Document and Entity Information

3 Months Ended

Mar. 31, 2012

Apr. 30, 2012

Document Type

10-Q

Amendment Flag

false

Document Period End Date

Mar. 31, 2012

Document Fiscal Year Focus

2012

Document Fiscal Period Focus

Q1

Trading Symbol

OPXA

Entity Registrant Name

OPEXA THERAPEUTICS, INC.

Entity Central Index Key

0001069308

Current Fiscal Year End Date

--12-31

Entity Filer Category

Smaller Reporting Company

Entity Common Stock, Shares Outstanding

23,048,488

BALANCE SHEETS (USD $)

Mar. 31, 2012

Dec. 31, 2011

Current assets:

Cash and cash equivalents

$ 4,677,956

$ 7,109,215

Other current assets

1,005,756

124,773

Total current assets

5,683,712

7,233,988

Property & equipment, net of accumulated depreciation of $1,260,334 and $1,193,601, respectively

1,390,674

1,029,236

Total assets

7,074,386

8,263,224

Current liabilities:

Accounts payable

1,681,799

476,315

Accounts payable - related parties

15,000

Accrued expenses

350,802

576,545

Total current liabilities

2,047,601

1,067,860

Total liabilities

2,047,601

1,067,860

Commitments and contingencies

Stockholders' equity:

Preferred stock, no par value, 10,000,000 shares authorized, none issued and outstanding

Common stock, $0.01 par value, 100,000,000 shares authorized, 23,048,488 shares issued and outstanding

230,485

Additional paid in capital

107,851,086

107,645,666

Deficit accumulated during the development stage

(103,054,786)

(100,680,787)

Total stockholders' equity

5,026,785

7,195,364

Total liabilities and stockholders' equity

$ 7,074,386

$ 8,263,224

BALANCE SHEETS (Parenthetical) (USD $)

Mar. 31, 2012

Dec. 31, 2011

Property & equipment, accumulated depreciation

$ 1,260,334

$ 1,193,601

Preferred stock, no par value

Preferred stock, shares authorized

10,000,000

Preferred stock, issued

Preferred stock, outstanding

Common stock, par value

$ 0.01

Common stock, shares authorized

100,000,000

Common stock, shares issued

23,048,488

Common stock, shares outstanding

23,048,488

STATEMENTS OF EXPENSES (USD $)

3 Months Ended

110 Months Ended

Mar. 31, 2012

Mar. 31, 2011

Mar. 31, 2012

Research and development

$ 1,490,097

$ 685,161

$ 71,668,972

General and administrative

816,196

592,058

28,425,271

Depreciation and amortization

67,355

29,634

1,413,836

Loss on disposal of assets

510,248

Operating loss

(2,373,648)

(1,306,853)

(102,018,327)

Interest income

136

211

1,358,553

Other income, net

661,146

Gain on extinguishment of debt

1,612,440

Gain on derivative instruments

1,388,848

Gain on sale of technology

3,000,000

Interest expense

(487)

(1,135)

(9,057,446)

Net loss

$ (2,373,999)

$ (1,307,777)

$ (103,054,786)

Basic and diluted loss per share

$ (0.10)

$ (0.06)

Weighted average shares outstanding

23,048,488

20,955,860

STATEMENTS OF CASH FLOWS (USD $)

3 Months Ended

110 Months Ended

Mar. 31, 2012

Mar. 31, 2011

Mar. 31, 2012

Cash flows from operating activities

Net loss

$ (2,373,999)

$ (1,307,777)

$ (103,054,786)

Adjustments to reconcile net loss to net cash used in operating activities

Stock payable for acquired research and development

112,440

Stock issued for acquired research and development

26,286,589

Stock issued for services

87,028

2,061,743

Stock issued for debt in excess of principal

109,070

Amortization of discount on notes payable due to warrants and beneficial conversion feature

6,752,698

Gain on extinguishment of debt

(1,612,440)

Depreciation

67,355

29,634

1,413,836

Amortization of debt financing costs

524,378

Option expense

205,420

95,470

15,780,627

Gain on derivative instruments

(1,388,848)

Loss on disposition of fixed assets

510,248

Changes in:

Other current assets

(880,983)

(28,249)

(1,422,429)

Accounts payable - third parties and related parties

1,022,532

294,033

933,291

Accrued expenses

(225,743)

38,825

296,477

Net cash used in operating activities

(2,185,418)

(791,036)

(52,697,106)

Cash flows from investing activities

Purchase of property & equipment

(245,841)

(194,034)

(1,917,651)

Net cash used in investing activities

(245,841)

(194,034)

(1,917,651)

Cash flows from financing activities

Common stock and warrants sold for cash, net of offering costs

8,618,157

49,072,488

Common stock repurchased and canceled

(325)

Proceeds from exercise of warrants and options

1,248,588

Proceeds from debt

9,283,184

Repayments on notes payable

(17,637)

(311,222)

Net cash provided by financing activities

8,600,520

59,292,713

Net change in cash and cash equivalents

(2,431,259)

7,615,450

4,677,956

Cash and cash equivalents at beginning of period

7,109,215

3,812,535

Cash and cash equivalents at end of period

4,677,956

11,427,985

4,677,956

Cash paid for:

Income tax

Interest

487

1,135

153,650

NON-CASH TRANSACTIONS

Issuance of common stock to Sportan shareholders

147,733

Issuance of common stock for accrued interest

603,604

Issuance of warrants to placement agent

37,453

Conversion of notes payable to common stock

7,709,980

Conversion of accrued liabilities to common stock

197,176

Conversion of accounts payable to note payable

93,364

Discount on convertible notes relating to:

Warrants

3,659,737

Beneficial conversion feature

1,805,519

Stock attached to notes

1,287,440

Fair value of derivative instrument

4,680,220

Derivative reclassified to equity

587,609

Unpaid additions to property and equipment

$ 182,952

$ 136,266

$ 182,952

Basis of Presentation

Note 1. Basis of Presentation

The accompanying interim unaudited financial statements of Opexa Therapeutics, Inc. (“Opexa”), a development stage company, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in Opexa’s latest Annual Report on Form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-K have been omitted.

Cash and Cash Equivalents

Note 2. Cash and Cash Equivalents

Opexa considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Investments with maturities in excess of three months but less than one year are classified as short-term investments and are stated at fair market value.

At March 31, 2012, Opexa invested approximately $4.5 million in a money market fund investing exclusively in high-quality, short-term money market instruments consisting of U.S. government obligations and repurchase agreements collateralized by the U.S. Government. While this fund seeks current income while preserving capital and liquidity, the fund is subject to risk, including U.S. government obligations risk, and is not federally insured or guaranteed by or obligations of the Federal Deposit Insurance Corporation or any other agency. For the three months ended March 31, 2012, the money market fund recognized an average market yield of 0.01%. Interest income of $136 was recognized for the three months ended March 31, 2012 in the statements of expenses.

Other Current Assets

Note 3. Other Current Assets

Other current assets at March 31, 2012 include prepaid reagents and supplies amounting to $796,154 that will be used in the Company’s planned clinical study. Opexa expects to amortize these prepaid reagents and supplies to research and development costs upon initiation of the planned clinical study.

Stock-Based Compensation

Note 4. Stock-Based Compensation

Stock Options

The 2010 Stock Incentive Plan (the “2010 Plan”) provides for the grant of equity incentive awards to employees, directors and consultants of Opexa in the form of incentive stock options or nonqualified stock options, as well as restricted stock, stock appreciation rights, restricted stock units and performance awards that may be settled in cash, stock or other property. The 2010 Plan is the successor to and continuation of Opexa’s June 2004 Compensatory Stock Option Plan (the “2004 Plan”). A total of 2,500,000 shares of common stock are authorized to be issued for awards made under the 2010 Plan through September 2020, plus (i) the number of shares subject to stock options outstanding under the 2004 Plan that are forfeited or terminate prior to exercise and would otherwise be returned to the share reserves under the 2004 Plan and (ii) any reserved shares under the 2004 Plan that were not issued or subject to outstanding grants. In addition, shares subject to awards granted under the 2010 Plan that terminate or expire before being exercised or settled will become available for grant under the 2010 Plan. As of March 31, 2012, options to purchase an aggregate of 3,227,222 shares were issued and outstanding.

Opexa accounts for share-based compensation, including options and nonvested shares, according to the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, "Share Based Payment.” During the three months ended March 31, 2012, Opexa recognized option expense of $205,420 which includes the related expense for the options that are expected to vest based on achievement of their related performance conditions (see below). Unamortized stock compensation expense as of March 31, 2012 amounted to $1,000,739.

Stock Option Activity

A summary of stock option activity for the three months ended March 31, 2012 is presented below:

	Number of Shares			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contract Term (# years)		Intrinsic Value
Outstanding at January 1, 2012		1,771,705		$	1.93
Granted		1,541,767			0.95
Exercised		-			-
Forfeited and canceled		(86,250	)		3.50

Outstanding at March 31, 2012		3,227,222		$	1.42		8.2	$	157,807

Exercisable at March 31, 2012		1,520,822		$	1.83		6.7	$	157,807

Option awards are granted with an exercise price equal to the market price of Opexa’s stock at the date of issuance, generally have a ten-year life, and have various vesting dates that range from no vesting or partial vesting upon date of grant to full vesting on a specified date. Opexa estimates the fair value of stock options using the Black-Scholes option-pricing model and records the compensation expense ratably over the service period.

During the three months ended March 31, 2012, options to purchase an aggregate of 375,331 shares were granted to employees, based on 2011 performance objectives, at an exercise price of $0.95. These options have terms of ten years and have a vesting schedule of three years. Fair value of $344,309 was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for the options issued to employees during the three months ended March 31, 2012 include (1) discount rate of 1.98%, (2) expected term of 5.25 years, (3) expected volatility of 183% and (4) zero expected dividends.

During the three months ended March 31, 2012, options to purchase an aggregate of 1,019,036 shares were granted to senior management, based on the achievement of future performance-based, strategic milestone objectives, at an exercise price of $0.95. These options have terms of ten years and have vesting schedules of three years commencing after the two specific milestone objectives have been met. Fair value of $964,715 was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for the options issued to senior management during the three months ended March 31, 2012 include (1) discount rate of 1.98%, (2) expected term of ten years, (3) expected volatility of 183% and (4) zero expected dividends.

During the three months ended March 31, 2012, options to purchase an aggregate of 25,000 shares were granted to recently hired employees at exercise prices ranging from $0.92 to $0.95. These options have terms of ten years and have a vesting schedule of three years commencing after the one-year anniversary of the individual employee’s date of hire. Fair value of $23,103 was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for the options issued to recently hired employees during the three months ended March 31, 2012 include (1) discount rate of 1.40%, (2) expected term of seven years, (3) expected volatility of 183% and (4) zero expected dividends.

During the three months ended March 31, 2012, options to purchase an aggregate of 122,400 shares were granted to directors for service on Opexa’s Board at an exercise price of $0.94. Options to purchase an aggregate of 40,000 shares have terms of 10 years, with 50% of the shares vesting immediately and 50% vesting in one year from the date of grant. Options to purchase the remaining 82,400 shares will expire on the earlier of 10 years or a change in control of the Company, with 50% of the shares vesting immediately and 50% vesting on December 31, 2012. Fair value of $111,428 was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for the options issued to directors during the three months ended March 31, 2012 include (1) discount rate of 2.03%, (2) expected term of 5.25 years, (3) expected volatility of 186% and (4) zero expected dividends.

Warrant Activity

A summary of warrant activity for the three months ended March 31, 2012 is presented below:

	Number of Shares		Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contract Term (# years)		Intrinsic Value
Outstanding at January 1, 2012		10,430,286	$	1.90
Granted		-		-
Exercised		-		-
Forfeited and canceled		-		-

Outstanding at March 31, 2012		10,430,286	$	1.90		1.5	$	137,840

Exercisable at March 31, 2012		10,430,286	$	1.90		1.5	$	137,840