstanding, basic and diluted		64,179,605			40,026,270
Other comprehensive (loss) income - currency translation adjustments		(1,902	)		126
COMPREHENSIVE LOSS	$	(14,153	)	$	(8,512	)

See accompanying Notes to Condensed Consolidated Financial Statements

6

VBI Vaccines Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

	Number of Common Shares		Share Capital		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss) - Currency Translation Adjustments			Accumulated Deficit			Total Stockholders’ Equity
BALANCE AS OF DECEMBER 31, 2017		64,078,781	$	201,806	$	60,891	$	1,065		$	(143,975	)	$	119,787
Stock-based compensation		135,000		88		734								822
Common shares issued on exercise of stock options		1,946		5										5
Net loss											(12,251	)		(12,251	)
Currency translation adjustments								(1,902	)					(1,902	)
BALANCE AS OF MARCH 31, 2018		64,215,727	$	201,899	$	61,625	$	(837	)	$	(156,226	)	$	106,461

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
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(12,251	)	$	(8,638	)
Adjustments to reconcile net loss to cash used in operating activities:					-
Depreciation and amortization		149			171
Stock-based compensation		822			624
Amortization of debt discount		299			288
Deferred taxes		-			(431	)
Net change in operating working capital items:
(Increase) in accounts receivable		(27	)		(32	)
(Increase) in inventory		(1	)		(78	)
Decrease in prepaid expenses		54			67
(Increase) in other current assets		(106	)		(95	)
(Increase) in other long-term assets		(19	)		(27	)
(Decrease) increase in accounts payable		614			(609	)
(Decrease) increase in deferred revenues		84			(73	)
Increase in other current liabilities		1,804			589
Net cash flows used in operating activities		(8,578	)		(8,244	)
INVESTING ACTIVITIES
Purchase of property and equipment		(1,015	)		(266	)
Net cash flows provided by investing activities		(1,015	)		(266	)
FINANCING ACTIVITIES
Proceeds from issuance of common shares for cash, upon exercise of stock options		5			16
Net cash flows provided by financing activities		5			16
Effect of exchange rates on cash		(12	)		(279	)
CHANGE IN CASH FOR THE PERIOD		(9,600	)		(8,773	)
CASH, BEGINNING OF PERIOD		67,694			32,282
CASH, END OF PERIOD	$	58,094		$	23,509
Supplementary information:
Interest paid – related party	$	474		$	450
Capital expenditures included in other current liabilities		-			76

See accompanying Notes to Condensed Consolidated Financial Statements

8

VBI Vaccines Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, except per share amounts)

1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS

Corporate Overview

VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.

The Company and its wholly-owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly-owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies Inc. a Canadian company and the wholly-owned subsidiary of VBI US (“VBI Cda”); and SciVac Ltd. an Israeli company (“SciVac”) are collectively referred to as the “Company”, “we”, “us”, “our” or “VBI”.

The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 222 Third Street, Suite 2241, Cambridge, MA 02142. 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 developing next generation vaccines to address unmet needs in infectious disease and immuno-oncology. We currently manufacture our product, Sci-B-Vac a third generation Hepatitis B (“HBV”) vaccine for adults, children and newborns, which is approved for use in Israel and 14 other countries. Sci-B-Vac has not yet been approved by the U.S. Food and Drug Administration (the “FDA”), the European Medicines Agency (the “EMA”) or Health Canada. VBI is currently conducting a global Phase III clinical program to obtain FDA, EMA and Health Canada market approvals for commercial sale of Sci-B-Vac in the United States, the European Union (the “EU”), and Canada, respectively. Our wholly-owned subsidiary in Rehovot, Israel, currently manufactures and sells Sci-B-Vac.

We are also developing technologies that seek to enhance vaccine protection in large, underserved markets. These include an enveloped “Virus Like Particle” or “eVLP” vaccine platform that allows for the design of enveloped virus-like particle vaccines that closely mimic the target viruses. VBI is advancing a pipeline of eVLP vaccines, with lead programs in human cytomegalovirus (“CMV”), an infection that, while common, can lead to serious complications in babies and people with weak immune systems, and is involved in the progression of glioblastoma multiforme (“GBM”), which is a form of brain cancer.

9

Liquidity and Going Concern

The Company has a limited operating history and faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development of its products.

The Company has an accumulated deficit of $156,226 as of March 31, 2018 and cash outflows from operating activities of $8,578 for the three months ended March 31, 2018.

The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products. The Company plans to finance future operations with existing cash reserves. Additional financing, if required, could be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, or revenues from potential collaborations, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

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 United States Securities and Exchange Commission (“SEC”), for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2017 consolidated balance sheet in this document was derived from the audited consolidated financial statements and does not include all of the disclosures required by U.S. GAAP. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form 10-Q”) 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, 2017 (the “2017 10-K”), as filed with the SEC on February 26, 2018.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: SciVac, VBI DE, VBI US and VBI Cda. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements.

In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.

10

Reclassification

Certain prior year amounts have been reclassified to conform with the current quarter presentation and were not material to our condensed consolidated financial statements.

Significant Accounting Policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2017 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2018, other than revenue recognition discussed below.

Revenue recognition

Revenues consist primarily of product sales of vaccines and research services. We apply the five-step model outlined in Accounting Standards Codification Topic 606, Revenue from Contracts from Customers (ASC 606). Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). We adopted ASC 606 effective January 1, 2018. As a result, we have changed our accounting for revenue recognition. We applied ASC 606 using the modified retrospective method and there was no material impact to our consolidated financial statements related to the adoption of ASC 606.

Foreign currency

The functional and reporting currency of the Company is the USD. Each of the Company’s subsidiaries determines its own respective functional currency, and this currency is used to separately measure each entity’s financial position and operating results.

Assets and liabilities of foreign operations with a different functional currency from that of the Company are translated at the closing rate at the end of each reporting period. Profit or loss items are translated at average exchange rates for all the relevant periods. All resulting translation differences are recognized as a component of accumulated other comprehensive loss (income).

Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved, are included in the condensed consolidated statements of operations.

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate estimates used in the preparation of the condensed consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the deferred tax valuation allowance, estimating accrued clinical expenses, the inputs in determining the fair value of the in-process research and development (“IPR&D”) and goodwill as part of the annual impairment analysis, the inputs in determining the fair value of equity-based awards and warrants issued as well as the values ascribed to assets acquired and liabilities assumed in business combinations. Actual results may differ from estimates made.

Goodwill and In-Process Research and Development

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

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary after step zero), an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Under Accounting Standards Update (“ASU”) 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, Step 2 from the goodwill impairment test has been eliminated and goodwill impairment is measured as the excess of the carrying amount of the reporting unit over its fair value. The Company has established August 31^st as the date for its annual impairment test of goodwill.

The goodwill is in VBI Cda and the change in carrying value from December 31, 2017 relates to currency translation adjustments which decreased goodwill by $243 for the three-month period ended March 31, 2018.

11

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

IPR&D acquired in a business combination is capitalized as an intangible asset and tested for impairment at least annually until commercialization, after which time the IPR&D is amortized over its estimated useful life. The impairment test compares the carrying amount of the IPR&D asset to its fair value. If the carrying amount exceeds the fair value of the asset, such excess is recorded as an impairment loss.

Fair value measurements of financial instruments

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.

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

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

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

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

Financial instruments recognized in the 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.

The carrying amounts of the Company’s long-term assets approximate their respective fair values.

At March 31, 2018 and December 31, 2017, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be approximately $15,306 and $15,157, respectively.

12

3. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Our adoption of this ASU effective, January 1, 2018, did not have a material impact on our condensed consolidated financial statements and footnote disclosures.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. This update will change the income statement impact of equity investments held by an entity; disclosures related to fair value of financial instruments and presentation of financial assets and liabilities. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities must apply the standard using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. Except for certain early application guidance, early adoption is not permitted. We adopted this ASU effective January 1, 2018 and are no longer required to disclose the fair value assumptions in determining the fair value of the long-term debt in the footnote disclosures.

Recently Issued Accounting Standards, not yet Adopted

Leases

In February 2016 the FASB issued ASU 2016-02: Leases. The ASU introduces a lessee model that results in most leases impacting the balance sheet. The ASU addresses other concerns related to the current leases model. Under ASU 2016-02, lessees will be required to recognize for all leases with terms longer than 12 months, at the commencement date of the lease, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee’s right to use or control the use of a specified asset for the lease term. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases, as disclosed in Note 11, will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will increase our total assets and liabilities.

13

4. INVENTORY, NET

Inventory is stated at the lower of cost or market and consists of the following:

	March 31, 2018		December 31, 2017
Finished goods	$	47	$	99
Work-in-process		381		119
Raw materials		355		570
	$	783	$	788

5. INTANGIBLES

			March 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(414	)	$	-		$	30	$	285
IPR&D assets		61,500		-			(300	)		115		61,315
	$	62,169	$	(414	)	$	(300	)	$	145	$	61,600

			December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(397	)	$	-		$	33	$	305
IPR&D assets		61,500		-			(300	)		1,831		63,031
	$	62,169	$	(397	)	$	(300	)	$	1,864	$	63,336

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

Amortization related to the IPR&D assets will not begin amortizing until the Company commercializes its products.

6. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Accrued expenses (including clinical trial accrued expenses)	$	10,033	$	7,921
Payroll and employee-related costs		1,056		1,699
Other current liabilities		113		206
	$	11,202	$	9,826

7. 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 shares of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 9, Stockholders’ Equity and Additional Paid-in Capital.

The following potentially dilutive securities outstanding at March 31, 2018 and 2017 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	March 31, 2018		March 31, 2017
Warrants		2,618,824		2,068,824
Stock options and equity awards		3,960,549		3,120,525
		6,579,373		5,189,349

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8. LONG-TERM DEBT – RELATED PARTY

As at March 31, 2018 and the December 31, 2017, the long-term debt is as follows:

	March 31, 2018		December 31, 2017
Long-term debt, net of debt discount	$	13,436	$	13,138
Less: current portion		2,200		1,600
	$	11,236	$	11,538

On May 6, 2016, the Company through VBI DE assumed a term loan facility with Perceptive Credit Holdings, LP, a related party, (the “Lender”) in the amount of $6,000 (the “Facility”). On December 6, 2016, the Company amended the Facility (the “Amended Facility”) and raised $13,200 which was combined with the remaining balance from the Facility of $1,800. The total principal outstanding at March 31, 2018, including the $300 exit fee discussed below, is $15,300. Borrowings under the Amended Facility are secured by all of VBI assets. The principal on the Amended Facility accrues interest at an annual rate equal to the greater of (a) one-month LIBOR (subject to a 5.00% cap) or (b) 1.00%, plus the Applicable Margin. The Applicable Margin will be 11.00%. The first eighteen months are interest only. The interest rate as of March 31, 2018 was 12.88%. Upon the occurrence of an event of default, and during the continuance, of an event of default, the Applicable Margin, defined above, will be increased by 4.00% per annum. This term loan facility matures December 6, 2019 and includes both financial and non-financial covenants, including a minimum cash balance requirement. The Company was in compliance with these covenants as of March 31, 2018. Pursuant to the Amended Facility, the Company agreed to appoint a representative of Perceptive Credit on our board of directors (the “Board”) who is also a portfolio manager of the Company’s largest shareholder, effective January 2018, Perceptive Credit’s representative resigned from our Board.

The Company’s obligations under the Amended Facility are secured on a senior basis by a lien on substantially all of the assets of the Company and its U.S. and Canadian subsidiaries and guaranteed by the Company and its U.S. and Canadian subsidiaries. The Amended and Restated Credit Agreement also contains customary events of default.

The total debt discount of $3,453 is being charged to interest expense using the effective interest method over the term of the debt. As of March 31, 2018, and December 31, 2017, the unamortized debt discount is $1,864 and $2,163. The Company recorded $299 and $288 of interest expense related to the amortization of the debt discount during the three months ended March 31, 2018 and 2017, respectively.

Total related party interest expense, including the amortization of the debt discount, was $773 and $738 for the three months ended March 31, 2018 and 2017, respectively. Such amounts are included in Interest expense, net in the accompanying condensed consolidated statements of operations and comprehensive loss.

The following table summarizes the future principal payments that the Company expects to make for long-term debt:

	Principal payments on Amended Facility and exit fee
Remaining 2018	$	1,600
2019		13,700
	$	15,300

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9. STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL

Stock option plans

The Company’s stock option plans are approved by and administered by the Company’s Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.

2006 VBI US Stock Option Plan

No further options will be issued under the 2006 VBI US Stock Option Plan (the “2006 Plan”). As at March 31, 2018, there were 1,140,053 options outstanding under the 2006 Plan.

2013 Stock Incentive Plan

No further options will be issued under the 2013 Equity Incentive Plan (the “2013 Plan”). As at March 31, 2018, there were 4,613 options outstanding under the 2013 Plan.

2014 Equity Incentive Plan

No further options will be issued under the 2014 Equity Incentive Plan (the “2014 Plan”). As at March 31, 2018, there were 645,222 options outstanding under the 2014 Plan.

2016 VBI Equity Incentive Plan

The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of 10% of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 10% maximum is inclusive of options granted under all equity incentive plans. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company following the VBI-SciVac Merger 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 at March 31, 2018, there were 1,639,114 options and 531,547 stock awards outstanding under the 2016 Plan.

The aggregate number of common shares remaining available for issuance for awards under this plan total 1,936,496 at March 31, 2018.

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Activity related to stock options is as follows:

	Number of Stock Options			Weighted Average Exercise Price
Balance outstanding at December 31, 2017		2,351,395		$	4.44
Granted		1,265,000		$	4.19
Forfeited		(185,447	)		4.00
Exercised		(1,946	)	$	2.50
Balance outstanding at March 31, 2018		3,429,002		$	4.35
Exercisable at March 31, 2018		1,747,927		$	4.50

Information relating to restricted stock units is as follow:

	Number of Stock Awards			Weighted Average Fair Value at Grant Date
Unvested shares outstanding at December 31, 2017		424,379		$	3.99
Granted		150,000		$	4.26
Vested and exercised		(17,832	)	$	4.94
Forfeited		(25,000	)	$	3.87
Unvested shares outstanding at March 31, 2018		531,547		$	4.03

In determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying the following weighted average assumptions:

	2018			2017
Volatility		114.53	%		87.22	%
Risk free interest rate		2.48	%		2.31	%
Expected term in years		5.77			6.3
Expected dividend yield		0	%		0	%
Weighted average fair value per option	$	3.53		$	3.12

The fair value of the options is recognized as an expense on a straight-line basis over the vesting period and forfeitures are accounted for when they occur. The total stock-based compensation expense recorded in the three months ended March 31, 2018 and 2017 was as follows:

	Three months ended March 31
	2018		2017
Research and development	$	191	$	185
General and administrative		618		423
Cost of revenues		13		16
Total stock-based compensation expense	$	822	$	624

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10. INCOME TAXES

The Company operates in U.S., Israel and Canadian tax jurisdictions. Its income is subject to varying rates of tax, and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another.

The Company determines its annual effective tax rate at the end of each interim period based on the year to date period results. Since the Company is incorporated in Canada, it is required to use Canada’s statutory tax rate of 26.00% in the determination of the estimated annual effective tax rate.

The Company’s effective tax rate on loss before tax for the three months ended March 31, 2018 of 0% (4.78% - 2017) differs from the Canadian statutory rate of 26.00% primarily due to recording a valuation allowance on the Canadian deferred tax assets in excess of the remaining Canadian deferred tax liability and the effect of recording a valuation allowance against deferred tax assets in all other jurisdictions.

The Company maintains a valuation allowance on all of its deferred tax assets. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized.

11. 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 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. As at March 31, 2018 the Company believes that it maintains adequate insurance coverage for any such litigation matters arising in the normal course of business.

Operating Leases

The Company has entered into various non-cancelable lease agreements for its office, lab and manufacturing facilities. These arrangements expire at various times through 2022. Rent expense for the three months ended March 31, 2018 and 2017 was $216 and $217, respectively.

The future annual minimum payments under these leases is as follows:

Year ending December 31
Remaining 2018	$	836
2019		913
2020		527
2021		451
2022		38
Thereafter		-
Total	$	2,765

On February 28, 2018 VBI DE signed a two-year term extension, which included additional office space, related to the office space in Cambridge, MA committing it to approximately $461 of rent payments which has been included in the above table.

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12. SEGMENT INFORMATION

The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.

Revenues from external customers are attributed to geographic areas based on location of the contracting customers:

	Three Months Ended March 31
	2018		2017
Israel	$	106	$	111
Asia		30		14
South America		-		2
Europe		42		-
Total	$	178	$	127

There was no revenue attributed to our country of domicile, Canada, for the three months ended March 31, 2018 and 2017.

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

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this Form 10-Q and with our audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017, as filed with the U.S. Securities and Exchange Commission (the “SEC”).

Except for per share amounts or as otherwise specified to be in millions, amounts presented are stated in thousands.

Overview

We are a commercial-stage, biopharmaceutical company developing next generation vaccines to address unmet needs in infectious disease and immuno-oncology. We currently manufacture our product, Sci-B-Vac a third-generation hepatitis B vaccine, which is approved for use in Israel and 14 other countries. Sci-B-Vac, has not yet been approved by the FDA, EMA or Heath Canada. The Sci-B-Vac vaccine has demonstrated safety and efficacy in nearly 500,000 patients in currently licensed markets. Several clinical trials have shown rapid and high rates of seroprotection with Sci-B-Vac. The Phase IV clinical study, conducted in Israel in order to qualify a new in-house reference standard for regulatory and quality control purposes, was successfully completed. We are currently enrolling patients in a pivotal Phase III clinical program, the results of which are intended to support regulatory and marketing authorization application submissions to obtain FDA, EMA, and Health Canada market approvals for commercial sale of Sci-B-Vac in the U.S., Europe, and Canada respectively. Our wholly-owned subsidiary in Rehovot, Israel currently manufactures and sells Sci-B-Vac.

We are also advancing a pipeline of enveloped virus-like particle (“eVLP”) vaccines, developed with our eVLP platform technology that allows for the design of enveloped virus-like particles that closely mimic the target viruses. We have lead programs in both infectious disease, with our congenital cytomegalovirus (“CMV”) vaccine candidate, and in immuno-oncology, with our glioblastoma multiforme (“GBM”) vaccine candidate. CMV is an infection that, while common, can lead to serious complications in babies and people with weak immune systems. In September 2016, we completed the enrollment and initial dosing of 128 participants in the Phase I clinical study to evaluate its preventative CMV vaccine candidate. In July 2017, we announced interim data from the Phase I clinical study of safety data through day 84 of the study and initial immunogenicity signals in participant samples collected one month after the second of three planned vaccine doses. Final data read out is anticipated mid-year 2018. In January 2018, VBI initiated dosing of its GBM candidate in a Phase I/IIa clinical program. We expect immunologic data from ongoing biomarker analyses mid-year 2018 and initial correlations between biomarker analyses and clinical outcomes in the second half of 2018, with 6-month overall survival and progression-free survival expected in the first half of 2019.

We may also seek to in-license clinical-stage vaccines that we believe complement our product and pipeline portfolio, in addition to technologies that may supplement our therapeutic vaccination efforts in immuno-oncology.

At present, our operations are focused on:

● conducting the Sci-B-Vac Phase III clinical program to support various marketing authorization applications in the U.S., Europe, Canada;

● completing the Phase I clinical study for our CMV vaccine candidate, VBI-1501;

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

● manufacturing in Rehovot, Israel and sale of Sci-B-Vac in territories where it is currently registered;

● scaling-up Sci-B-Vac manufacturing capabilities to further commercialize this product in additional markets where we may obtain regulatory approval;

● continuing the research and development of our product candidates, including the exploration and development of new product candidates, including a Zika vaccine candidate;

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

● maintaining, expanding and protecting our intellectual property portfolio.

VBI’s income generating activities have been the sale of Sci-B-Vac product in markets where it is approved, though those markets have generated a limited number of sales to-date and R&D services generating fees. VBI has incurred significant net losses and negative operating cash flows since inception and expect to continue incurring losses and negative cash flows from operations as we carry out our, planned clinical, regulatory, R&D, sales and manufacturing activities with respect to the advancement of our Sci-B-Vac and new vaccine candidates. As of March 31, 2018, VBI had an accumulated deficit of approximately $156.2 million and stockholders’ equity of approximately $106.5 million. Our ability to maintain our status as an operating company is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our administrative overhead and our research and development activities. We plan to finance future operations with existing cash reserves. We expect that we will need to secure additional financing to finance our business plans, if required, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, and revenues from potential collaborations, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

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We have incurred operating losses since inception, have not generated significant product sales revenue and have not achieved profitable operations. We incurred net losses of $12.3 million for the three months ended March 31, 2018 and we expect to continue to incur substantial losses in future periods. We anticipate that our operating expenses will increase substantially as we continue our clinical studies. These include expenses related to:

● continuing the Phase III clinical program for Sci-B-Vac and the Phase I/IIa clinical study of our GBM vaccine candidate;

● continuing the research and development of our product candidates;

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

● maintaining, expanding and protecting our intellectual property portfolio;

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

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

In addition, we have incurred and will continue to incur significant expenses as a public company, which subjects us to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the NASDAQ Capital Market and the Canadian securities regulators. Effective as of March 23, 2018, we voluntarily delisted our common shares from the Toronto Stock Exchange.

In 2017, we raised $71.9 million from equity financings to support our Sci-B-Vac, CMV, and GBM vaccine programs, to continue the advancement of our research programs, and for use in other general corporate purposes. Based upon our current cash position and by monitoring our discretionary expenditures as well as the management of our clinical trial commitments and operating costs, we believe these proceeds will be sufficient to fund our activities, including our approved capital expenditure requirements throughout 2018. We expect, however, that additional financing will be needed in the future to further support clinical, regulatory, research and development, sales and manufacturing, and general business operations.

Since inception, VBI and its subsidiaries collectively have raised approximately $196.6 million in total equity and debt financing to support clinical and research development and general business operations.

Research and Development (“R&D”) Services

Pursuant to an agreement with the Israel Innovations Authority (formerly the Office of the Chief Scientist of Israel), the Company is required to make services available for the biotechnology industry in Israel. These services include relevant activities for development and manufacturing of therapeutic proteins according to international standards and GMP quality level suitable for toxicological studies in animals and clinical studies (Phase I & II) in humans. Service activities include analytics/bio analytics methods for development and process development of therapeutic proteins starting with a lead candidate clone through the upstream, purification, formulation and filling processes and manufacturing for Phase I & II clinical trials.

These R&D services are primarily marketed to the Israeli research community in academia and Israeli biotechnology companies in the life sciences lacking the infrastructure or experience in the development and production of therapeutic proteins in the standards and quality required for clinical trials for human use. In 2017 the Company provided services to more than 10 biotechnology companies including analytical development, upstream development process, protein purification and formulation and filling for Phase I clinical studies.

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Financial Overview

Overall Performance

The Company had net losses of approximately $12,251 and $8,638 for the three months ended March 31, 2018 and 2017, respectively. The Company has an accumulated deficit of $156,226 at March 31, 2018. The Company had $58,094 of cash at March 31, 2018 and net working capital of approximately $44,339.

Cost of revenues

Cost of revenues consist primarily of costs incurred for manufacturing the Sci-B-Vac vaccine, which includes cost of materials, consumables, supplies, contractors and manufacturing salaries.

Research and Development Expenses

R&D expenses consist primarily of costs incurred for the development of our CMV, GBM, and Sci-B-Vac vaccines, which include:

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

● expenses incurred under agreements with contractors or Contract Manufacturing Organizations to advance the vaccines into and through completion of clinical studies; and

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

We expense R&D costs when we incur them.

General and Administrative Expenses

General and administration expenses consist principally of salaries and related costs for executive and other administrative personnel and consultants, including stock-based compensation and travel expenses. Other general and administration expenses include professional fees for legal, patent protection, consulting and accounting services, travel and conference fees, including board and scientific advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies and expenses, insurance and other general expenses. General and administrative expenses are expensed when incurred.

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

Interest Income

Interest income consists principally of interest income earned on cash balances.

Interest Expense

Interest expense is associated with our credit facility entered into on July 25, 2014 and subsequently amended on December 6, 2016.

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Results of Operations

Three Months Ended March 31, 2018 Compared to the Three Months Ended March 31, 2017

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

	Three months ending March 31
	2018			2017			Change $			Change %
Revenue	$	178		$	127		$	51			40	%
Expenses:
Cost of revenue		1,413			1,275			138			11	%
Research and development		6,964			4,654			2,310			50	%
General and administration		3,425			3,045			380			12	%
Total operating expenses		11,802			8,974			2,828			32	%
Net loss from operations		(11,624	)		(8,847	)		(2,777	)		31	%
Interest expenses, net		(539	)		(704	)		165			(23	)%
Foreign exchange (loss) gain		(88	)		482			(570	)		(118	)%
Loss before income taxes		(12,251	)		(9,069	)		(3,182	)		35	%
Income tax benefit		-			431			(431	)		(100	)%
NET LOSS	$	(12,251	)	$	(8,638	)	$	(3,613	)		42	%

Revenues

Revenue for the three months ended March 31, 2018 was $178, as compared to $127 for the three months ended March 31, 2017.

Revenue by Geographic Region

	Three months ending March 31
	2018		2017		$ Change			% Change
	$		$
Revenue in Israel	$	106	$	111	$	(5	)		(5	)%
Revenue in Asia		30		14		16			114	%
Revenue in South America		-		2		(2	)		(100	)%
Revenue in Europe		42		-		42			100	%
Total Revenue	$	178	$	127		51			40	%

Revenue earned in Israel, Asia, South America and Europe for the three months ended March 31, 2018 and 2017 were insignificant.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2018 was $1,413 as compared to $1,275 for the three months ended March 31, 2017. The increase in the cost of revenues of $138, or 11%, was a result of slightly increased revenue as well as increased headcount and salary increases.

Research and Development

R&D expenses for the three months ended March 31, 2018 were $6,964 as compared to $4,654 for the three months ended March 31, 2017. During the three months ended March 31, 2018, the significant increase in the cost of R&D is as a result of the increased costs related to the ongoing clinical studies of Sci-B-Vac, which commenced patient dosing in December 2017 and our GBM vaccine candidate, which commenced patient dosing in January 2018. This is compared to the three months ended March 31, 2017 where only the CMV clinical study was ongoing, which commenced patient dosing in June 2016 with the last visit in August 2017.

General and Administrative

General and administrative (“G&A”) expenses for the three months ended March 31, 2018 were $3,425 as compared to $3,045 for the three months ended March 31, 2017. The G&A expense increase of $380, or 12%, is a result of increased headcount and stock-based compensation expenses.

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Net Loss from Operations

The net loss from operations for the three months ended March 31, 2018 were $11,624 as compared to $8,847 for the three months ended March 31, 2017. The $2,777 increase in the net loss from operations resulted from the increased cost of revenues, R&D expenses, and G&A expenses, discussed above.

Interest Expense, net

The interest expense decrease of $165 is largely a result of interest income of $202 earned on cash balances for the three months ended March 31 2018 as compared to minimal interest for the three months ended March 31, 2017. Interest paid on the long-term debt and non-cash accretion related to the debt discount were comparable for the three months ended March 31, 2018 and March 31, 2017.

Foreign Exchange Gain

The foreign exchange loss of $88 for the three months ended March 31, 2018 as compared to a gain of $482 in the comparative period for 2017, is the result of the fluctuation in the foreign currency exchange rate of the CAD and the NIS as compared to the U.S. dollar.

Net Loss

The net loss increased by $3,613, or 42%, from $8,638 for the three months ended March 31, 2017 to $12,251 for the three months ended March 31, 2018. The increase in our net loss is mainly attributable to the increase in our loss from operations as discussed above.

Liquidity and Capital Resources

	March 31, 2018			December 31, 2017			$ Change			% Change
Cash	$	58,094		$	67,694		$	(9,600	)		(14	)%
Current Assets		60,352			70,426			(10,074	)		(14	)%
Current Liabilities		16,013			13,236			2,777			21	%
Working Capital		44,339			57,190			(12,851	)		(22	)%
Accumulated Deficit	$	(156,226	)	$	(143,975	)		(12,251	)		9	%

As at March 31, 2018, we had cash of $58,094 as compared to $67,694 as at December 31, 2017. As at March 31, 2018, the Company had working capital of $44,339 as compared to working capital of $57,190 at December 31, 2017. Working capital is calculated by subtracting current liabilities from current assets.

We expect that we will need to secure additional financing in the future to further support clinical, regulatory, research and development, sales and manufacturing and general business operations. We base this belief on assumptions that are subject to change, and we may be required to use our available cash resources sooner than we currently expect. The Company expects a need to raise additional funds in order to continue its ongoing development programs. The additional funds may be in the form of additional debt, equity or a combination of both and may require that additional warrants be issued. 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.

The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2017 contains an explanatory paragraph regarding our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. The Company’s long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of its products, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or, alternatively, to advance its products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.

On October 30, 2017, we closed an underwritten public offering and a concurrent registered direct offering of an aggregate of 23,575,410 common shares at a price of $3.05 per share for total gross proceeds of $71,905. In addition, in connection with the registered direct offering, the Company issued four-year warrants to purchase 550,000 common shares at an exercise price of $3.34 per share. The Company incurred $4,683 of cash issuance costs related to the offering resulting in net cash proceeds of $67,222. We have and will continue to use the proceeds of the underwritten public offering to support our Sci-B-Vac, CMV, and GBM vaccine program, to continue the advancement of our research programs and for other general corporate purposes.

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Our actual future capital requirements will depend on many factors, including the progress and results of our clinical trials, the duration and cost of discovery and preclinical development, laboratory testing and clinical trials for our products, the timing and outcome of regulatory review of our products, product sales outside of Israel, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the number and development requirements of other product candidates that we pursue and the costs of commercialization activities, including product marketing, sales and distribution.

The Company will require additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products.

We expect to finance our future cash needs through public or private equity offerings, debt financings, or corporate collaboration and licensing arrangements. Although we are pursuing different opportunities, other than as disclosed in this report, we currently do not have any signed commitments for future external funding. 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 or debt financing, grants or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our R&D programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

To the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business and other factors beyond our control. The unstable economic environment in Europe, and disruptions in the U.S. and 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.

Net cash used by Operating Activities

The Company incurred net losses of $12,251 and $8,638 in the three months ended March 31, 2018 and 2017, respectively. The Company used $8,578 and $8,244 in cash for operating activities during the three months ended March 31, 2018 and 2017, respectively. The increase in cash outflows is largely as a result of increased net losses related to the increased R&D expenses offset by an increase in net changes in working capital items, specifically accounts payable and other current liabilities.

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Net cash used by Investing Activities

Cash flows used in investing activities increased by $749, from $266 for the three months ended March 31, 2017 to $1,015 for the three months ended March 31, 2018. The increase was largely related to the purchase of additional property and equipment in SciVac. As part of scaling up of our manufacturing capabilities, we were, and are continued to be, required to purchase additional manufacturing equipment and information technology equipment.

Net cash received from Financing Activities

Cash flows related to financing activities were not significant in three months ended March 31, 2017 and 2018.

The Company’s long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of its products, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or, alternatively, to advance its products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.

To date, the Company has been able to obtain financing as and when it was needed; however, there is no assurance that financing will be available in the future, or if it is, that it will be available at acceptable terms.

Off-Balance Sheet Arrangements

As of March 31, 2018, the Company has 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.

Tabular Disclosure of Contractual Obligations

The tabular disclosure of contractual obligations is disclosed in the 2017 10-K and there have been no material changes during the three months ended March 31, 2018, other than disclosed in Note 11 of the Notes to the Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies during the three months ended March 31, 2018. Critical accounting policies and the significant accounting estimates made in accordance with such policies are regularly discussed with the Audit Committee of the Company’s board of directors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” included in Item 7, as well as in our consolidated financial statements and the footnotes thereto, included in our 2017 10-K.

Trends, Events and Uncertainties

As with other companies that are in the process of commercializing novel vaccines, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. Furthermore, 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.

26

Other than as discussed above and elsewhere in this Form 10-Q, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

Recent Accounting Pronouncements

See Note 3 of Notes to the Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The quantitative and qualitative disclosures about market risk are disclosed in the 2017 10-K and there have been no material changes during the three months ended March 31, 2018.

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 Senior Vice-President, Finance (our principal financial 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 Senior Vice-President, Finance 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 Senior Vice-President, Finance, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the three months ended March 31, 2018, we began implementation of a new enterprise resource planning (“ERP”) system to support our procurement and financial reporting processes. We implemented this new ERP system to enhance our overall system of internal control over financial reporting through further automation and integration of business processes. The ERP system was not implemented in response to any identified deficiency or material weakness in our internal control over financial reporting. As a result of this implementation, we have modified the design and documentation of certain internal control processes and procedures relating to the ERP system. We will continue to implement modules of the ERP system through 2018 relating mainly to inventory, manufacturing and quality processes.

Other than the ERP system implementation described above, there were no changes 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 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

27

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.

Item 1A. Risk Factors

A description of the risks associated with our business, financial condition and results of operations is set forth in “Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the SEC on February 26, 2018. There have been no material changes to these risks during the three months ended March 31, 2018.

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

a) Sales of Unregistered Securities

There have been no unregistered sales of securities during the period covered by this Form 10-Q that have not been previously reported in a current report on Form 8-K. The Company has not made any purchases of its own securities during the time period covered by this Form 10-Q.

c) Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

The information set forth below is included herein for the purpose of providing the disclosure required under “Item 1.01 - Entry into a Material Definitive Agreement” of Form 8-K  .

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.

28

EXHIBIT INDEX

Exhibit No.	Description
3.1	Articles (incorporated by reference to Exhibit 3.1 to the registration statement on Form F-4 (SEC File No. 333-208761), filed with the SEC on December 23, 2015).
3.2	Notice of Articles (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the registration statement on Form F-4 (SEC File No. 333-208761), filed with the SEC on February 5, 2016).
3.3	Form of Notice of Alteration (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to the registration statement on Form F-4 (SEC File No. 333-208761), filed with the SEC on February 5, 2016).
10.1+	Amendment to Consulting Agreement with F. Diaz-Mitoma Professional Corporation, dated February 19, 2018 (incorporated by reference to Exhibit 10.57 to the annual report on Form 10-K (SEC File No. 001-37769), filed with the SEC on February 26, 2018).
10.2	Amendment to Sublease Lease, dated January 21, 2018, by and between Green Power YE and SciVac Ltd. (incorporated by reference to Exhibit 10.58 to the annual report on Form 10-K (SEC File No. 001-37769), filed with the SEC on February 26, 2018).
10.3	Waiver Agreement, dated February 21, 2018, by and among Variation Biotechnologies (US), Inc., the Guarantors party thereto, and Perceptive Credit Holdings, LP (incorporated by reference to Exhibit 10.59 to the current report on Form 8-K (SEC File No. 001-37769), filed with the SEC on February 26, 2018.
10.4*	Amendment to lease agreement among American Twine Limited Partnership and Variation Biotechnologies (US), Inc.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1**	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2**	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

** Furnished herewith.

+ Indicates a management contract or compensatory plan.

29

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 1, 2018	VBI VACCINES INC.
	By:	/s/ Jeff Baxter
		Jeff Baxter President & Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Athena Kartsaklis
		Athena Kartsaklis
		Senior Vice-President, Finance (Principal Financial and Accounting Officer)

30

EX-10.4

Exhibit 10.4

SIXTH AMENDMENT TO LEASE

THIS SIXTH AMENDMENT TO LEASE (the “SIXTH Amendment”) is made as 23rd day of March 2018 by and between American Twine Limited Partnership, a Massachusetts limited partnership (the “Landlord”), having an address c/o Transatlantic Investment Management, Inc. 222 Third Street, Cambridge, Massachusetts and Variation Biotechnologies (US), Inc. (the “Tenant”), having an address at 222 Third Street. Cambridge, MA 02142.

WITINESSTH THAT

WHEREAS:

Landlord and Tenant are the current parties to that certain Lease dated May 31, 2012, as amended by the First Amendment dated June 28, 2013, the Second Amendment dated October 2, 2013, and the Third Amendment dated January 31. 2014, the Fourth Amendment dated August 7, 2014, the Fifth Amendment dated May 9, 2017 (together the “Lease”) with respect to approximately 2,359 rentable square feet, suite 2241, in the building located on the property known as 222 Third Street, Cambridge, Middlesex County, Massachusetts; and

WHEREAS:

Landlord and Tenant desire to amend the Lease to extend the term, expand into suite 2240 and other changes to the Lease as agreed to by the parties.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged. the parties hereby agree to amend the Lease as follows:

1.	The Effective Date of this Sixth Amendment shall be April 1, 2018.
2.	As of the Effective Date Section 1.1 of the Lease Premises, will be amended to add Suite 2240 consisting of 1,116 rentable square feet.

Suite 2240	Suite 2241
1,116		2,359

3.	As of the Effective Date, Section 1.1 of the Lease, Term will be amended to extend the term by Two (2) Years and One (1) month, terminating on April 30, 2020.
4.	As of the Effective Date Section 1.1 of the Lease, Annual Fixed Rent will be amended to add the following:

Suite 2240

4/1/2018 – 3/31/2019: $77,004.00 ($69.00/sf)

4/1/2019 – 3/31/2020: $78,120.00 ($70.00/sf)

4/1/2020 – 4/30/2020: $79,236.00 ($71.00/sf)

Suite 2241

5/1/2018 – 4/30/2019: $148,617.00 ($63.00/sf)

5/1/2019 – 4/30/2020: $150,976.00 ($64.00/sf)

5. As of the Effective Date section 1.1 of the Lease under the heading “Pro-Rota” will be amended as follows:

Suite 2240			Suite 2241
	.96	%		2.04	%

6.	As of the Effective date, section 1.1 Lease under the heading “Tax Base” will be amended to add suite 2240 for Calendar Year 2018.
7.	As of the Effective Date, section 1.1 of the Lease under the heading “Operating Base” will be amended to add suite 2240 for Calendar Year 2018.
8.	Landlord will complete the following work in suite 2240 prior to Effective Date. The modifications in suite 2240 are as shown in Exhibit A.

· Demo/remove two walls and kitchenette area.

· Paint entire office with two colors as selected by tenant from Landlord’s samples.

· Replace carpet in “reception area” where wall is being removed.

· Replace all light fixtures with building standard LED cable hung fixtures. All Leasehold improvements shall be mutually agreed upon using building standard procedures and materials.

As a Concession (as defined herein), Landlord shall cause to be performed the work defined above (“Landlord’s Work”). All such work shall be done in a good and workmanlike manner employing first quality materials, free from defects and so as to conform to all applicable building and zoning law s. Tenant agrees that Landlord may make any immaterial changes in such work which may become reasonably necessary or advisable, without approval of Tenant , provided written notice is promptly given to Tenant, and Landlord may make material changes in such work only with the prior written approval of Tenant.

Except for Landlord’s Work, Tenant hereby accepts the Premises “as is,” with all faults, whether latent. patent or otherwise, and hereby warrants and represents that it has caused such inspections to be made of the Premises by persons or companies of its choosing and has had such reports and evaluations of the Premises issued, as it has determined is appropriate, and is satisfied in all respects therewith.

9.	As of the Effective Date, section 1.1 of the Lease under the heading “Parking” will be amended to be Two (2) Reserved Parking Spaces at the current market rate of $200/month/space).
10.	Tenant understands and agrees that Landlord’s agreement to provide, grant, afford, and/or incur the cost of any “Concession” described within the Lease or this Amendment is expressly conditioned on Tenant’s full and timely performance of all terms, conditions, and obligations of the Lease and this Amendment and that accordingly, in the event of any default by Tenant beyond any applicable notice and cure period, Landlord shall recover from Tenant, as Additional Rent, and in addition to all other remedies available to Landlord under the Lease and/or under law, the Full Value of such Concessions. As used herein, the term “Full Value” shall mean the full dollar amount expended by Land lord with respect to those Concessions which required expenditure s by Landlord, and the amount the Land lord would have received from the Tenant but for those Concessions which involved payment waivers or abatements by Landlord.
11.	Landlord acknowledges that it currently holds $17,201.00 as a Security Deposit under the Lease. Upon execution of this Sixth Amendment Tenant shall to pay to Landlord as additional Security Deposit the sum of $1,981.00 for suite 2240. As of the Effective Date the information contained in Article 1 of the Lease, immediately following the heading “Security Deposit” shall be amended to $19,184.00.
12.	Tenant represents and warrants that Tenant has had no contact with any broker in connection with this Sixth Amendment to Lease. Landlord represents and warrants the Landlord has had no contact with any broker in connection with this Sixth Amendment. Landlord and Tenant will each indemnify and hold the other harmless in the event that any broker claims a commission from Landlord as a result of representing Tenant or from Tenant as a result of representing Landlord.

Except as expressly amended by this Sixth Amendment, all of the terms and conditions of the Lease shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Sixth Amendment to be executed as of the date first above written.

LANDLORD:	AMERCIAN TWINE LIMITED PARTNERSHIP
	By:	ATLP, Inc., its general partner
	By:	/s/ Anthony Goschalk
		Anthony Goschalk
		President

TENANT:	Variation Biotechnologies (US), Inc.
	By:	/s/ Jeff Baxter
		Jeff Baxter
		Chief Executive Officer

Exhibit A

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jeff Baxter, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of VBI Vaccines Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(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 1, 2018

/s/ Jeff Baxter

Jeff Baxter

Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Athena Kartsaklis, 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 1, 2018

/s/ Athena Kartsaklis

Athena Kartsaklis

Senior Vice-President, Finance (Principal Financial and Accounting Officer)

EX-32.1

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, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Jeff 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 1, 2018

/s/ Jeff Baxter

Jeff Baxter

Chief Executive Officer (Principal Executive Officer)

EX-32.2

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, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Athena Kartsaklis, Senior Vice-President, Finance (Principal Financial 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 1, 2018

/s/ Athena Kartsaklis

Athena Kartsaklis

Senior Vice-President, Finance (Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 25, 2018
Document And Entity Information
Entity Registrant Name	VBI Vaccines Inc/BC
Entity Central Index Key	0000764195
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		64,215,727
Trading Symbol	VBIV
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2018

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
CURRENT ASSETS
Cash	$ 58,094	$ 67,694
Accounts receivable, net	167	143
Inventory, net	783	788
Prepaid expenses	371	951
Other current assets	937	850
Total current assets	60,352	70,426
NON-CURRENT ASSETS
Other long-term assets	1,196	675
Property and equipment, net	2,942	2,245
Intangible assets, net	61,600	63,336
Goodwill	8,731	8,974
Total non-current assets	74,469	75,230
TOTAL ASSETS	134,821	145,656
CURRENT LIABILITIES
Accounts payable	2,537	1,810
Other current liabilities	11,202	9,826
Deferred revenues	74
Current portion of long-term debt – related party	2,200	1,600
Total current liabilities	16,013	13,236
NON-CURRENT LIABILITIES
Long-term debt, net of debt discount – related party	11,236	11,538
Liabilities for severance pay	442	426
Deferred revenues, net of current portion	669	669
Total non-current liabilities	12,347	12,633
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY
Common shares (unlimited authorized; no par value) (2018 issued – 64,215,727 2017 - issued 64,078,781)	201,899	201,806
Additional paid-in capital	61,625	60,891
Accumulated other comprehensive (loss) income	(837)	1,065
Accumulated deficit	(156,226)	(143,975)
Total stockholders' equity	106,461	119,787
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 134,821	$ 145,656

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Common stock, authorized unlimited	Unlimited	Unlimited
Common stock, no par value
Common stock, shares issued	64,215,727	64,078,781

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Revenues	$ 178	$ 127
Operating expenses:
Cost of revenue	1,413	1,275
Research and development	6,964	4,654
General and administration	3,425	3,045
Total operating expenses	11,802	8,974
Loss from operations	(11,624)	(8,847)
Interest expense, net of interest income of $202 and $12 (including related party – see Note 8)	(539)	(704)
Foreign exchange (loss) gain	(88)	482
Loss before incomes taxes	(12,251)	(9,069)
Income tax benefit		431
NET LOSS	$ (12,251)	$ (8,638)
Net loss per share of common shares, basic and diluted	$ (0.19)	$ (0.22)
Weighted-average number of common shares outstanding, basic and diluted	64,179,605	40,026,270
Other comprehensive (loss) income - currency translation adjustments	$ (1,902)	$ 126
COMPREHENSIVE LOSS	$ (14,153)	$ (8,512)

XML

Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Interest income	$ 202	$ 12

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Income (Loss) - Currency Translation Adjustments [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017	$ 201,806	$ 60,891	$ 1,065	$ (143,975)	$ 119,787
Balance, shares at Dec. 31, 2017	64,078,781
Stock-based compensation	$ 88	734			822
Stock-based compensation, shares	135,000
Common shares issued on exercise of stock options	$ 5				5
Common shares issued on exercise of stock options, shares	1,946
Net loss				(12,251)	(12,251)
Currency translation adjustments			(1,902)		(1,902)
Balance at Mar. 31, 2018	$ 201,899	$ 61,625	$ (837)	$ (156,226)	$ 106,461
Balance, Shares at Mar. 31, 2018	64,215,727

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (12,251)	$ (8,638)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	149	171
Stock-based compensation	822	624
Amortization of debt discount	299	288
Deferred taxes		(431)
Net change in operating working capital items:
(Increase) in accounts receivable	(27)	(32)
(Increase) in inventory	(1)	(78)
Decrease in prepaid expenses	54	67
(Increase) in other current assets	(106)	(95)
(Increase) in other long-term assets	(19)	(27)
(Decrease) increase in accounts payable	614	(609)
(Decrease) increase in deferred revenues	84	(73)
Increase in other current liabilities	1,804	589
Net cash flows used in operating activities	(8,578)	(8,244)
INVESTING ACTIVITIES
Purchase of property and equipment	(1,015)	(266)
Net cash flows provided by investing activities	(1,015)	(266)
FINANCING ACTIVITIES
Proceeds from issuance of common shares for cash, upon exercise of stock options	5	16
Net cash flows provided by financing activities	5	16
Effect of exchange rates on cash	(12)	(279)
CHANGE IN CASH FOR THE PERIOD	(9,600)	(8,773)
CASH, BEGINNING OF PERIOD	67,694	32,282
CASH, END OF PERIOD	58,094	23,509
Supplementary information:
Interest paid – related party	474	450
Capital expenditures included in other current liabilities		$ 76

XML

Nature of Business and Continuation of Business

3 Months Ended

Mar. 31, 2018

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”); and SciVac Ltd. an Israeli company (“SciVac”) are collectively referred to as the “Company”, “we”, “us”, “our” or “VBI”.

The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 222 Third Street, Suite 2241, Cambridge, MA 02142. 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 developing next generation vaccines to address unmet needs in infectious disease and immuno-oncology. We currently manufacture our product, Sci-B-Vac a third generation Hepatitis B (“HBV”) vaccine for adults, children and newborns, which is approved for use in Israel and 14 other countries. Sci-B-Vac has not yet been approved by the U.S. Food and Drug Administration (the “FDA”), the European Medicines Agency (the “EMA”) or Health Canada. VBI is currently conducting a global Phase III clinical program to obtain FDA, EMA and Health Canada market approvals for commercial sale of Sci-B-Vac in the United States, the European Union (the “EU”), and Canada, respectively. Our wholly-owned subsidiary in Rehovot, Israel, currently manufactures and sells Sci-B-Vac.

We are also developing technologies that seek to enhance vaccine protection in large, underserved markets. These include an enveloped “Virus Like Particle” or “eVLP” vaccine platform that allows for the design of enveloped virus-like particle vaccines that closely mimic the target viruses. VBI is advancing a pipeline of eVLP vaccines, with lead programs in human cytomegalovirus (“CMV”), an infection that, while common, can lead to serious complications in babies and people with weak immune systems, and is involved in the progression of glioblastoma multiforme (“GBM”), which is a form of brain cancer.

Liquidity and Going Concern

The Company has a limited operating history and faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development of its products.

The Company has an accumulated deficit of $156,226 as of March 31, 2018 and cash outflows from operating activities of $8,578 for the three months ended March 31, 2018.

The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals, commercially launch its products. The Company plans to finance future operations with existing cash reserves. Additional financing, if required, could be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, or revenues from potential collaborations, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

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 United States Securities and Exchange Commission (“SEC”), for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2017 consolidated balance sheet in this document was derived from the audited consolidated financial statements and does not include all of the disclosures required by U.S. GAAP. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form 10-Q”) 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, 2017 (the “2017 10-K”), as filed with the SEC on February 26, 2018.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: SciVac, VBI DE, VBI US and VBI Cda. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements.

In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.

Reclassification

Certain prior year amounts have been reclassified to conform with the current quarter presentation and were not material to our condensed consolidated financial statements.

Significant Accounting Policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2017 10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2018, other than revenue recognition discussed below.

Revenue recognition

Revenues consist primarily of product sales of vaccines and research services. We apply the five-step model outlined in Accounting Standards Codification Topic 606, Revenue from Contracts from Customers (ASC 606). Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). We adopted ASC 606 effective January 1, 2018. As a result, we have changed our accounting for revenue recognition. We applied ASC 606 using the modified retrospective method and there was no material impact to our consolidated financial statements related to the adoption of ASC 606.

Foreign currency

The functional and reporting currency of the Company is the USD. Each of the Company’s subsidiaries determines its own respective functional currency, and this currency is used to separately measure each entity’s financial position and operating results.

Assets and liabilities of foreign operations with a different functional currency from that of the Company are translated at the closing rate at the end of each reporting period. Profit or loss items are translated at average exchange rates for all the relevant periods. All resulting translation differences are recognized as a component of accumulated other comprehensive loss (income).

Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved, are included in the condensed consolidated statements of operations.

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate estimates used in the preparation of the condensed consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the deferred tax valuation allowance, estimating accrued clinical expenses, the inputs in determining the fair value of the in-process research and development (“IPR&D”) and goodwill as part of the annual impairment analysis, the inputs in determining the fair value of equity-based awards and warrants issued as well as the values ascribed to assets acquired and liabilities assumed in business combinations. Actual results may differ from estimates made.

Goodwill and In-Process Research and Development

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

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary after step zero), an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Under Accounting Standards Update (“ASU”) 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, Step 2 from the goodwill impairment test has been eliminated and goodwill impairment is measured as the excess of the carrying amount of the reporting unit over its fair value. The Company has established August 31^st as the date for its annual impairment test of goodwill.

The goodwill is in VBI Cda and the change in carrying value from December 31, 2017 relates to currency translation adjustments which decreased goodwill by $243 for the three-month period ended March 31, 2018.

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

IPR&D acquired in a business combination is capitalized as an intangible asset and tested for impairment at least annually until commercialization, after which time the IPR&D is amortized over its estimated useful life. The impairment test compares the carrying amount of the IPR&D asset to its fair value. If the carrying amount exceeds the fair value of the asset, such excess is recorded as an impairment loss.

Fair value measurements of financial instruments

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.

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

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

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

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

Financial instruments recognized in the 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.

The carrying amounts of the Company’s long-term assets approximate their respective fair values.

At March 31, 2018 and December 31, 2017, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be approximately $15,306 and $15,157, respectively.

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New Accounting Pronouncements

3 Months Ended

Mar. 31, 2018

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements

3. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Our adoption of this ASU effective, January 1, 2018, did not have a material impact on our condensed consolidated financial statements and footnote disclosures.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. This update will change the income statement impact of equity investments held by an entity; disclosures related to fair value of financial instruments and presentation of financial assets and liabilities. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Entities must apply the standard using a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. Except for certain early application guidance, early adoption is not permitted. We adopted this ASU effective January 1, 2018 and are no longer required to disclose the fair value assumptions in determining the fair value of the long-term debt in the footnote disclosures.

Recently Issued Accounting Standards, not yet Adopted

Leases

In February 2016 the FASB issued ASU 2016-02: Leases. The ASU introduces a lessee model that results in most leases impacting the balance sheet. The ASU addresses other concerns related to the current leases model. Under ASU 2016-02, lessees will be required to recognize for all leases with terms longer than 12 months, at the commencement date of the lease, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee’s right to use or control the use of a specified asset for the lease term. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases, as disclosed in Note 11, will be subject to the new standard. We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will increase our total assets and liabilities.

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Inventory, Net

3 Months Ended

Mar. 31, 2018

Inventory Disclosure [Abstract]

Inventory, Net

4. INVENTORY, NET

Inventory is stated at the lower of cost or market and consists of the following:

	March 31, 2018		December 31, 2017
Finished goods	$	47	$	99
Work-in-process		381		119
Raw materials		355		570
	$	783	$	788

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Intangibles

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Intangibles

5. INTANGIBLES

			March 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(414	)	$	-		$	30	$	285
IPR&D assets		61,500		-			(300	)		115		61,315
	$	62,169	$	(414	)	$	(300	)	$	145	$	61,600

			December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(397	)	$	-		$	33	$	305
IPR&D assets		61,500		-			(300	)		1,831		63,031
	$	62,169	$	(397	)	$	(300	)	$	1,864	$	63,336

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

Amortization related to the IPR&D assets will not begin amortizing until the Company commercializes its products.

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Other Current Liabilities

3 Months Ended

Mar. 31, 2018

Other Liabilities Disclosure [Abstract]

Other Current Liabilities

6. OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Accrued expenses (including clinical trial accrued expenses)	$	10,033	$	7,921
Payroll and employee-related costs		1,056		1,699
Other current liabilities		113		206
	$	11,202	$	9,826

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Loss Per Share of Common Shares

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Loss Per Share of Common Shares

7. 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 shares of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 9, Stockholders’ Equity and Additional Paid-in Capital.

The following potentially dilutive securities outstanding at March 31, 2018 and 2017 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	March 31, 2018		March 31, 2017
Warrants		2,618,824		2,068,824
Stock options and equity awards		3,960,549		3,120,525
		6,579,373		5,189,349

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Long-Term Debt - Related Party

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Long-Term Debt - Related Party

8. LONG-TERM DEBT – RELATED PARTY

As at March 31, 2018 and the December 31, 2017, the long-term debt is as follows:

	March 31, 2018		December 31, 2017
Long-term debt, net of debt discount	$	13,436	$	13,138
Less: current portion		2,200		1,600
	$	11,236	$	11,538

On May 6, 2016, the Company through VBI DE assumed a term loan facility with Perceptive Credit Holdings, LP, a related party, (the “Lender”) in the amount of $6,000 (the “Facility”). On December 6, 2016, the Company amended the Facility (the “Amended Facility”) and raised $13,200 which was combined with the remaining balance from the Facility of $1,800. The total principal outstanding at March 31, 2018, including the $300 exit fee discussed below, is $15,300. Borrowings under the Amended Facility are secured by all of VBI assets. The principal on the Amended Facility accrues interest at an annual rate equal to the greater of (a) one-month LIBOR (subject to a 5.00% cap) or (b) 1.00%, plus the Applicable Margin. The Applicable Margin will be 11.00%. The first eighteen months are interest only. The interest rate as of March 31, 2018 was 12.88%. Upon the occurrence of an event of default, and during the continuance, of an event of default, the Applicable Margin, defined above, will be increased by 4.00% per annum. This term loan facility matures December 6, 2019 and includes both financial and non-financial covenants, including a minimum cash balance requirement. The Company was in compliance with these covenants as of March 31, 2018. Pursuant to the Amended Facility, the Company agreed to appoint a representative of Perceptive Credit on our board of directors (the “Board”) who is also a portfolio manager of the Company’s largest shareholder, effective January 2018, Perceptive Credit’s representative resigned from our Board.

The Company’s obligations under the Amended Facility are secured on a senior basis by a lien on substantially all of the assets of the Company and its U.S. and Canadian subsidiaries and guaranteed by the Company and its U.S. and Canadian subsidiaries. The Amended and Restated Credit Agreement also contains customary events of default.

The total debt discount of $3,453 is being charged to interest expense using the effective interest method over the term of the debt. As of March 31, 2018, and December 31, 2017, the unamortized debt discount is $1,864 and $2,163. The Company recorded $299 and $288 of interest expense related to the amortization of the debt discount during the three months ended March 31, 2018 and 2017, respectively.

Total related party interest expense, including the amortization of the debt discount, was $773 and $738 for the three months ended March 31, 2018 and 2017, respectively. Such amounts are included in Interest expense, net in the accompanying condensed consolidated statements of operations and comprehensive loss.

The following table summarizes the future principal payments that the Company expects to make for long-term debt:

	Principal payments on Amended Facility and exit fee
Remaining 2018	$	1,600
2019		13,700
	$	15,300

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Stockholders' Equity and Additional Paid-In Capital

3 Months Ended

Mar. 31, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity and Additional Paid-In Capital

9. STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL

Stock option plans

The Company’s stock option plans are approved by and administered by the Company’s Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.

2006 VBI US Stock Option Plan

No further options will be issued under the 2006 VBI US Stock Option Plan (the “2006 Plan”). As at March 31, 2018, there were 1,140,053 options outstanding under the 2006 Plan.

2013 Stock Incentive Plan

No further options will be issued under the 2013 Equity Incentive Plan (the “2013 Plan”). As at March 31, 2018, there were 4,613 options outstanding under the 2013 Plan.

2014 Equity Incentive Plan

No further options will be issued under the 2014 Equity Incentive Plan (the “2014 Plan”). As at March 31, 2018, there were 645,222 options outstanding under the 2014 Plan.

2016 VBI Equity Incentive Plan

The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of 10% of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 10% maximum is inclusive of options granted under all equity incentive plans. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company following the VBI-SciVac Merger 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 at March 31, 2018, there were 1,639,114 options and 531,547 stock awards outstanding under the 2016 Plan.

The aggregate number of common shares remaining available for issuance for awards under this plan total 1,936,496 at March 31, 2018.

Activity related to stock options is as follows:

	Number of Stock Options			Weighted Average Exercise Price
Balance outstanding at December 31, 2017		2,351,395		$	4.44
Granted		1,265,000		$	4.19
Forfeited		(185,447	)		4.00
Exercised		(1,946	)	$	2.50
Balance outstanding at March 31, 2018		3,429,002		$	4.35
Exercisable at March 31, 2018		1,747,927		$	4.50

Information relating to restricted stock units is as follow:

	Number of Stock Awards			Weighted Average Fair Value at Grant Date
Unvested shares outstanding at December 31, 2017		424,379		$	3.99
Granted		150,000		$	4.26
Vested and exercised		(17,832	)	$	4.94
Forfeited		(25,000	)	$	3.87
Unvested shares outstanding at March 31, 2018		531,547		$	4.03

In determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying the following weighted average assumptions:

	2018			2017
Volatility		114.53	%		87.22	%
Risk free interest rate		2.48	%		2.31	%
Expected term in years		5.77			6.3
Expected dividend yield		0	%		0	%
Weighted average fair value per option	$	3.53		$	3.12

The fair value of the options is recognized as an expense on a straight-line basis over the vesting period and forfeitures are accounted for when they occur. The total stock-based compensation expense recorded in the three months ended March 31, 2018 and 2017 was as follows:

	Three months ended March 31
	2018		2017
Research and development	$	191	$	185
General and administrative		618		423
Cost of revenues		13		16
Total stock-based compensation expense	$	822	$	624

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

10. INCOME TAXES

The Company operates in U.S., Israel and Canadian tax jurisdictions. Its income is subject to varying rates of tax, and losses incurred in one jurisdiction cannot be used to offset income taxes payable in another.

The Company determines its annual effective tax rate at the end of each interim period based on the year to date period results. Since the Company is incorporated in Canada, it is required to use Canada’s statutory tax rate of 26.00% in the determination of the estimated annual effective tax rate.

The Company’s effective tax rate on loss before tax for the three months ended March 31, 2018 of 0% (4.78% - 2017) differs from the Canadian statutory rate of 26.00% primarily due to recording a valuation allowance on the Canadian deferred tax assets in excess of the remaining Canadian deferred tax liability and the effect of recording a valuation allowance against deferred tax assets in all other jurisdictions.

The Company maintains a valuation allowance on all of its deferred tax assets. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. 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 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. As at March 31, 2018 the Company believes that it maintains adequate insurance coverage for any such litigation matters arising in the normal course of business.

Operating Leases

The Company has entered into various non-cancelable lease agreements for its office, lab and manufacturing facilities. These arrangements expire at various times through 2022. Rent expense for the three months ended March 31, 2018 and 2017 was $216 and $217, respectively.

The future annual minimum payments under these leases is as follows:

Year ending December 31
Remaining 2018	$	836
2019		913
2020		527
2021		451
2022		38
Thereafter		-
Total	$	2,765

On February 28, 2018 VBI DE signed a two-year term extension, which included additional office space, related to the office space in Cambridge, MA committing it to approximately $461 of rent payments which has been included in the above table.

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Segment Information

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Segment Information

12. SEGMENT INFORMATION

The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.

Revenues from external customers are attributed to geographic areas based on location of the contracting customers:

	Three Months Ended March 31
	2018		2017
Israel	$	106	$	111
Asia		30		14
South America		-		2
Europe		42		-
Total	$	178	$	127

There was no revenue attributed to our country of domicile, Canada, for the three months ended March 31, 2018 and 2017.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

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 United States Securities and Exchange Commission (“SEC”), for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. The December 31, 2017 consolidated balance sheet in this document was derived from the audited consolidated financial statements and does not include all of the disclosures required by U.S. GAAP. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form 10-Q”) 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, 2017 (the “2017 10-K”), as filed with the SEC on February 26, 2018.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: SciVac, VBI DE, VBI US and VBI Cda. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements.

In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.

Reclassification

Reclassification

Certain prior year amounts have been reclassified to conform with the current quarter presentation and were not material to our condensed consolidated financial statements.

Revenue Recognition

Revenue recognition

Revenues consist primarily of product sales of vaccines and research services. We apply the five-step model outlined in Accounting Standards Codification Topic 606, Revenue from Contracts from Customers (ASC 606). Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). We adopted ASC 606 effective January 1, 2018. As a result, we have changed our accounting for revenue recognition. We applied ASC 606 using the modified retrospective method and there was no material impact to our consolidated financial statements related to the adoption of ASC 606.

Foreign Currency

Foreign currency

The functional and reporting currency of the Company is the USD. Each of the Company’s subsidiaries determines its own respective functional currency, and this currency is used to separately measure each entity’s financial position and operating results.

Assets and liabilities of foreign operations with a different functional currency from that of the Company are translated at the closing rate at the end of each reporting period. Profit or loss items are translated at average exchange rates for all the relevant periods. All resulting translation differences are recognized as a component of accumulated other comprehensive loss (income).

Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved, are included in the condensed consolidated statements of operations.

Use of Estimates

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate estimates used in the preparation of the condensed consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the deferred tax valuation allowance, estimating accrued clinical expenses, the inputs in determining the fair value of the in-process research and development (“IPR&D”) and goodwill as part of the annual impairment analysis, the inputs in determining the fair value of equity-based awards and warrants issued as well as the values ascribed to assets acquired and liabilities assumed in business combinations. Actual results may differ from estimates made.

Goodwill and In-Process Research and Development

Goodwill and In-Process Research and Development

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

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary after step zero), an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Under Accounting Standards Update (“ASU”) 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, Step 2 from the goodwill impairment test has been eliminated and goodwill impairment is measured as the excess of the carrying amount of the reporting unit over its fair value. The Company has established August 31^st as the date for its annual impairment test of goodwill.

The goodwill is in VBI Cda and the change in carrying value from December 31, 2017 relates to currency translation adjustments which decreased goodwill by $243 for the three-month period ended March 31, 2018.

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

IPR&D acquired in a business combination is capitalized as an intangible asset and tested for impairment at least annually until commercialization, after which time the IPR&D is amortized over its estimated useful life. The impairment test compares the carrying amount of the IPR&D asset to its fair value. If the carrying amount exceeds the fair value of the asset, such excess is recorded as an impairment loss.

Fair Value Measurements of Financial Instruments

Fair value measurements of financial instruments

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.

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

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

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

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

Financial instruments recognized in the 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.

The carrying amounts of the Company’s long-term assets approximate their respective fair values.

At March 31, 2018 and December 31, 2017, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be approximately $15,306 and $15,157, respectively.

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Inventory, Net (Tables)

3 Months Ended

Mar. 31, 2018

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory is stated at the lower of cost or market and consists of the following:

	March 31, 2018		December 31, 2017
Finished goods	$	47	$	99
Work-in-process		381		119
Raw materials		355		570
	$	783	$	788

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Intangibles (Tables)

3 Months Ended

Mar. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangibles Assets

			March 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(414	)	$	-		$	30	$	285
IPR&D assets		61,500		-			(300	)		115		61,315
	$	62,169	$	(414	)	$	(300	)	$	145	$	61,600

			December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Cumulative Impairment Charge			Cumulative Currency Translation		Net Book Value
Patents	$	669	$	(397	)	$	-		$	33	$	305
IPR&D assets		61,500		-			(300	)		1,831		63,031
	$	62,169	$	(397	)	$	(300	)	$	1,864	$	63,336

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Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

Other Liabilities Disclosure [Abstract]

Schedule of Other Current Liabilities

Other current liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Accrued expenses (including clinical trial accrued expenses)	$	10,033	$	7,921
Payroll and employee-related costs		1,056		1,699
Other current liabilities		113		206
	$	11,202	$	9,826

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Loss Per Share of Common Shares (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Schedule of Antidilutive Weighted Average Shares Outstanding

The following potentially dilutive securities outstanding at March 31, 2018 and 2017 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

	March 31, 2018		March 31, 2017
Warrants		2,618,824		2,068,824
Stock options and equity awards		3,960,549		3,120,525
		6,579,373		5,189,349

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Long-Term Debt - Related Party (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

As at March 31, 2018 and the December 31, 2017, the long-term debt is as follows:

	March 31, 2018		December 31, 2017
Long-term debt, net of debt discount	$	13,436	$	13,138
Less: current portion		2,200		1,600
	$	11,236	$	11,538

Schedule of Future Payment of Long-Term Debt

The following table summarizes the future principal payments that the Company expects to make for long-term debt:

	Principal payments on Amended Facility and exit fee
Remaining 2018	$	1,600
2019		13,700
	$	15,300

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Stockholders' Equity and Additional Paid-in Capital (Tables)

3 Months Ended

Mar. 31, 2018

Stockholders' Equity Note [Abstract]

Schedule of Stock Options Activity

Activity related to stock options is as follows:

	Number of Stock Options			Weighted Average Exercise Price
Balance outstanding at December 31, 2017		2,351,395		$	4.44
Granted		1,265,000		$	4.19
Forfeited		(185,447	)		4.00
Exercised		(1,946	)	$	2.50
Balance outstanding at March 31, 2018		3,429,002		$	4.35
Exercisable at March 31, 2018		1,747,927		$	4.50

Schedule of Restricted Stock Units

Information relating to restricted stock units is as follow:

	Number of Stock Awards			Weighted Average Fair Value at Grant Date
Unvested shares outstanding at December 31, 2017		424,379		$	3.99
Granted		150,000		$	4.26
Vested and exercised		(17,832	)	$	4.94
Forfeited		(25,000	)	$	3.87
Unvested shares outstanding at March 31, 2018		531,547		$	4.03

Schedule of Fair Value of Options Granted By Using Black-Scholes Option Pricing Assumptions

In determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying the following weighted average assumptions:

	2018			2017
Volatility		114.53	%		87.22	%
Risk free interest rate		2.48	%		2.31	%
Expected term in years		5.77			6.3
Expected dividend yield		0	%		0	%
Weighted average fair value per option	$	3.53		$	3.12

Schedule of Stock-based Compensation Expense

The total stock-based compensation expense recorded in the three months ended March 31, 2018 and 2017 was as follows:

	Three months ended March 31
	2018		2017
Research and development	$	191	$	185
General and administrative		618		423
Cost of revenues		13		16
Total stock-based compensation expense	$	822	$	624

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Annual Minimum Lease Payments

The future annual minimum payments under these leases is as follows:

Year ending December 31
Remaining 2018	$	836
2019		913
2020		527
2021		451
2022		38
Thereafter		-
Total	$	2,765

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of Revenue by Geographical Region

Revenues from external customers are attributed to geographic areas based on location of the contracting customers:

	Three Months Ended March 31
	2018		2017
Israel	$	106	$	111
Asia		30		14
South America		-		2
Europe		42		-
Total	$	178	$	127

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Nature of Business and Continuation of Business (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 156,226		$ 143,975
Net cash flows used in operating activities	$ 8,578	$ 8,244

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Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Cumulative translation adjustment	$ 243
Fair value of debt outstanding	$ 15,306	$ 15,157

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Inventory, Net - Schedule of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Finished goods	$ 47	$ 99
Work-in-process	381	119
Raw materials	355	570
Inventory net	$ 783	$ 788

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Intangibles - Schedule of Intangibles Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Intangible assets, Gross	$ 62,169	$ 62,169
Accumulated amortization	(414)	(397)
Cumulative Impairment Charge	(300)	(300)
Cumulative Currency Translation	145	1,864
Intangible assets, Net	61,600	63,336
Patents [Member]
Intangible assets, Gross	669	669
Accumulated amortization	(414)	(397)
Cumulative Impairment Charge
Cumulative Currency Translation	30	33
Intangible assets, Net	285	305
IPR&D [Member]
Intangible assets, Gross	61,500	61,500
Accumulated amortization
Cumulative Impairment Charge	(300)	(300)
Cumulative Currency Translation	115	1,831
Intangible assets, Net	$ 61,315	$ 63,031

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Other Current Liabilities - Schedule of Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Other Liabilities Disclosure [Abstract]
Accrued expenses (including clinical trial accrued expenses)	$ 10,033	$ 7,921
Payroll and employee-related costs	1,056	1,699
Other current liabilities	113	206
Total Other current liabilities	$ 11,202	$ 9,826

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Loss Per Share of Common Shares - Schedule of Antidilutive Weighted Average Shares Outstanding (Details) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Antidilutive weighted average shares outstanding	6,579,373	5,189,349
Warrants [Member]
Antidilutive weighted average shares outstanding	2,618,824	2,068,824
Stock Options and Equity Awards [Member]
Antidilutive weighted average shares outstanding	3,960,549	3,120,525

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Long-Term Debt - Related Party (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	Dec. 06, 2016	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	May 06, 2016
Line of credit maximum borrowing capacity					$ 6,000
Unamortized debt discount	$ 3,453	$ 1,864		$ 2,163
Debt discount		299	$ 288
Interest Expenses Related Party [Member]
Debt discount		773	$ 738
Perceptive Credit Holdings, LP [Member]
Proceeds from line of credit	13,200
Line of credit remaining balance	$ 1,800
Exit fee		300
Long term debt, gross		$ 15,300
Term loan annual interest rate description		The principal on the facility accrues interest at an annual rate equal to the greater of (a) one-month LIBOR (subject to a 5.00% cap) or (b) 1.00%, plus the Applicable Margin. The Applicable Margin will be 11.00%.
Term loan interest rate		12.88%
Term loan maturity date		Dec. 06, 2019

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Long-Term Debt - Related Party - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Long-term debt, net of debt discount	$ 13,436	$ 13,138
Less: current portion	2,200	1,600
Long-term debt	$ 11,236	$ 11,538

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Long-Term Debt - Related Party - Schedule of Future Payment of Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Total	$ 13,436	$ 13,138
Long-term Debt [Member]
Remaining 2018	1,600
2019	13,700
Total	$ 15,300

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Stockholders' Equity and Additional Paid-In Capital (Details Narrative)	3 Months Ended
	Mar. 31, 2018 shares
Number of common shares available for issuance	1,936,496
2006 VBI US Stock Option Plan [Member]
Number of options outstanding	1,140,053
2013 Stock Incentive Plan [Member]
Number of options outstanding	4,613
2014 Equity Incentive Plan [Member]
Number of options outstanding	645,222
2016 VBI Equity Incentive Plan [Member]
Maximum percentage of common shares issued and outstanding	10.00%
Maximum percentage of options granted	10.00%
Stock Options [Member]
Number of options outstanding	1,639,114
Stock Awards [Member]
Number of options outstanding	531,547

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Stockholders' Equity and Additional Paid-In Capital - Schedule of Stock Options Activity (Details) - Stock Options [Member]	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Number of Stock Options Outstanding, Beginning Balance | shares	2,351,395
Number of Stock Options, Granted | shares	1,265,000
Number of Stock Options, Forfeited | shares	(185,447)
Number of Stock Options, Exercised | shares	(1,946)
Number of Stock Options Outstanding, Ending Balance | shares	3,429,002
Number of Stock Options, Exercisable | shares	1,747,927
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 4.44
Weighted Average Exercise Price, Granted | $ / shares	4.19
Weighted Average Exercise Price, Forfeited | $ / shares	4.00
Weighted Average Exercise Price, Exercised | $ / shares	2.50
Weighted Average Exercise Price, Ending Balance | $ / shares	4.35
Weighted Average Exercise Price, Exercisable | $ / shares	$ 4.50

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Stockholders' Equity and Additional Paid-In Capital - Schedule of Restricted Stock Units (Details) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Number of Stock Awards, Unvested shares outstanding beginning balance | shares	424,379
Number of Stock Awards, Granted | shares	150,000
Number of Stock Awards, Vested and exercised | shares	(17,832)
Number of Stock Awards, Forfeited | shares	(25,000)
Number of Stock Awards, Unvested shares outstanding ending balance | shares	531,547
Weighted Average Fair Value at Grant Date, Unvested shares outstanding beginning balance | $ / shares	$ 3.99
Weighted Average Fair Value at Grant Date, Granted | $ / shares	4.26
Weighted Average Fair Value at Grant Date, Vested and exercised | $ / shares	4.94
Weighted Average Fair Value at Grant Date, Forfeited | $ / shares	3.87
Weighted Average Fair Value at Grant Date, Unvested shares outstanding | $ / shares	$ 4.03

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Stockholders' Equity and Additional Paid-In Capital - Schedule of Fair Value of Options Granted By Using Black-Scholes Option Pricing Assumptions (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Stockholders' Equity Note [Abstract]
Volatility	114.53%	87.22%
Risk free interest rate	2.48%	2.31%
Expected term in years	5 years 9 months 7 days	6 years 3 months 19 days
Expected dividend yield	0.00%	0.00%
Weighted average fair value per option	$ 3.53	$ 3.12

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Stockholders' Equity and Additional Paid-In Capital - Schedule of Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Total stock-based compensation expense	$ 822	$ 624
Research and Development [Member]
Total stock-based compensation expense	191	185
General and Administrative [Member]
Total stock-based compensation expense	618	423
Cost of Revenues [Member]
Total stock-based compensation expense	$ 13	$ 16

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Income Taxes (Details Narrative) - Canada [Member]	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statutory income tax rate	26.00%
Federal income tax rate	0.00%	4.78%

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands		3 Months Ended
	Feb. 28, 2018	Mar. 31, 2018	Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Operating leases expiration		2022
Operating leases, rent expense	$ 461	$ 216	$ 217

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Commitments and Contingencies - Schedule of Future Annual Minimum Lease Payments (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remaining 2018	$ 836
2019	913
2020	527
2021	451
2022	38
Thereafter
Total	$ 2,765

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Segment Information (Details Narrative) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) Number	Mar. 31, 2017 USD ($)
Revenue	$ 178	$ 127
Canada [Member]
Number of operating segment | Number	1
Revenue

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Segment Information - Schedule of Revenue by Geographical Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue	$ 178	$ 127
Israel [Member]
Revenue	106	111
Asia [Member]
Revenue	30	14
South America [Member]
Revenue		2
Europe [Member]
Revenue	$ 42