OPEXA THERAPEUTICS, INC., 10-K filed on 2/27/2012
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Feb. 15, 2012
Jun. 30, 2011
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
Document Fiscal Year Focus
2011 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
OPXA 
 
 
Entity Registrant Name
OPEXA THERAPEUTICS, INC. 
 
 
Entity Central Index Key
0001069308 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Smaller Reporting Company 
 
 
Entity Common Stock, Shares Outstanding
 
23,048,488 
 
Entity Public Float
 
 
$ 28,516,172 
BALANCE SHEETS (USD $)
Dec. 31, 2011
Dec. 31, 2010
Current assets:
 
 
Cash and cash equivalents
$ 7,109,215 
$ 3,812,535 
Other current assets
124,773 
85,525 
Total current assets
7,233,988 
3,898,060 
Property & equipment, net of accumulated depreciation of $1,193,601 and $1,109,558, respectively
1,029,236 
815,958 
Total assets
8,263,224 
4,714,018 
Current liabilities:
 
 
Accounts payable
476,315 
358,837 
Accounts payable-related parties
15,000 
15,000 
Accrued expenses
576,545 
335,861 
Current maturity of loan payable
 
35,607 
Total current liabilities
1,067,860 
745,305 
Total liabilities
1,067,860 
745,305 
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 and 18,466,924 shares issued and outstanding
230,485 
184,670 
Additional paid in capital
107,645,666 
98,496,382 
Deficit accumulated during the development stage
(100,680,787)
(94,712,339)
Total stockholders' equity
7,195,364 
3,968,713 
Total liabilities and stockholders' equity
$ 8,263,224 
$ 4,714,018 
BALANCE SHEETS (Parenthetical) (USD $)
Dec. 31, 2011
Dec. 31, 2010
Property & equipment, accumulated depreciation
$ 1,193,601 
$ 1,109,558 
Preferred stock, no par value
   
   
Preferred stock, authorized
10,000,000 
10,000,000 
Preferred stock, issued
   
   
Preferred stock, outstanding
   
   
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
23,048,488 
18,466,924 
Common stock, shares outstanding
23,048,488 
18,466,924 
STATEMENTS OF EXPENSES (USD $)
12 Months Ended 107 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2011
Research and development
$ 3,340,038 
$ 2,584,734 
$ 70,178,875 
General and administrative
2,406,269 
2,216,043 
27,609,075 
Depreciation
210,252 
168,843 
1,346,481 
Loss on disposal of fixed assets
9,686 
459 
510,248 
Operating loss
(5,966,245)
(4,970,079)
(99,644,679)
Interest income
932 
1,660 
1,358,417 
Other income and expense, net
 
 
661,146 
Gain on extinguishment of debt
 
 
1,612,440 
Gain (loss) on derivative instruments
 
 
1,388,848 
Gain on sale of technology
 
 
3,000,000 
Interest expense
(3,135)
(500,648)
(9,056,959)
Net loss
$ (5,968,448)
$ (5,469,067)
$ (100,680,787)
Basic and diluted loss per share
$ (0.26)
$ (0.32)
 
Weighted average shares outstanding
22,532,498 
17,071,691 
 
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)
11 Months Ended 12 Months Ended 107 Months Ended
Dec. 31, 2003
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Dec. 31, 2007
Dec. 31, 2006
Dec. 31, 2005
Dec. 31, 2004
Dec. 31, 2011
Cumulative effect of change in accounting principle
 
 
 
$ (220,835)
 
 
 
 
 
 
Change in derivative liability
 
 
 
587,609 
 
6,656,676 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Conversion of convertible notes
 
 
1,380,091 
 
 
 
 
 
248,370 
 
Exercise of options
 
 
109,641 
63,604 
 
 
 
 
 
 
Acquisition of Opexa
 
 
 
 
 
 
 
 
23,750,000 
 
Shares repurchased and cancelled
(325)
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
 
489,914 
508,550 
650,249 
1,901,570 
1,876,103 
2,749,617 
2,487,741 
123,333 
 
Warrant Expense
 
 
 
 
603,850 
845,275 
1,568,966 
2,373,888 
 
 
Transition of warrants from equity instruments to liability instruments
 
 
 
 
 
 
 
(10,658,496)
 
 
Net loss
(126,003)
(5,968,448)
(5,469,067)
(1,433,922)
(11,852,152)
(14,667,367)
(12,649,170)
(14,856,724)
(31,411,736)
(100,680,787)
Ending Balances
(68,968)
7,195,364 
3,968,713 
7,375,148 
1,487,397 
2,133,585 
7,422,898 
(5,580,034)
(3,228,942)
7,195,364 
Cash
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
1,000 
8,618,157 
 
4,689,165 
8,651,579 
 
21,153,519 
5,346,217 
9,000 
 
Beneficial Conversion Feature
 
 
 
 
 
 
 
 
 
 
Discount related to:
 
 
 
 
 
 
 
 
 
 
Discount
28,180 
 
 
 
 
 
 
831,944 
855,849 
 
Warrants Attached To Debt
 
 
 
 
 
 
 
 
 
 
Discount related to:
 
 
 
 
 
 
 
 
 
 
Discount
28,180 
 
 
37,453 
 
 
 
1,433,108 
1,848,502 
 
Services
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
87,028 
64,350 
 
48,965 
 
 
1,012,400 
849,000 
 
Licensing Agreements
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
1,868,384 
427,075 
 
Reverse merger with Sportan
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
 
(147,733)
 
Convertible Debt
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
7,649,446 
288,366 
 
Debt
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
180,000 
161,000 
 
 
Convertible Notes Payable
 
 
 
 
 
 
 
 
 
 
Discount related to:
 
 
 
 
 
 
 
 
 
 
Discount
 
 
 
439,493 
 
 
 
 
 
 
Warrants
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
1,074,935 
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
Par value adjustment
 
 
 
(6,329,888)
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Conversion of convertible notes (in shares)
 
 
2,760,181 
 
 
 
 
 
60,750 
 
Conversion of convertible notes
 
 
27,602 
 
 
 
 
 
30,375 
 
Exercise of options (in shares)
 
 
141,520 
60,400 
 
 
 
 
 
 
Exercise of options
 
 
1,416 
26,280 
 
 
 
 
 
 
Acquisition of Opexa (in shares)
 
 
 
 
 
 
 
 
250,000 
 
Acquisition of Opexa
 
 
 
 
 
 
 
 
125,000 
 
Shares cancelled (in shares)
 
 
 
 
 
 
 
 
(8,000)
 
Shares cancelled
 
 
 
 
 
 
 
 
(4,000)
 
Shares repurchased and cancelled (in shares)
(170,625)
 
 
 
 
 
 
 
 
 
Shares repurchased and cancelled
(85,313)
 
 
 
 
 
 
 
 
 
Ending Balances (in shares)
354,375 
23,048,488 
18,466,924 
15,476,222 
12,245,858 
6,696,784 
6,696,784 
2,061,955 
1,005,984 
23,048,488 
Ending Balances
177,187 
230,485 
184,670 
154,762 
6,122,888 
3,348,351 
3,348,351 
1,030,977 
502,992 
230,485 
Common Stock |
Cash
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
525,000 
4,531,259 
 
2,550,000 
5,503,874 
 
4,600,000 
389,451 
2,250 
 
Shares issued
262,500 
45,312 
 
25,500 
2,751,937 
 
2,300,000 
194,725 
1,125 
 
Common Stock |
Services
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
50,305 
55,000 
 
45,200 
 
 
24,000 
206,500 
 
Shares issued
 
503 
550 
 
22,600 
 
 
12,000 
103,250 
 
Common Stock |
Licensing Agreements
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
 
 
 
 
 
 
29,194 
24,269 
 
Shares issued
 
 
 
 
 
 
 
14,597 
12,135 
 
Common Stock |
Reverse merger with Sportan
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
 
 
 
 
 
 
 
99,740 
 
Shares issued
 
 
 
 
 
 
 
 
49,870 
 
Common Stock |
Convertible Debt
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
 
 
 
 
 
 
611,026 
16,100 
 
Shares issued
 
 
 
 
 
 
 
305,513 
8,050 
 
Common Stock |
Debt
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
 
 
 
 
 
34,829 
2,300 
 
 
Shares issued
 
 
 
 
 
 
17,374 
1,150 
 
 
Common Stock |
Warrants
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued (in shares)
 
 
34,001 
619,964 
 
 
 
 
 
 
Shares issued
 
 
340 
309,982 
 
 
 
 
 
 
Additional Paid in Capital
 
 
 
 
 
 
 
 
 
 
Cumulative effect of change in accounting principle
 
 
 
(1,976,457)
 
 
 
 
 
 
Par value adjustment
 
 
 
6,329,888 
 
 
 
 
 
 
Change in derivative liability
 
 
 
587,609 
 
10,658,496 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Conversion of convertible notes
 
 
1,352,489 
 
 
 
 
 
217,995 
 
Exercise of options
 
 
108,225 
37,324 
 
 
 
 
 
 
Acquisition of Opexa
 
 
 
 
 
 
 
 
23,625,000 
 
Shares cancelled
 
 
 
 
 
 
 
 
4,000 
 
Shares repurchased and cancelled
84,988 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
 
489,914 
508,550 
650,249 
1,901,570 
1,876,103 
2,749,617 
2,487,741 
123,333 
 
Warrant Expense
 
 
 
 
603,850 
845,275 
1,568,966 
2,373,888 
 
 
Transition of warrants from equity instruments to liability instruments
 
 
 
 
 
 
 
(10,658,496)
 
 
Ending Balances
(120,152)
107,645,666 
98,496,382 
96,463,658 
84,929,481 
76,498,054 
63,118,180 
39,783,452 
27,805,805 
107,645,666 
Additional Paid in Capital |
Cash
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
(261,500)
8,572,845 
 
4,663,665 
5,899,642 
 
18,853,519 
5,151,492 
7,875 
 
Additional Paid in Capital |
Beneficial Conversion Feature
 
 
 
 
 
 
 
 
 
 
Discount related to:
 
 
 
 
 
 
 
 
 
 
Discount
28,180 
 
 
 
 
 
 
831,944 
855,849 
 
Additional Paid in Capital |
Warrants Attached To Debt
 
 
 
 
 
 
 
 
 
 
Discount related to:
 
 
 
 
 
 
 
 
 
 
Discount
28,180 
 
 
37,453 
 
 
 
1,433,108 
1,848,502 
 
Additional Paid in Capital |
Services
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
86,525 
63,800 
 
26,365 
 
 
1,000,400 
745,750 
 
Additional Paid in Capital |
Licensing Agreements
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
1,853,787 
414,940 
 
Additional Paid in Capital |
Reverse merger with Sportan
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
 
(197,603)
 
Additional Paid in Capital |
Convertible Debt
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
 
7,343,933 
280,316 
 
Additional Paid in Capital |
Debt
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
 
 
 
 
162,626 
159,850 
 
 
Additional Paid in Capital |
Convertible Notes Payable
 
 
 
 
 
 
 
 
 
 
Discount related to:
 
 
 
 
 
 
 
 
 
 
Discount
 
 
 
439,493 
 
 
 
 
 
 
Additional Paid in Capital |
Warrants
 
 
 
 
 
 
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Shares issued
 
 
(340)
764,953 
 
 
 
 
 
 
Accumulated Deficit
 
 
 
 
 
 
 
 
 
 
Cumulative effect of change in accounting principle
 
 
 
1,755,622 
 
 
 
 
 
 
Change in derivative liability
 
 
 
 
 
(4,001,820)
 
 
 
 
Shares issued for:
 
 
 
 
 
 
 
 
 
 
Net loss
(126,003)
(5,968,448)
(5,469,067)
(1,433,922)
(11,852,152)
(14,667,367)
(12,649,170)
(14,856,724)
(31,411,736)
 
Ending Balances
$ (126,003)
$ (100,680,787)
$ (94,712,339)
$ (89,243,272)
$ (89,564,972)
$ (77,712,820)
$ (59,043,633)
$ (46,394,463)
$ (31,537,739)
$ (100,680,787)
STATEMENTS OF CASH FLOWS (USD $)
12 Months Ended 107 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2011
Cash flows from operating activities
 
 
 
Net loss
$ (5,968,448)
$ (5,469,067)
$ (100,680,787)
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 
64,350 
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
 
314,749 
6,752,698 
Gain on extinguishment of debt
 
 
(1,612,440)
Depreciation
210,252 
168,843 
1,346,481 
Amortization of debt financing costs
 
108,117 
524,378 
Option and warrant expense
489,914 
508,550 
15,575,207 
Loss (gain) on derivative instruments
 
 
(1,388,848)
Loss on disposal of fixed assets
9,686 
459 
510,248 
Changes in:
 
 
 
Accounts receivable
26,245 
(26,245)
 
Prepaid and other expenses
(65,493)
19,909 
(541,446)
Accounts payable - third parties and related parties
(13,028)
(251,765)
(89,241)
Accrued expenses
234,923 
186,087 
522,220 
Net cash used in operating activities
(4,988,921)
(4,376,013)
(50,511,688)
Cash flows from investing activities
 
 
 
Purchase of property & equipment
(296,949)
(35,350)
(1,671,810)
Net cash used in investing activities
(296,949)
(35,350)
(1,671,810)
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
 
109,641 
1,248,588 
Proceeds from debt
 
 
9,283,184 
Repayments on loan payable
(35,607)
(67,325)
(311,222)
Net cash provided by financing activities
8,582,550 
42,316 
59,292,713 
Net change in cash and cash equivalents
3,296,680 
(4,369,047)
7,109,215 
Cash and cash equivalents at beginning of period
3,812,535 
8,181,582 
 
Cash and cash equivalents at end of period
7,109,215 
3,812,535 
7,109,215 
Cash paid for:
 
 
 
Income tax
   
   
   
Interest
3,135 
86,491 
153,163 
NON-CASH TRANSACTIONS
 
 
 
Issuance of common stock to Sportan shareholders
 
 
147,733 
Issuance of common stock for accrued interest
 
78,091 
603,604 
Issuance of warrants to placement agent
 
 
37,453 
Conversion of notes payable to common stock
 
1,302,000 
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
$ 136,266 
 
$ 136,266 
BUSINESS OVERVIEW AND SUMMARY OF ACCOUNTING POLICIES
BUSINESS OVERVIEW AND SUMMARY OF ACCOUNTING POLICIES
NOTE 1—BUSINESS OVERVIEW AND SUMMARY OF ACCOUNTING POLICIES
 
Opexa Therapeutics, Inc. (“Opexa” or “the Company”) was incorporated in Texas in March 1991 as a bio-pharmaceutical company engaged in developing autologous personalized cellular therapies. During the development stage, Opexa acquired the worldwide license to technology developed at Argonne National Laboratory, a U.S. Department of Energy Laboratory operated by the University of Chicago (“Argonne”). This is an exclusive license to a stem cell technology in which adult multi-potent stem cells are derived from monocytes obtained from the patient’s own blood (the “License”). A patent application was filed in November 2003 with the United States Patent and Trade Office regarding the technology involved in the License.
 
In June 2004, PharmaFrontiers Corp. (“Pharma”) was acquired by Sportan United Industries, Inc. (“Sportan”) in a transaction accounted for as a reverse acquisition. Pharma’s stockholders were issued 6,386,439 Sportan shares in exchange for 100 percent of the outstanding common shares of Pharma. Immediately following the transaction, Sportan changed its name to Pharma and 7,383,838 shares were outstanding.
 
On October 7, 2004, Opexa acquired all of the outstanding stock of Opexa Pharmaceuticals, Inc., an entity that has the exclusive worldwide license from Baylor College of Medicine to an individualized T-cell therapeutic vaccine, Tovaxin®, for the treatment of multiple sclerosis (MS).
 
In June 2006, Opexa (i) changed its name to Opexa Therapeutics, Inc. from Pharma and (ii) effected a one-for-ten reverse common stock split (the “Split”).  In January 2007, Opexa Therapeutics, Inc., the parent, merged with its wholly owned subsidiary, Opexa Pharmaceuticals, Inc. with Opexa Therapeutics, Inc. being the surviving company.
 
In August  2009, Opexa entered into an exclusive agreement with Novartis whereby Novartis acquired Opexa’s rights to the stem cell technology platform and had full responsibility for funding and carrying out all research, development and commercialization activities.  Opexa received an upfront cash payment of $3 million at the time the agreement was entered into and subsequently received $0.5 million as a technology transfer fee milestone. On November 2, 2011, Opexa re-acquired the stem cell assets from Novartis in consideration for releasing Novartis with respect to any further payment obligations owed to Opexa by Novartis, including the remaining $0.5 million technology transfer milestone payment.  In connection with the re-acquisition of the stem cell assets, a related license agreement with the University of Chicago was assigned back to Opexa.  Opexa and the University of Chicago entered into a Fourth Amended and Restated License Agreement in connection with such assignment to Opexa.
 
Development Stage Company. Opexa is considered to be in development stage and has had no commercial revenues to date.
 
Basis of Presentation.  All references to number of shares and per share amounts reflect the Split as if it occurred on the first day of the first period presented. The financial statements include the accounts of Opexa and its former wholly-owned subsidiary, Opexa Pharmaceuticals, Inc. through December 31, 2006. All inter-company accounts and transactions have been eliminated.
 
Reclassifications. Certain prior year amounts have been reclassified to conform with the current year presentation.
 
Use of Estimates in Financial Statement Preparation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Cash and Cash Equivalents For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less. The primary objectives for the fixed income investment portfolio are liquidity and safety of principal. Investments are made with the objective of achieving the highest rate of return consistent with these two objectives. Opexa’s investment policy limits investments to certain types of instruments issued by institutions primarily with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.
 
Long-lived Assets. Property and equipment are stated on the basis of historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Major renewals and improvements are capitalized, while minor replacements, maintenance and repairs are charged to current operations. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.
 
Income Taxes. Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, and are measured by applying enacted tax rates in effect in years in which the differences are expected to reverse. A valuation allowance is recorded to reduce the net deferred tax asset to zero because it is more likely than not that the deferred tax asset will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination.
 
Stock-Based Compensation. Opexa accounts for share-based awards issued to employees and non-employees in accordance with FASB ASC 718. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting is over a 3-year period). Additionally, share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value.
 
Research and Development. Research and development expenses include salaries, related employee expenses, clinical trial expenses, research expenses, consulting fees, and laboratory costs. All costs for research and development activities are expensed as incurred. Opexa expenses the costs of licenses of patents and the prosecution of patents until the issuance of such patents and the commercialization of related products is reasonably assured. Research and development expense for the years ended December 31, 2011 and 2010 was $3,340,038 and $2,584,734, respectively.
CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS
NOTE 2—CASH AND CASH EQUIVALENTS

At December 31, 2011, Opexa invested approximately $7.0 million in a money market account with an average market yield of 0.01%. The money market fund invests 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. Interest income of $932 was recognized for the year ended December 31, 2011 in the statements of expenses.
 
At December 31, 2010, Opexa invested approximately $3.7 million in a money market account with an average market yield of 0.03%. Interest income of $1,660 was recognized for the year ended December 31, 2010 in the statements of expenses.
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT
NOTE 3—PROPERTY AND EQUIPMENT
 
Property and equipment consisted of the following at December 31, 2011 and 2010:

Description
  
Life
  
2011
    
2010
  
Computer equipment
  
3 years
   $ 99,603     $ 117,789  
Office furniture and equipment
  
5-7 years
     251,170       246,117  
Software
  
3 years
     96,097       80,480  
Laboratory equipment
  
7 years
     994,994       990,961  
Leasehold improvements
  
10 years
     603,445       465,601  
Manufacturing equipment
  
7 years
     177,528       24,568  
Subtotal
         2,222,837       1,925,516  
Less: accumulated depreciation
         (1,193,601 )     (1,109,558 )
Property and equipment, net
       $ 1,029,236     $ 815,958  
 
Property and equipment is carried at cost less accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful life of three to ten years, depending upon the type of equipment, except for leasehold improvements which are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. The cost of repairs and maintenance is charged as an expense as incurred. Depreciation expense totaled $210,252 and $168,843 for the years ended December 31, 2011 and 2010, respectively.
INCOME TAXES
INCOME TAXES
NOTE 4—INCOME TAXES
 
Opexa uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
 
At December 31, 2011, Opexa had approximately $61 million of unused net operating losses available for carryforward to future years. The unused net operating losses begin to expire at December 31, 2024. At December 31, 2011, Opexa’s deferred tax asset resulting from its cumulative NOLs amounted to $20,876,592 which is covered by a full valuation allowance due to uncertainty of Opexa’s ability to generate future taxable income necessary to realize the related deferred tax asset.
 
During 2010, Opexa received a direct payment of $244,479 from the Internal Revenue Service in payment of their application for the Qualifying Therapeutic Discovery Grant. Opexa accounted for this payment as a reduction of research and development expenses for the year ended December 31, 2010.
LOAN PAYABLE
LOAN PAYABLE
NOTE 5—LOAN PAYABLE
 
Loan payable consisted of an equipment line of up to $250,000 with Wells Fargo of which $0 and $35,607 were outstanding as of December 31, 2011 and 2010, respectively. This loan had an interest rate of 7.61% per annum, matured in June 2011 and was secured by Opexa’s furniture and equipment purchased with the loan proceeds. For the years ended December 31, 2011 and 2010, Opexa recognized interest expense of $775 and $5,522, respectively, associated with its equipment line.
CONVERTIBLE PROMISSORY NOTES
CONVERTIBLE PROMISSORY NOTES
NOTE 6—CONVERTIBLE PROMISSORY NOTES
 
On April 14, 2009 and May 14, 2009, Opexa closed a private offering consisting of secured convertible notes (the “Notes”) for gross proceeds of approximately $1.3 million. The Notes matured in two years from the date of issue and accrued interest at a 10% rate, compounded annually. The interest was payable at maturity in either cash or common stock at Opexa’s option. The Notes were secured by substantially all of Opexa’s assets and were convertible into common stock, at the option of the holders, at a price of $0.50 per share. Additionally, subject to the satisfaction of certain conditions, the Notes were mandatorily convertible into common stock, at Opexa’s option, during their term also at $0.50 per share. The required conditions were: (1) Opexa enters into an agreement that will fund a Phase IIb or Phase III clinical trial for the further development of Opexa’s product known as Tovaxin®, (2) Opexa’s common stock trades at a price greater than or equal to $1.00 per share for 20 consecutive trading days, and (3) Opexa has an effective registration statement on file with the Securities and Exchange Commission for the resale of the shares of common stock issuable upon conversion of the Notes.
 
In connection with the issuance of the Notes, warrants to purchase a total of 1,302,000 shares of common stock were issued to the investors. See Note 9 “Broker and Investor Warrants” for details on the warrants. The Notes were evaluated for a beneficial conversion feature under FASB ASC 470 and determined to have a beneficial conversion feature totaling $89,546. Opexa recorded a debt discount of $439,493 related to the warrants granted to the investors. Pursuant to FASB ASC 470, the discount on the Notes is amortized over the period between the issuance date and the maturity of the Notes under the effective interest method.
 
Opexa analyzed the Notes and the warrants for derivative accounting consideration under FASB ASC 470. Opexa determined the embedded conversion option in the Notes and the warrants met the criteria for classification in stockholders equity under FASB ASC 470. Therefore, derivative accounting was not applicable for these Notes payable or their associated warrants.
 
The total of the fees associated with the financing (broker commissions and legal fees) were $158,468. These fees were to be amortized over the life of the Notes using the effective interest method.
 
Upon notice of Opexa’s intent to prepay the then outstanding $1.25 million aggregate principal balance of the Notes in full on June 23, 2010, the noteholders elected to convert the outstanding principal balance of the Notes into shares of Opexa common stock at the conversion price of $0.50 pursuant to the terms of the Notes.  The conversion of all outstanding Notes was effected June 23, 2010, with one Note for $50,000 in principal amount having been previously converted in May 2010 by the holder thereof into 100,000 shares of Opexa common stock pursuant to the terms thereof.
 
In settlement of accrued and unpaid interest on the Notes in the approximate amount of $156,000, the noteholders accepted Opexa’s offer to pay 50% of the accrued interest to June 23, 2010 in cash and 50% of the accrued interest to June 23, 2010 in shares of common stock calculated at the same $0.50 conversion price.  As a condition to accepting Opexa’s offer, each noteholder agreed to immediately terminate and release the security interest associated with the Notes as well as Opexa’s obligations under the Unit Purchase Agreement, Registration Rights Agreement and Security Agreement that were executed in connection with the original issuance of the Notes.
 
The conversion of the Notes and payment of accrued interest resulted in the issuance of an aggregate of 2,760,181 shares of common stock and an aggregate cash payment in the amount of $78,115.  As debt was extinguished in exchange for equity pursuant to a preexisting contractual obligation recognized in the financial statements, management has concluded that no gain or loss should be recognized upon the conversion.  As of the date of the conversion, the unamortized discount related to the beneficial conversion feature and the warrants issued with the Notes amounting to $211,590 as well as the unamortized deferred financing costs of $70,191 were charged to interest expense for the year ended December 31, 2010.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
NOTE 7—COMMITMENTS AND CONTINGENCIES
 
In October 2005, Opexa entered into a ten-year lease for its office and research facilities. The facility including the property is leased for a term of ten years with two options for an additional five years each at the then prevailing market rate. Future minimum lease payments under the non-cancellable operating lease are $150,133 for 2012, $157,896 for 2013, $157,896 for 2014 and $118,422 for 2015. Rent expense was approximately $136,000 for each of the years ended December 31, 2011 and 2010.
EQUITY
EQUITY
NOTE 8—EQUITY
 
During 2003, equity related transactions were as follows:
 
 
·
525,000 shares of common stock were sold for $1,000.
 
 
·
170,625 shares were reacquired for $325 and canceled.
 
 
·
Additional contributions to capital of $56,360 resulted from the discounted value to notes payable due to warrants and beneficial conversion features attached to convertible notes was issued in 2003.
 
During 2004, equity related transactions were as follows:
 
 
·
2,250 shares of common stock were sold for $9,000.
 
 
·
206,500 shares of common stock valued at their then fair value of $849,000 were issued to employees and consultants for their services.
 
 
·
24,269 shares of common stock valued at their then fair value of $427,075 were issued to the University of Chicago per the terms of a license agreement. See Note 11 for details.
 
 
·
99,740 shares of common stock were issued for net liabilities of $147,733 pursuant to the 2004 reorganization.
 
 
·
250,000 shares of common stock valued at their then fair value of $23,750,000 were issued to Opexa Pharmaceuticals, Inc. stockholders.
 
 
·
16,100 shares of common stock with a relative fair value of $288,366 were issued to noteholders as their additional shares for their subscription investment.
 
 
·
60,750 shares of common stock were issued to noteholders for the conversion of $248,370 of principal and interest from convertible notes.
 
 
·
8,000 shares of common stock were cancelled pursuant to the terms of an employment separation agreement.
 
 
·
Additional contributions to capital of $2,704,351 resulted from the discounted value to notes payable from warrants and beneficial conversion features attached to convertible notes.
 
 
·
Employee stock option compensation expense was $123,333 for 2004.
 
During 2005, equity related transactions were as follows:
 
 
·
389,451 shares of common stock with warrants to purchase 1,070,993 shares were sold for $5,841,769. The relative fair value of the common stock was $1,103,714 and the relative fair value of the warrants was $4,738,055. Offering costs of $495,552 related to shares issued were charged to additional paid in capital.
 
 
·
45,168 shares of common stock with a relative fair value of $999,074 were issued to noteholders as their additional shares for their subscription investment.
 
 
·
565,858 shares of common stock were issued to noteholders for the conversion of $6,124,859 of principal and $525,513 interest from convertible notes.
 
 
·
2,300 shares of common stock valued at their fair value of $161,000 were issued to noteholders for the conversion of $51,930 of principal and interest from the notes.
 
 
·
29,194 shares of common stock were issued to the University of Chicago per the terms of a license agreement. These shares were recorded at $1,868,384. See Note 11 for details.
 
 
·
24,000 shares of common stock valued at their fair value of $1,012,400 were issued to consultants for their services.
 
 
·
Additional contributions to capital of $2,265,052 relating to the discounted value to notes payable from warrants, beneficial conversion features attached to convertible notes.
 
 
·
Employee stock option compensation expense was $2,487,741 for 2005.
 
 
·
Non-employee stock option compensation expense was $2,373,888 for 2005.
 
 
·
Transition of warrants from equity instruments to liability instruments in the amount of $10,658,496 was recorded.
 
During 2006, equity related transactions were as follows:
 
 
·
In March 2006, 34,829 shares of common stock were issued to settle an outstanding accounts payable in the amount of $180,000.
 
 
·
In April 2006, Opexa sold 4,600,000 shares of its common stock and warrants to purchase 2,300,000 shares of Opexa’s common stock for $23 million. Opexa paid $1,846,481 for the commissions and fees related to this offering and granted to its brokers warrants to purchase 213,720 shares of common stock at an exercise price of $5.00 per share. These warrants are not callable and have a cashless exercise option.
 
 
·
Employee stock option compensation expense was $2,749,617 for 2006.
 
 
·
Non-employee stock option compensation expense was $1,568,966 for 2006.
 
During 2007, equity related transactions were as follows:
 
 
·
Employee stock option compensation expense was $1,876,103 for 2007.
 
 
·
Non-employee stock option compensation expense was $845,275 for 2007.
 
During 2008, equity related transactions were as follows:
 
 
·
In February 2008, Opexa sold 3,500,000 shares of common stock and 4,025,000 Series E warrants in a public offering for approximately $7.6 million. Opexa paid approximately $1.2 million for the underwriter discounts, commissions and other expenses related to this offering and granted to the underwriter warrants to purchase 350,000 shares of common stock at a price of $2.40 per share and an option to acquire 350,000 Series E warrants at a price of $0.18 per Series E warrant.
 
 
·
In August, Opexa sold 2,003,874 shares of common stock and Series F warrants to purchase 2,003,874 shares of common stock in a private offering to certain institutional and accredited investors for approximately $3.0 million. Opexa paid approximately $100,000 in expenses related to this offering.
 
 
·
45,200 shares of restricted common stock valued at $48,965 were issued to Board members as compensation for their Board services.
 
 
·
Employee stock option compensation expense was $1,467,364 for 2008.
 
 
·
Non-employee stock option compensation expense was $434,207 for 2008.
 
During 2009, equity related transactions were as follows:
 
 
·
In December 2009, Opexa sold 2,550,000 shares of its common stock and warrants to purchase 1,275,000 shares of Opexa’s common stock for $5.1 million. Opexa paid $310,500 for the commissions related to this offering and granted broker warrants to purchase 89,250 shares of common stock at an exercise price of $2.50 per share. These warrants are not callable and have a cashless exercise option.
 
 
·
60,400 shares of common stock were issued in connection with the exercise of stock options.
 
 
·
48,200 shares of common stock were issued in connection with the exercise of Series E warrants.
 
 
·
472,968 shares of common stock were issued in connection with the exercise of Series F warrants
 
 
·
98,796 shares of common stock were issued in connection with the exercise of broker warrants.
 
 
·
On November 11, 2009, the Company’s stockholders approved an amendment to the Articles of Incorporation reducing the par value of the common stock from $.50 to $.01 per share. As a result of the reduction in par value, the “Common stock” account was reduced by $6,329,888 and the “Additional paid-in capital” account was increased by the same amount in the accompanying Statements of Changes in Stockholders’ Equity.
 
During 2010, equity related transactions were as follows:
 
 
·
In June 2010, 2,760,181 shares of common stock were issued to noteholders for the conversion of $1,302,000 of principal and $78,091 of accrued interest from the 10% Convertible Promissory Notes.
 
 
·
141,520 shares of common stock were issued in connection with the exercise of stock options.
 
 
·
34,001 shares of common stock were issued in connection with the cashless exercise of broker warrants.
 
 
·
55,000 shares of common stock valued at their fair value of $64,350 were issued to a consultant in exchange for services.
 
During 2011, equity related transactions were as follows:
 
 
·
In January 2011, 384,759 shares of common stock were sold under the Continuous Offering Program Agreement dated May 14, 2010 (the “ATM Agreement”) for net proceeds of $1,066,266.  Compensation and fees totaling $10,826 was paid to the placement agent with respect to the shares sold.  The ATM Agreement was subsequently terminated by Opexa on February 7, 2011.
 
 
·
In February 2011, an aggregate of 4,146,500 units were sold in a public offering, with each unit consisting of one share of common stock and a warrant to purchase four-tenths (0.40) of a share of common stock, at a price to the public of $2.05 per unit, for gross proceeds of $8,500,325. The shares of common stock and warrants were immediately separable and were issued separately such that no units were issued. The warrants were exercisable immediately upon issuance, having a five-year term and an exercise price of $2.61 per share. Net proceeds from this offering were approximately $7,551,891, after deducting underwriting discounts and commissions and other estimated offering expenses. The offering closed on February 11, 2011.
 
 
·
50,305 shares of common stock valued at their fair value of $87,028 were issued to a consultant in exchange for services.
OPTIONS AND WARRANTS
OPTIONS AND WARRANTS
NOTE 9—OPTIONS AND WARRANTS
 
On September 2, 2010, the Board adopted the Opexa Therapeutics, Inc. 2010 Stock Incentive Plan (“the 2010 Plan”) for the granting of equity incentive awards to employees, directors and consultants of Opexa.  The 2010 Plan was approved by the Company’s stockholders on October 19, 2010. The 2010 Plan is the successor to and continuation of Opexa’s June 2004 Compensatory Stock Option Plan (the “2004 Plan”).  The 2004 Plan reserved a maximum of 2,300,000 shares of common stock for issuance pursuant to incentive stock options and nonqualified stock options granted to employees, directors and consultants. Awards were made as either incentive stock options or nonqualified stock options, with the Board having discretion to determine the number, term, exercise price and vesting of grants made under the 2004 Plan. All outstanding equity awards granted under the 2004 Plan continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the terms of the 2004 Plan, but no additional awards will be granted under the 2004 Plan subsequent to approval of the 2010 Plan.  Under the 2010 Plan, the total number of shares of common stock reserved for issuance consists of 2,500,000 shares plus 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 any reserved shares not issued or subject to outstanding grants, up to a maximum of 2,066,800 shares. The 2010 Plan provides for the grant of either 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 Board of Directors or Compensation Committee, as applicable, administers the 2010 Plan and has discretion to determine the recipients, the number and types of stock awards to be granted and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to a limitation on repricing without stockholder approval, the Board or Compensation Committee, as applicable, may also determine the exercise price of options granted under the 2010 Plan.
 
Employee Options:
 
During 2004, options to purchase 96,500 shares were granted to employees at exercise prices ranging from $30.00 to $50.00. These options have terms of five years and vest from one to three years. Fair value of $5,623,186 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2004 include (1) discount rate of 2%, (2) option life of five years, (3) expected volatility of 75.1% and (4) zero expected dividends.
 
During 2005, options to purchase 63,050 shares were granted to employees at an exercise price of $7.00. These options have terms of ten years and vest in four years. Fair value of $261,879 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2005 include (1) discount rate of 2%, (2) option life of ten years, (3) expected volatility of 175.4% and (4) zero expected dividends.
 
During 2005, options to purchase 4,167 shares were forfeited and cancelled.
 
During 2006, options to purchase 389,160 shares of common stock were granted by Opexa to its employees at exercise prices ranging from $5.00 to $9.40. These options have terms from five to ten years and vest from one to three years. Fair value of $3,126,168 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2006 include (1) discount rate range of 4.72% to 5.22%, (2) option life of five to ten years, (3) expected volatility range of 401.3% to 429.9% and (4) zero expected dividends.
 
During 2006, options to purchase 14,133 shares were forfeited.
 
Opexa recorded $2,749,617 stock-based compensation expense to management and employees during 2006.
 
During 2007, options to purchase 224,400 shares of common stock were granted by Opexa to its employees at exercise prices ranging from $3.96 to $5.47. These options have terms of ten years and vest annually over a three year period. Fair value of $958,011 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2007 include (1) discount rate range of 4.22% to 5.07%, (2) option life is a term with the expected term of five to six years, (3) expected volatility range of 95.4% to 103.9% and (4) zero expected dividends.
 
During 2007, options to purchase 17,345 shares were forfeited.
 
Opexa recorded $1,876,103 stock-based compensation expense to management and employees during 2007.
 
During 2008, options to purchase 469,100 shares of common stock were granted by Opexa to its employees at exercise prices ranging from $1.09 to $1.17. These options have terms of ten years and have vesting ranges from 8 months to three years. Fair value of $433,164 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2008 include (1) discount rate range of 3.15% to 3.73%, (2) option life is a term with the expected term of five to six years, (3) expected volatility of 115.3% and (4) zero expected dividends.
 
During 2008, options to purchase 104,578 shares were forfeited.
 
Opexa recorded $1,467,364 stock-based compensation expense to management and employees during 2008.
 
During 2009, options to purchase 535,959 shares of common stock were granted by Opexa to its employees at exercise prices ranging from $0.22 to $2.05. These options have terms of ten years and have vesting ranges from 6 months to three years. Fair value of $512,919 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2009 include (1) discount rate range of 1.47% to 2.01%, (2) option life is a term with the expected term of five to six years, (3) expected volatility of 192.4%—207.7% and (4) zero expected dividends.
 
During 2009, options to purchase 228,786 shares were forfeited.
 
Opexa recorded $402,803 stock-based compensation expense to management and employees during 2009. Unamortized stock-based compensation expense as of December 31, 2009 amounted to $586,467.
 
During 2010, options to purchase 60,000 shares of common stock were granted by Opexa to its employees at exercise prices ranging from $1.53 to $2.25. These options have a term of ten years and vest over three years. Fair value of $112,313 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2010 include (1) discount rate range of 1.93% to 2.78%, (2) option life is an expected term of six to eight years, (3) expected volatility of 206.0%—212.1% and (4) zero expected dividends.
 
During 2010, options to purchase 352,578 shares were forfeited and cancelled.
 
Opexa recorded $289,413 stock-based compensation expense to management and employees during 2010. Unamortized stock-based compensation expense as of December 31, 2010 amounted to $399,638.
 
During 2011, options to purchase 175,000 shares of common stock were granted by Opexa to its employees at an exercise price of $1.56. These options have a term of ten years and vest over three years. Fair value of $268,451 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2011 include (1) discount rate of 3.36%, (2) option life is an expected term of six years, (3) expected volatility of 192.4% and (4) zero expected dividends.
 
During 2011, options to purchase 75,000 shares were forfeited and cancelled.
 
Opexa recorded $304,024 stock-based compensation expense to management and employees during 2011. Unamortized stock-based compensation expense as of December 31, 2011 amounted to $364,064.
 
Non-Employee Options:
 
During 2004, options to purchase 20,000 shares were granted to consultants at exercise prices ranging from $30.00 to $50.00. These options have terms of five years and vest from one to three years. Fair value of $1,011,770 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2004 include (1) discount rate of 2% (2) option life of five years, (3) expected volatility of 75.1% and (4) zero expected dividends.
 
During 2005, options to purchase 71,060 shares were granted to consultants. Using the Black-Scholes option-pricing model fair value for 2005 was $1,552,936. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2005 include (1) discount rate of 2%, (2) option life of five years, (3) expected volatility of 175.4% and (4) zero expected dividends.
 
During 2005, options to purchase 10,000 shares were forfeited and cancelled.
 
During 2006, options to purchase 156,500 shares of common stock were granted by Opexa to its consultants, directors and exiting directors at exercise prices ranging from $5.20 to $9.80. These warrants have a term of ten years and vest from one to three years. Fair value of $1,496,375 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2006 include (1) discount rate range of 4.7%—5.2%, (2) option life of ten years, (3) expected volatility range of 401.3% to 429.9% and (4) zero expected dividends.
 
During 2006, options to purchase 5,000 shares expired.
 
Opexa recorded $1,568,966 stock-based compensation expense to consultants, directors and exiting directors during 2006.
 
During 2007, options to purchase 69,500 shares of common stock were granted by Opexa to its consultants and directors at exercise prices ranging from $3.95 to $5.47. These options have a term of ten years, and have vesting dates that vary from either full or partial vesting at date of grant to full vesting at the first and second year anniversary of the date of grant. Fair value of $268,675 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2007 include (1) discount rate range of 4.20% to 5.07%, (2) option life is a term with the expected term of five and three-quarters years, (3) expected volatility range of 95.4% to 95.9% and (4) zero expected dividends.
 
Opexa recorded $845,275 stock-based compensation expense to consultants and directors during 2007.
 
During 2008, options to purchase 171,300 shares of common stock were granted by Opexa to its consultants and directors at exercise prices ranging from $0.88 to $1.55. These options have a term of ten years, and have vesting dates that vary from either full or partial vesting at date of grant to full vesting at the first year anniversary of the date of grant. Fair value of $179,340 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2008 include (1) discount rate range of 3.07% to 3.44%, (2) option life is a term with the expected term of five and one-half years, (3) expected volatility range of 115.3% to 116.5% and (4) zero expected dividends.
 
During 2008, options to purchase 22,000 shares were forfeited.
 
Opexa recorded $434,207 stock-based compensation expense to consultants and directors during 2008.
 
During 2009, options to purchase 238,380 shares of common stock were granted by Opexa to its consultants and directors at exercise prices ranging from $0.47 to $2.10. These options have a term of ten years, and have vesting dates that vary from either full or partial vesting at date of grant to full vesting at the first year anniversary of the date of grant. Fair value of $215,275 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2009 include (1) discount rate range of 1.87% to 2.46%, (2) option life is a term with the expected term of 5 to five and one-half years, (3) expected volatility range of 192.9% to 208.9% and (4) zero expected dividends.
 
During 2009, options to purchase 113,750 shares were forfeited.
 
Opexa recorded $247,446 stock-based compensation expense to consultants and directors during 2009. Unamortized stock-based compensation expense as of December 31, 2009 amounted to $33,715.
 
During 2010, options to purchase 92,556 shares of common stock were granted by Opexa to its consultants and directors at exercise prices ranging from $1.53 to $2.25. These options have terms of two to ten years, and have vesting dates that vary from either full or partial vesting at date of grant to full vesting within one to two years of the date of grant. Fair value of $200,209 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2010 include (1) discount rate range of 0.97% to 2.43%, (2) option life is an expected term of two to five and one-quarter years, (3) expected volatility of 206.0%—271.6% and (4) zero expected dividends.
 
During 2010, options to purchase 40,136 shares were forfeited.
 
Opexa recorded $219,138 stock-based compensation expense to consultants and directors during 2010. Unamortized stock-based compensation expense as of December 31, 2010 amounted to $14,788.
 
During 2011, options to purchase 129,633 shares of common stock were granted by Opexa to its consultants and directors at exercise prices ranging from $0.95 to $1.78. These options have terms of two to ten years, and have vesting dates that vary from either full or partial vesting at date of grant to full vesting within one to two years of the date of grant. Fair value of $196,783 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2011 include (1) discount rate range of 0.25% to 3.50%, (2) option life is an expected term of two to five and one-quarter years, (3) expected volatility of 84.7%—198.2% and (4) zero expected dividends.
 
Opexa recorded $185,890 stock-based compensation expense to consultants and directors during 2011. Unamortized stock-based compensation expense as of December 31, 2011 amounted to $19,658.
 
Broker and Investor Warrants:
 
During 2003, warrants to purchase 15,000 shares were granted to investors related to the convertible notes.
 
During 2004, warrants to purchase 142,800 shares were granted to investors related to the convertible notes.
 
During 2005, warrants to purchase 46,084 shares of common stock were issued to several brokerage firms as the offering costs and commissions for Opexa’s financing activities at an exercise price of $1.50. These warrants have a fair value of $2,197,162 and vest immediately.
 
During 2005, warrants to purchase 2,386,984 shares were granted to investors related to the convertible notes.
 
During 2005 warrants to purchase 254,362 shares were forfeited.
 
In April 2006, warrants to purchase 213,720 shares of common stock were granted by Opexa to the brokers in connection with the $23 million equity financing, at an exercise price of $5.00. These warrants have a term of three years and vest immediately. Fair value of $1,077,778 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for warrants issued during the year ended December 31, 2006 include (1) discount rate of 5.22%, (2) warrant life of three years, (3) expected volatility of 429.9% and (4) zero expected dividends.
 
During 2006, warrants to purchase 2,765,043 shares were granted to investors related to the April 2006 financing. These warrants have a term of five years and vest immediately. Fair value of $11,729,982 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for warrants issued during the year ended December 31, 2006 include (1) discount rate of 4.86%, (2) warrant life of five years, (3) expected volatility of 429.9% and (4) zero expected dividends.
 
During 2006, warrants to purchase 1,644,908 shares were forfeited.
 
During 2007, there were no warrants granted to investors.
 
During 2008, Series E warrants to purchase 4,025,000 shares of common stock were issued by Opexa to the investors and underwriters in connection with the February 2008 public offering, at an exercise price of $2.00. These warrants vest immediately and have a fair value of $603,750. During 2008, Opexa issued warrants to the underwriter of the February 2008 public offering to purchase 350,000 shares of common stock at a price of $2.40 per share and an option to acquire 350,000 Series E warrants at a price of $0.18 per Series E warrant. These warrants are classified as equity and are immediately exercisable. Fair value of $350,061 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for options issued during the year ended December 31, 2008 include (1) discount rate of 2.93%, (2) warrant life is a term with the expected term of five years, (3) expected volatility of 97. 7% and (4) zero expected dividends.
 
During August 2008, in connection with a private financing, Opexa issued warrants to purchase 2,003,874 shares of its common stock to certain institutional and accredited investors. The warrants expire four years from issuance, are first exercisable after six months of the closing of the financing and are exercisable at $1.78 per share. These warrants are classified as equity. Fair value of $1,976,457 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for warrants issued during the year ended December 31, 2008 include (1) discount rate of 3.27%, (2) warrant life is a term with the expected term of four years, (3) expected volatility of 116.5% and (4) zero expected dividends.
 
In connection with the April and May 2009 private offering of convertible notes, investors were issued four-year warrants to purchase up to an aggregate of 1,302,000 shares of common stock, at an exercise price of $0.75 per share. The estimated fair value of the investor warrants was $478,577 and was calculated using the Black-Scholes valuation model. The following assumptions were used: (1) no expected dividends, (2) risk free interest rate of 0.86%—0.87%, (3) expected volatility range of 195%,—197% and (4) expected life of four years.
 
As additional compensation, Opexa issued warrants to the broker to purchase 112,140 shares of common stock also at a price of $0.75 per share. The estimated fair value of the broker warrants was $37,453 and was calculated using the Black-Scholes valuation model. The following assumptions were used: (1) no expected dividends, (2) risk free interest rate of 0.87%, (3) expected volatility of 195% and (4) expected life of four years.
 
In connection with the December 2009 registered direct offering, institutional investors were issued Series A warrants to purchase 892,500 shares of common stock and Series B warrants to purchase 382,500 shares of common stock. The Series A and Series B warrants are exercisable at $2.55 per share and were first exercisable on June 15, 2010. The Series A Warrants expire on June 15, 2015 and the Series B warrants expire on June 15, 2011.
 
As additional compensation, Opexa issued warrants to the placement agent to purchase 89,250 shares of common stock at $2.50 per share that were first exercisable on June 15, 2010 and expire on November 23, 2014.
 
During 2010, warrants to purchase 1,156,633 shares were forfeited.
 
During 2010, options to acquire Series E warrants of 7,867 shares at a price of $0.18 per Series E warrant were exercised.
 
At December 31, 2010, the aggregate intrinsic value of the outstanding options and warrants was $588,504 and $1,330,134, respectively.
 
During 2011, warrants to purchase 2,687,890 shares were forfeited.

In connection with Opexa’s February 2011 public offering, as disclosed in Note 8, Opexa issued warrants to purchase an aggregate of 1,658,600 shares of common stock to the investors at an exercise price of $2.61 per share. These warrants have a term of five years and are immediately exercisable.
 
At December 31, 2011, the aggregate intrinsic value of the outstanding options and warrants was $227,567 and $435,913, respectively.
 
Summary information regarding options and warrants is as follows:

   
Options
    
Weighted
Average
Exercise
Price
    
Warrants
    
Weighted
Average
Exercise
Price
  
Outstanding at December 31, 2006 
     762,970     $ 11.48       3,670,361     $ 19.51  
                                 
Year ended December 31, 2007:
                                
Granted
     293,900       5.28       —       —  
Forfeited and canceled
     (17,345 )     7.74       —       —  
Outstanding at December 31, 2007
     1,039,525     $ 9.79       3,670,361     $ 19.51  
                                 
Year ended December 31, 2008:
                                
Granted
     640,400       1.10       6,728,874       1.96  
Forfeited and canceled
     (126,578 )     6.53       —       —  
Outstanding at December 31, 2008
     1,553,347     $ 6.47       10,399,235     $ 8.15  
                                 
Year ended December 31, 2009:
                                
Granted
     773,339       0.96       3,204,620       1.67  
Exercised
     (60,774 )     1.05       (718,764 )     1.66  
Forfeited and canceled
     (342,536 )     10.56       (208,330 )     5.00  
Outstanding at December 31, 2009
     1,923,376     $ 3.70       12,676,761     $ 6.93  
Year ended December 31, 2010:
                                
Granted
     152,556       2.08       7,867       2.00  
Exercised
     (141,146 )     0.77       (68,411 )     2.10  
Forfeited and canceled
     (392,714 )     9.11       (1,156,641 )     29.40  
Outstanding at December 31, 2010
     1,542,072     $ 2.15       11,459,576     $ 2.75  
Year ended December 31, 2011:
                                
Granted
     304,633       1.57       1,658,600       2.61  
Exercised
     —       —       —       —  
Forfeited and canceled
     (75,000 )     5.00       (2,687,890 )     5.93  
Outstanding at December 31, 2011
     1,771,705     $ 1.93       10,430,286     $ 1.90  
 
Summary of options outstanding and exercisable as of December 31, 2011 is as follows:
 
Range of Exercise
Prices
    
Weighted Average
Remaining Contractual
Life (years)
    
Number of Options
Outstanding
    
Number of Options
Exercisable
  
$ 0.22 to 4.99       6.50       1,540,765       1,258,388  
 
5.00 to 9.80
       0.61       230,940       230,940  
$ 0.22 to 9.80       7.11       1,771,705       1,489,328  
 
Summary of warrants outstanding and exercisable as of December 31, 2011 is as follows:
 
Range of  Exercise
Prices
    
Weighted Average
Remaining Contractual
Life (years)
    
Number of Warrants
Outstanding
    
Number of Warrants
Exercisable
  
$ 0.18 to 2.61       1.76       10,430,286       10,430,286  
$ 0.18 to 2.61       1.76       10,430,286       10,430,286
LICENSES AND GAIN ON EXTINGUISHMENT OF DEBT
LICENSES AND GAIN ON EXTINGUISHMENT OF DEBT
NOTE 10—LICENSES AND GAIN ON EXTINGUISHMENT OF DEBT
 
University of Chicago License Agreement
 
In 2004, Opexa entered into an agreement with the University of Chicago (“University”) for the worldwide license to technology developed at Argonne National Laboratory, a U.S. Department of Energy Laboratory operated by the University. The license was later amended granting Opexa an exclusive, non-transferable worldwide license to the University’s stem cell technology. In consideration for the license and amendment, Opexa paid the University a total of $232,742 and issued the University 53,462 shares of common stock valued at $2,295,461. Opexa also agreed to pay the University $1.5 million and to issue the University 21,623 shares of Opexa common stock. In April 2007, the $1.5 million cash payment obligation was extended until July 31, 2007 and the obligation to issue shares of Opexa’s common stock was extended until July 31, 2007, with $112,440 accrued as of June 30, 2007.
 
In July 2007, Opexa entered into a second amended and restated license agreement with the University that eliminated the obligations under the prior agreement for the payment of $1.5 million due July 31, 2007 and the obligation to issue 21,623 shares of Opexa common stock. These obligations were recorded as an intangible asset, with the liabilities recorded as a notes payable—current portion of $1.5 million and a stock payable of $112,440. As a result of the amendment and restatement of the license agreement with the University, $1,612,440 was reported as a gain on extinguishment of liability. Opexa applied the accounting guidance related to transfers and servicing of financial assets and extinguishments of liabilities as well as the guidance on debtor’s accounting for a modification or exchange of debt instruments. In August 2009, the University of Chicago license agreement was assigned to Novartis as part of Opexa’s sale of its stem cell technology platform to Novartis, and effective November 2, 2011, the license agreement was assigned back to Opexa and the license agreement was amended and restated, as further described below.
 
Stem Cell Technology Agreement
 
In August 2009, Opexa entered into an exclusive agreement with Novartis for the further development of its stem cell technology. This technology, which has generated preliminary data, was in early preclinical development. Under the terms of the agreement, Novartis acquired the stem cell technology from Opexa and Novartis had full responsibility for funding and carrying out all research, development and commercialization activities. Opexa received an upfront cash payment of $3 million at the time the agreement was entered into and subsequently received $0.5 million as a technology transfer milestone fee.
 
On November 2, 2011, Opexa re-acquired the stem cell assets from Novartis in consideration for releasing Novartis with respect to any further payment obligations owed to Opexa by Novartis, including the remaining $0.5 million technology transfer milestone payment.  In connection with the re-acquisition of the stem cell assets, a related license agreement with the University of Chicago was assigned back to Opexa. Opexa and the University of Chicago entered into a Fourth Amended and Restated License Agreement in connection with such assignment to Opexa.
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
NOTE 11—SUBSEQUENT EVENTS
 
Subsequent to December 31, 2011, Opexa granted its management and employees options to purchase an aggregate of 1,409,367 shares of common stock with a fair value of $1,323,063 at an exercise price of $0.95 and an aggregate of 10,000 shares of common stock with a fair value of $9,064 at an exercise price of $0.92.  Of those options, 1,019,036 are performance-based and will commence three-year quarterly vesting, if at all, in two tranches upon Opexa achieving certain key milestone events.  The remaining options to purchase 400,331 shares are time-based and vest quarterly over a three-year period.
 
On February 15, 2012, Opexa entered into an agreement with Pharmaceutical Research Associates, Inc. (“PRA”), a contract research organization (CRO), in which PRA will provide Opexa with services related to the design, implementation and management of Opexa’s planned Phase II clinical trial program in SP-MS. Under the terms of the agreement, Opexa will pay an upfront cash payment to PRA of $236,830 within ten days of contract execution, an upfront cash payment to PRA of $45,365 as an advance payment of 10% of the estimated pass through costs to be incurred by PRA during the term of the agreement and an upfront cash payment of approximately $24,750 to PRA for certain proprietary system support and administration licensure necessary for data reporting and management. Future payments by Opexa to PRA under the agreement are based on the achievement of certain time and performance milestones as presented in the agreement. Unless terminated by either party without cause on 60 days prior notice or on shorter notice with cause, the initial term of the agreement is for four years and automatically renews for successive one year terms.