| Stockholders' Equity and Additional Paid-In Capital | 11. STOCKHOLDERS’ EQUITY AND ADDITIONAL
PAID-IN CAPITAL Authorized We have an unlimited number of common shares
authorized without par value. Common shares issuances 2018 common share issuances were as follows:
i. During the first half of 2018 the Company issued 39,828 common shares related to stock options that were exercised during the year.
ii. On March 7, 2018, the Company issued 135,000 stock awards pursuant to the 2016 VBI Equity Incentive Plan (“2016 Plan”). Pursuant to Israeli tax requirements, the common shares were issued to a Trustee on behalf of SciVac employees.
iii. On June 18, 2018, 25% of the stock awards granted on June 24, 2016 vested and the Company issued 129,782 shares of the Company’s common shares.
iv. On December 4, 2018, the Company issued 2,295,082 common shares of the Company to Brii Bio as part of the License Agreement (see Note 1). The transaction was measured using the fair value of the Company’s common shares at December 4, 2018 at a price of $1.58 for a total net proceeds of $3,626.
v. On December 17, 2018, the Company closed an underwritten public offering of 30,665,304 common shares at a price of $1.40 per share for total gross proceeds of $42,932. The Company incurred $3,152 of share issuance costs of which $3,006 were paid in cash during the year ended December 31, 2018 and $146 are included in other current liabilities as of December 31, 2018. 2019 common share issuances were as follows:
i. On February 20, 2019, the Company issued 143,110 stock awards pursuant to the 2016 Plan. Pursuant to Israeli tax requirements, the common shares were issued to a trustee on behalf of SciVac employees.
ii.
On February 20, 2019, the Company issued 35,000
stock awards to service providers pursuant to the 2016 Plan.
iii. On February 20, 2019, the Company issued 140,000 stock awards pursuant to the 2016 Plan.
iv. On June 17, 2019, 25% of the stock awards granted on June 24, 2016 vested and the Company issued 95,312 shares of the Company’s common shares.
v. In September 2019, the Company closed an underwritten public offering of 80,500,000 common shares at a price of $0.50 per share for total gross proceeds of $40,250. The Company incurred $2,835 of share issuance costs. Stock option plans The Company’s stock option plans are
approved by and administered by the Board and its Compensation Committee. The Board designates, in connection with recommendations
from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise
price and vesting period of the new options. 2006 VBI US Stock Option Plan The 2006 VBI US Stock Option Plan (the “2006
Plan”), was approved by and was previously administered by the VBI US board of directors which designated eligible participants
to be included under the 2006 Plan, and designated the number of options, exercise price and vesting period of the new options.
The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan (as defined below)
following the PLCC Merger and no further options will be issued under the 2006 Plan. As of December 31, 2019, there were 994,716
options outstanding under the 2006 Plan. 2013 Stock Incentive Plan The 2013 Equity Incentive Plan (the “2013
Plan”) was approved by and was previously administered by the VBI DE board of directors which designated eligible participants
to be included under the 2013 Plan, and designated the number of options, exercise price and vesting period of the new options.
The 2013 Plan was approved by the VBI DE shareholders on November 8, 2013. No further options will be issued under the 2013 Plan.
As of December 31, 2019, there are no options outstanding under the 2013 Plan. 2014 Equity Incentive Plan On May 1, 2014, the VBI DE board of directors
adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the VBI DE’s
shareholders on July 14, 2014. No further options will be issued under the 2014 Plan. As of December 31, 2019, there were 521,242
options outstanding under the 2014 Plan. 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 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity
and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer
incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016
Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share
units (“RSUs”), performance share units (“PSUs”), shares of restricted stock or other such award as may
be permitted under the 2016 Plan. As of December 31, 2019, there were 4,955,750 options outstanding and 157,997 RSUs unvested under
the 2016 Plan. The principal features of the 2016 Plan are
as follows: Eligible Participants Eligible participants include individuals employed
(including services as a director) by the Company or its affiliates, including a service provider, who, by the nature of his or
her position or job is, in the opinion of the Board, in a position to contribute to the success of the Company (“Eligible
Persons”). Reservation of Shares The aggregate number of common Shares reserved
for issuance to any one participant under the 2016 Plan, together with all other security-based compensation arrangements must
not exceed 5% of the total number of issued and outstanding common shares on a non-diluted basis. The maximum number of common shares (a) issued
to insiders within any one year period; and (b) issuable to insiders at any time, under the 2016 Plan, when combined with all of
the Company’s other security-based compensation arrangements, must not exceed 10% of the total number of issued and outstanding
common shares. The aggregate number of common shares remaining
available for issuance for awards under the 2016 Plan totaled 10,001,505 at December 31, 2019. The source of common shares issued under the
various stock option plans are new common shares. Options and Stock Appreciation Rights The Company may grant options to Eligible Persons
on such terms and conditions consistent with the 2016 Plan. The exercise price for an option must not be less than 100% of the
“market price,” as that term is defined in the 2016 Plan, based on the trading price per common share, on the date
of grant of such option. With respect to SARs attached to an option,
which allows the holder, upon vesting of the option and Tandem SAR, to choose to exercise the stock appreciation right or to exercise
the option, the exercise price is the exercise price applicable to the option (as explained above) to which the Tandem SAR relates,
subject to adjustment provisions under the 2016 Plan. For stand-alone SARs, a SAR that is granted without reference to any related
Company options, the base price must not be less than 100% of the market price on the date of grant of such Stand-Alone SAR. Stock
appreciation rights (and in the case of Tandem SARs, the related options) will be settled by payment in cash or common shares or
a combination thereof, with an aggregate value equal to the product of (a) the excess of the market price on the date of exercise
over the exercise price or base price under the applicable stock appreciation right, multiplied by (b) the number of stock appreciation
rights exercised or settled. The Company has not issued any SARs under the 2016 Plan at December 31, 2019 and 2018. Under the 2016 Plan unless otherwise designated
by the Board of Directors, 25% of the options will vest on each of the first four anniversaries of the grant date. The term of
options will be for a maximum of 10 years, unless exercised or terminated earlier in accordance with the terms of the 2016 VBI
Plan or the applicable grant agreement. Upon a participant’s termination of employment
due to death, or in the case of disability: (a) the outstanding options that were granted prior to the year that includes the participant’s
death or disability that have not become vested prior to such date will continue to vest and, upon vesting, be exercisable during
the 36-month period following such date; and (b) the outstanding options that have become vested prior to the participant’s
death or disability will continue to be exercisable during the 36-month period following such date. In the case of a participant’s termination
of employment or contract for services without cause: (a) the outstanding options that have not become vested prior to the participant’s
termination will continue to vest and, upon vesting, be exercisable during the 120-day period following such date; and (b) the
outstanding options that have become vested prior to the participant’s termination will continue to be exercisable during
the 120-day period following such date. In the case of a participant’s termination
due to resignation (including voluntary withdrawal of services by a non-employee participant): (a) the outstanding options that
have not become vested prior to the date of notice of resignation will be forfeited and cancelled as of such date; and (b) the
outstanding options that have become vested prior to the date of notice of resignation will continue to be exercisable during the
90-day period following such date. In the case of a participant’s termination
of employment or contract for services for cause, any and all then outstanding unvested options granted to such participant will
be immediately forfeited and cancelled, without any consideration therefor, as of the date such notice of termination is given. Share Units The Board of Directors may grant share units,
which include RSUs and PSUs, to Eligible Persons on such terms and conditions consistent with the 2016 Plan. The Board will determine the grant value and
the valuation date for each grant of share units. The number of share units to be covered by each grant will be determined by dividing
the grant value for such grant by the market value of a common share as of the valuation date, rounded up to the next whole number. Share units subject to a grant will vest as
specified in the grant agreement governing such grant, provided that the participant is employed on the relevant vesting date.
RSUs and PSUs will be settled upon, or as soon as reasonably practicable following the vesting thereof, subject to the terms of
the grant agreement. In all events, RSUs and PSUs will be settled on or before the earlier of the 90th day following the vesting
date and the date that is 2 ½ months after the end of the year in which the vesting occurred. Settlement will be made by way
of issuance of one common share for each RSU or PSU, a cash payment equal to the market value of the RSUs or PSUs being settled,
or a combination thereof. If the share units would be settled within a blackout period, such settlement will be postponed until
the earlier of the 6th trading day following the end of such blackout period and the otherwise applicable date of settlement as
determined in accordance with the settlement provision set out above. The Company has not issued any PSUs under this plan at December
31, 2019 and 2018. All RSUs issued under the plan at December 31, 2019 and 2018 contain no cash settlement provision. If and when cash dividends are paid with respect
to common shares to shareholders of record during the period from the grant date to the date of settlement of the RSUs or PSUs,
a number of dividend equivalent RSUs or PSUs, as applicable, will be credited to the share unit account of such participant. In the event a participant’s employment
is terminated due to resignation, share units that have not vested prior to the date of resignation will not vest and all such
common shares will be forfeited immediately. In the case of a participant’s termination
due to death, or in the case of disability, all share units granted prior to the year that includes the participant’s death
or disability, that have not vested prior to the participant’s death or disability will vest at the end of the vesting period
and in the case of PSUs, subject to the achievement of applicable performance conditions and the adjustment of the number of PSUs
that vest to reflect the extent to which such performance conditions were achieved. In the event a participant’s employment
or contract for services is terminated without cause, prior to the end of a vesting period relating to such participant’s
grant, the number of RSUs or PSUs, respectively, as determined by their respective formula set out in the 2016 Plan will become
vested at the end of the vesting period. In the event a participant’s employment
is terminated for cause, share units that have not vested prior to the date of the termination for cause will not vest and all
such share units will be forfeited immediately. Restricted Stock Restricted stock means common shares that are
subject to restrictions on such participant’s free enjoyment of the common shares granted, as determined by the Board. Notwithstanding
the restrictions, the participant will receive dividends paid on the restricted stock, will receive proceeds of the restricted
stock in the event of any change in the common shares and will be entitled to vote the restricted stock during the restriction
period. The participant will not have rights to sell,
transfer or assign, or otherwise dispose of the shares of restricted stock or any interest therein while the restrictions remain
in effect. Grants of restricted stock will be forfeited if the applicable restriction does not lapse prior to such date or occurrence
of such event or the satisfaction of such other criteria as is specified in the grant agreement. No restricted stock has been issued through
December 31, 2019. Stock-based compensation expense The table below provides information, as of
December 31, 2019, regarding the 2006 Plan, the 2013 Plan, the 2014 Plan and the 2016 Plan under which our equity securities are
authorized for issuance to officers, directors, employees, consultants, independent contractors and advisors.
Plan Category Number of Weighted
2006 Plan 994,716 $ 4.00
2013 Plan - $ -
2014 Plan 521,242 $ 5.07
2016 Plan 5,113,747 $ 2.32
Total 6,629,705 $ 2.79 Activity related to stock
options is as follows:
Number of Weighted
Balance outstanding at December 31, 2017 2,351,395 $ 4.44
Granted 1,515,000 $ 3.82
Exercised (39,828 ) $ 2.50
Forfeited (346,891 ) $ 4.47
Balance outstanding at December 31, 2018 3,479,676 $ 4.14
Granted 3,870,000 $ 1.69
Exercised - $ -
Forfeited (877,968 ) $ 3.40
Balance outstanding at December 31, 2019 6,471,708 $ 2.79
Exercisable at December 31, 2019 3,459,745 $ 3.45
Outstanding Exercisable
Exercise Price Number Of Weighted Number Of Weighted
$ 0.00- $ 3.49 3,964,743 8.78 1,322,364 $ 1.90
$ 3.50 - $ 4.49 1,813,366 6.63 1,443,782 $ 4.14
$ 4.50 - $ 5.49 670,711 5.31 670,711 $ 4.85
$ 5.50+ 22,888 4.57 22,888 $ 8.17
6,471,708 7.80 3,459,745 $ 3.45 The weighted average remaining contractual
life of exercisable options was 6.81 years and 6.12 years at December 31, 2019 and 2018, respectively. Information relating to restricted stock units is as follow:
Number of Weighted
Unvested shares outstanding at January 1, 2017 and December 31, 2017 424,379 3.99
Granted 150,000 $ 4.26
Vested (237,669 ) $ 4.01
Forfeited (68,140 ) $ 3.89
Unvested shares outstanding at December 31, 2018 268,570 $ 4.13
Granted 330,000 $ 1.65
Vested (421,544 ) $ 2.73
Forfeited (19,029 ) $ 3.43
Unvested shares outstanding at December 31, 2019 157,997 $ 2.77 The intrinsic value of outstanding options
at December 31, 2019 was $0 (the intrinsic value of vested options was $0 and the intrinsic value of those expected to vest was
$0). The fair value of the vested RSU’s was $1,153 for the year ended December 31, 2019. There were no options exercised
for the year ended December 31, 2019 and the intrinsic value of exercised options was not significant for the year ended December
31, 2018. 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:
2019 2018
Volatility 118.62 % 114.68 %
Risk free interest rate 2.46 % 2.57 %
Expected term in years 5.78 5.84
Expected dividend yield 0.00 % 0.00 %
Weighted average fair value per option $ 1.45 $ 3.21 The volatility was based on an average of volatility
rates of a pool of public pharmaceutical or biotechnology companies that are at a comparable stage of development and the Company’s
recent historic volatility, all calculated taking into account the expected term of the option. The risk-free rate was based on rates provided
by the United States Treasury with a term equal to the expected life of the option. The Company does not have sufficient historical
exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares
have been publicly traded. As a result, the Company uses the simplified method to determine the expected term of stock options
whereby the expected term equals the average between the vesting period and the contractual life. The fair value of the options is recognized
as an expense on a straight-line basis over the vesting period, forfeitures are accounted for when they occur. The total stock-based compensation expense
recorded in the years ended December 31, was as follows:
2019 2018
Research and development $ 796 $ 696
General and administration 3,080 2,556
Cost of revenue 59 60
Total stock-based compensation expense $ 3,935 $ 3,312 There is $5,414 of unrecognized compensation
from all equity awards as of December 31, 2019. This expense will be recognized over a weighted average period of 1.89 years. The number of restricted stock awards vested
during the year ended December 31, 2019 and 2018 includes no shares and 9,281 shares withheld or repurchased, respectively, by
the Company on behalf of employees to satisfy $0 and $35 of tax obligations relating to the vesting of such shares, respectively. Warrants During the year ended December 31, 2019, the
Company amended the exercise price of certain warrants issued on July 25, 2014 and December 6, 2016, as described in
Note 9. During the year ended December 31, 2018, the
Company extended the expiration date of certain warrants issued on July 25, 2014, as described in Note 9. Activity related to the warrants is as follows:
Number of Weighted
Balance outstanding at December 31, 2017 and 2018 2,618,824 $ 3.57
Issued - $ -
Balance outstanding at December 31, 2019 2,618,824 $ 2.87 |
