OPEXA THERAPEUTICS, INC., 10-Q filed on 5/12/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2017
May 1, 2017
Document And Entity Information [Abstract]
 
 
Entity Registrant Name
OPEXA THERAPEUTICS, INC. 
 
Entity Central Index Key
0001069308 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2017 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Is Entity a Well-known Seasoned Issuer?
No 
 
Is Entity a Voluntary Filer?
No 
 
Is Entity's Reporting Status Current?
Yes 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
7,657,332 
Document Fiscal Period Focus
Q1 
 
Document Fiscal Year Focus
2017 
 
Consolidated Balance Sheets (USD $)
Mar. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 2,822,677 
$ 3,444,952 
Other current assets
237,331 
371,562 
Total current assets
3,060,008 
3,816,514 
Property & equipment, net of accumulated depreciation of $0 and $3,194,029, respectively
50,000 
Total assets
3,060,008 
3,866,514 
Current liabilities:
 
 
Accounts payable
298,050 
377,956 
Accrued expenses
428,394 
625,890 
Notes payable - insurance
91,871 
156,642 
Total current liabilities
818,315 
1,160,488 
Total liabilities
818,315 
1,160,488 
Stockholders' equity:
 
 
Preferred stock, no par value, 10,000,000 shares authorized, none issued and outstanding
Common stock, $0.01 par value, 150,000,000 shares authorized, 7,657,332 and 7,141,054 shares issued and outstanding
76,573 
71,411 
Additional paid in capital
164,410,992 
163,954,215 
Accumulated deficit
(162,245,872)
(161,319,600)
Total stockholders' equity
2,241,693 
2,706,026 
Total liabilities and stockholders' equity
$ 3,060,008 
$ 3,866,514 
Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]
 
 
Property & equipment, accumulated depreciation
$ 0 
$ 3,194,029 
Preferred stock, no par value
$ 0 
$ 0 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
150,000,000 
150,000,000 
Common stock, shares issued
7,657,332 
7,141,054 
Common stock, shares outstanding
7,657,332 
7,141,054 
Consolidated Statements of Operations (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Revenue:
 
 
Option Revenue
$ 0 
$ 726,291 
Research and development
206,024 
1,829,062 
General and administrative
719,869 
987,248 
Depreciation and amortization
72,589 
Operating loss
(925,893)
(2,162,608)
Interest income (expense), net
(846)
108 
Other income (expense), net
467 
2,106 
Net loss
$ (926,272)
$ (2,160,394)
Basic and diluted loss per share
$ (0.12)
$ (0.31)
Weighted average shares outstanding - Basic and diluted
7,597,769 
6,982,909 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
Common Stock [Member]
Additional Paid In Capital [Member]
Accumulated Deficit [Member]
Total
Beginning Balance, Amount at Dec. 31, 2016
$ 71,411 
$ 163,954,215 
$ (161,319,600)
$ 2,706,026 
Beginning Balance, Shares at Dec. 31, 2016
7,141,054 
 
 
 
Common stock sold for cash, Shares
516,278 
 
 
 
Common stock sold for cash, Amount
5,162 
408,500 
 
413,662 
Option expense
 
48,277 
 
48,277 
Net loss
 
 
(926,272)
(926,272)
Ending Balance, Amount at Mar. 31, 2017
$ 76,573 
$ 164,410,992 
$ (162,245,872)
$ 2,241,693 
Ending Balance, Shares at Mar. 31, 2017
7,657,332 
 
 
 
Consolidated Statements of Cash Flows (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities
 
 
Net loss
$ (926,272)
$ (2,160,394)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
72,589 
Option expense
48,277 
153,853 
Changes in:
 
 
Other current assets
134,231 
98,565 
Accounts payable
(79,906)
(186,027)
Accrued expenses
(197,496)
202,531 
Deferred revenue
(726,291)
Net cash used in operating activities
(1,021,166)
(2,545,174)
Cash flows from investing activities
 
 
Proceeds from sale of property & equipment
50,000 
(485)
Net cash provided/(used) in investing activities
50,000 
(485)
Cash flows from financing activities
 
 
Common stock sold for cash net of offering cost
413,662 
Note payable - insurance
(64,771)
(55,144)
Payment of deferred offering costs
(27,512)
Net cash provided/(used) in financing activities
348,891 
(82,656)
Net change in cash and cash equivalents
(622,275)
(2,628,315)
Cash and cash equivalents at beginning of period
3,444,952 
12,583,764 
Cash and cash equivalents at end of period
2,822,677 
9,955,449 
Cash paid for:
 
 
Interest
1,182 
1,371 
Income taxes
NON-CASH TRANSACTIONS
 
 
Unpaid deferred offering costs
$ 0 
$ 8,395 
1. Basis of Presentation and Going Concern
Basis of Presentation and Going Concern

The accompanying interim unaudited consolidated financial statements of Opexa Therapeutics, Inc. (“Opexa” or the “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 (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in Opexa’s latest Annual Report filed with the SEC on Form 10-K.  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 consolidated financial statements that would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year as reported in Form 10-K have been omitted.

 

The accompanying consolidated financial statements include the accounts of Opexa and its wholly owned subsidiary, Opexa Hong Kong Limited (“Opexa Hong Kong”). All intercompany balances and transactions have been eliminated in the consolidation.

 

Going Concern. The accompanying interim unaudited consolidated financial statements for the three months ended March 31, 2017 have been prepared assuming that the Company will continue as a going concern, meaning the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. As of March 31, 2017, the Company had cash and cash equivalents of $2.8 million as well as accounts payable, short-term notes payable and accrued expenses aggregating $818,315. While the Company has historically recognized revenue related to certain upfront payments received from Ares Trading SA (“Merck Serono”), a wholly owned subsidiary of Merck Serono S.A., in connection with the Option and License Agreement and an amendment thereto between Merck Serono and the Company, the Company has never generated any commercial revenues, nor does it expect to generate any commercial revenues for the foreseeable future or other revenues in the near term that will result in cash receipts. Opexa continues to incur net losses, negative operating cash flows and has an accumulated deficit of approximately $162.2 million as of March 31, 2017. These factors raise substantial doubt as to the Company’s ability to continue as a going concern.

 

Following the October 28, 2016 announcement that the Abili-T trial did not meet its primary or secondary endpoints, and in order to conserve cash resources while it reevaluated its programs and explored various strategic alternatives, during the fourth quarter of 2016 and first quarter of 2017 the Company implemented several reductions in workforce totaling 90% of its then 20 full-time employees. As of March 31, 2017 Opexa has two full-time employees. After further analysis of the data from the Abili-T trial, the Company has determined that it will not move forward with further studies of Tcelna in SPMS at this time and is conducting a review of its other research and development programs, including the preclinical program for OPX-212 in NMO, to assess the viability of continuing to pursue one or more of these programs. The Company is also exploring its strategic alternatives. The Company cannot fully predict its future cash needs until it completes this analysis. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 The Company continues to explore potential opportunities and alternatives to obtain the additional resources that will be necessary to support its ongoing operations through and beyond the next 12 months, including raising additional capital through either private or public equity or debt financing as well as using its at-the-market offering program and cutting expenses where possible. However, in light of the disappointing Abili-T study results, there can be no assurance that the Company will be able to secure additional funds or, if such funds are available, whether the terms or conditions would be acceptable to the Company.

2. Significant Accounting Polices
Significant Accounting Polices

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.

 

Opexa primarily maintains cash balances on deposit in accounts at a U.S.-based financial institution.  The aggregate cash balance on deposit in these accounts is insured by the Federal Deposit Insurance Corporation up to $250,000.  Opexa’s cash balances on deposit in these accounts may, at times, exceed the federally insured limits.  Opexa has not experienced any losses in such accounts.

 

As of March 31, 2017, Opexa had approximately $1.8 million in a savings account.  For the three months ended March 31, 2017, the savings account recognized an average market yield of 0.06%.  Interest income of $336 was recognized for the three months ended March 31, 2017 in the consolidated statements of operations.

 

Recent Accounting Pronouncements. The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements. Management has also considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

 

3. Other Current Assets
Other Current Assets

Other current assets consisted of the following at March 31, 2017 and December 31, 2016:

 

Description 

March 31,

2017

 

December 31,

2016

Deferred offering costs  $49,918   $111,641 
Prepaid expense   187,413    259,921 
Total Other Current Assets  $237,331   $371,562 

 

Deferred offering costs at March 31, 2017 and December 31, 2016 were $49,918 and $111,641 respectively. The March 31, 2017 balance includes costs incurred from third parties in connection with the March 25, 2016 implementation of a new Sales Agreement (“ATM Agreement”) with IFS Securities, Inc. (doing business as Brinson Patrick, a division of IFS Securities, Inc.) as sales agent, pursuant to which Opexa can offer and sell shares of common stock from time to time depending upon market demand, in transactions deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933.   These are included in other current assets in the consolidated balance sheets. Upon the sales of shares of common stock under the ATM Agreement, these capitalized costs will be offset against the proceeds of such sales of shares of common stock and recorded in additional paid in capital. As of March 31, 2017, $61,723 of deferred offering costs were recorded in additional paid in capital.

 

Prepaid expenses at March 31, 2017 and December 31, 2016 were $187,413 and $259,921 respectively. Included in the March 31, 2017 balance is $138,723 of prepaid insurance as well as the remaining balance of Opexa’s NASDAQ Capital Market All-Inclusive Annual Fee of $41,250. The remaining balances are attributable to various service contracts and deposits.

 

4. Notes Payable
Notes Payable

    Notes payable consists of a commercial insurance premium finance agreement - promissory note with AFCO of which $78,075 and $136,038 was outstanding as of March 31, 2017 and December 31, 2016, respectively. The loan has an interest rate of 3.5% per annum and matures July 1, 2017. The second note is also a commercial insurance premium finance agreement – promissory note with AFCO of which $13,796 and $20,604 was outstanding as of March 31, 2017 and December 31, 2016, respectively. The loan has an interest rate of 3.5% per annum and matures September 1, 2017. Payments on the above notes are due and payable monthly until maturity.

5. Equity
Equity

For the three months ended March 31, 2017, equity related transactions were as follows:

 

During January 2017, Opexa sold an aggregate of 516,278 shares of common stock under its ATM facility with IFS Securities, Inc. (doing business as Brinson Patrick, a division of IFS Securities, Inc.) as sales agent, for gross proceeds of $490,098. Proceeds net of fees and deferred offering costs were $413,662.

 

6. Stock-Based Compensation
Stock-Based Compensation

Stock Options

 

Opexa accounts for stock-based compensation, including options and nonvested shares, according to the provisions of FASB ASC 718, "Share Based Payment.” During the three months ended March 31, 2017, Opexa recognized stock-based compensation expense of $48,277. Unamortized stock-based compensation expense as of March 31, 2017 amounted to $235,340.

 

Stock Option Activity

 

A summary of stock option activity for the three months ended March 31, 2017 is presented below:

 

   Number of Shares  Weighted Avg. Exercise Price 

Weighted Average Remaining Contract Term

(# years)

  Intrinsic Value
Outstanding at December 31, 2016   481,947   $12.14    7.60    —   
Exercised   —      —             
Forfeited and canceled   (187,351)   11.93           
Outstanding at March 31, 2017   294,596   $12.28    7.19   $—   
Exercisable at March 31, 2017   244,868   $13.69    6.92   $—   

 

Employee Options and Non-Employee Options

 

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.

 

Opexa recognized stock based compensation expense of $48,277 and $153,853 during the three months ended March 31, 2017 and 2016, respectively, for grants made to employees.

 

In addition, during the three months ended March 31, 2017 there were 187,351 shares underlying options that were forfeited and cancelled.

 

There were no stock options or restricted stock awards granted during the three months ended March 31, 2017.

 

Warrant Activity

 

A summary of warrant activity for the three months ended March 31, 2017 is presented below:

 

   Number of Shares  Weighted Avg. Exercise Price 

Weighted Average Remaining Contract Term

(# years)

  Intrinsic Value
Outstanding at December 31, 2016   3,596,625   $12.39    1.21    —   
Forfeited and canceled   (127,894)   12.72            
Outstanding at March 31, 2017   3,468,731    12.38    1.00   $—   
Exercisable at March 31, 2017   3,468,731    12.38    1.00   $—   

 

8. Commitments and Contingencies
Commitments and Contingencies

On February 1, 2017, Opexa entered into an Assignment and Assumption of Lease with KBI Biopharma, Inc. (KBI), pursuant to which Opexa assigned to KBI, and KBI assumed from Opexa, all of Opexa’s remaining rights and obligations under the lease for Opexa’s 10,200 square foot corporate headquarters facility located in The Woodlands, Texas. The facility was originally leased by Opexa from Dirk D. Laukien, as landlord, pursuant to a lease dated August 19, 2005 as amended by that certain First Amendment to Lease Agreement dated May 11, 2015. In light of Opexa’s continuing evaluation of its strategic alternatives following the release of the data from the Abili-T clinical study, management deemed it advisable to reduce the office, R&D and manufacturing space and corresponding rent obligations. The lease had a remaining term through September 2020 and current monthly base rental payments of $16,666.67 with payment escalations to $17,500 over the remaining term. In connection with the lease assignment, Opexa also sold certain furniture, fixtures and equipment (including laboratory and manufacturing equipment) as well as its laboratory supplies located at its corporate headquarters to KBI for cash consideration in the amount of $50,000.

2. Significant Accounting Polices (Policies)

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.

 

Opexa primarily maintains cash balances on deposit in accounts at a U.S.-based financial institution.  The aggregate cash balance on deposit in these accounts is insured by the Federal Deposit Insurance Corporation up to $250,000.  Opexa’s cash balances on deposit in these accounts may, at times, exceed the federally insured limits.  Opexa has not experienced any losses in such accounts.

 

As of March 31, 2017, Opexa had approximately $1.8 million in a savings account.  For the three months ended March 31, 2017, the savings account recognized an average market yield of 0.06%.  Interest income of $336 was recognized for the three months ended March 31, 2017 in the consolidated statements of operations.

Recent Accounting Pronouncements. The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements. Management has also considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

 

3. Other Current Assets (Tables)
Other Current Assets
Description 

March 31,

2017

 

December 31,

2016

Deferred offering costs  $49,918   $111,641 
Prepaid expense   187,413    259,921 
Total Other Current Assets  $237,331   $371,562 
6. Stock-Based Compensation (Tables)
   Number of Shares  Weighted Avg. Exercise Price 

Weighted Average Remaining Contract Term

(# years)

  Intrinsic Value
Outstanding at December 31, 2016   481,947   $12.14    7.60    —   
Exercised   —      —             
Forfeited and canceled   (187,351)   11.93           
Outstanding at March 31, 2017   294,596   $12.28    7.19   $—   
Exercisable at March 31, 2017   244,868   $13.69    6.92   $—   
   Number of Shares  Weighted Avg. Exercise Price 

Weighted Average Remaining Contract Term

(# years)

  Intrinsic Value
Outstanding at December 31, 2016   3,596,625   $12.39    1.21    —   
Forfeited and canceled   (127,894)   12.72           
Outstanding at March 31, 2017   3,468,731    12.38    1.00   $—   
Exercisable at March 31, 2017   3,468,731    12.38    1.00   $—   
1. Basis of Presentation and Going Concern (Details Narrative) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2016
Dec. 31, 2015
Basis Of Presentation And Going Concern Details Narrative
 
 
 
 
Cash and cash equivalents
$ 2,822,677 
$ 3,444,952 
$ 9,955,449 
$ 12,583,764 
Accounts payable, short-term notes payable and accrued expenses
818,315 
1,160,488 
 
 
Accumulated deficit
$ (162,245,872)
$ (161,319,600)
 
 
2. Significant Accounting Polices (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Significant Accounting Polices Details
 
Cash in savings account
$ 1,800,000 
Interest income
$ 336 
3. Other Current Assets (Details) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
 
 
Deferred offering costs
$ 49,918 
$ 111,641 
Prepaid expense
187,413 
259,921 
Total Other Current Assets
$ 237,331 
$ 371,562 
3. Other Current Assets (Details Narrative) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Deferred offering costs
$ 49,918 
$ 111,641 
Prepaid expenses
187,413 
259,921 
Prepaid insurance
$ 138,723 
 
4. Notes Payable (Details Narrative) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Notes payable - insurance
$ 91,871 
$ 156,642 
AFCO
 
 
Notes payable - insurance
78,075 
136,038 
AFCO
 
 
Notes payable - insurance
$ 13,796 
$ 20,604 
6. Stock-Based Compensation (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Options
 
Number of Shares, Outstanding at beginning of period
481,947 
Options, Exercised
Options, Forfeited and canceled
(187,351)
Number of Shares, Outstanding at end of period
294,596 
Number of Shares, Exercisable at end of period
244,868 
Weighted Average Exercise Price, Options
 
Weighted average exercise price, Outstanding at beginning of period
$ 12.14 
Weighted average exercise price options, Exercised
$ 0.00 
Weighted average exercise price options, Forfeited and canceled
$ 11.93 
Weighted average exercise price, Outstanding at end of period
$ 12.28 
Weighted average exercise price, Exercisable at end of period
$ 13.69 
Weighted Average Remaining Contract Term, Options
 
Weighted Average Remaining Contract Term, Outstanding at beginning of period
7 years 7 months 6 days 
Weighted Average Remaining Contract Term, Outstanding at end of period
7 years 2 months 8 days 
Weighted Average Remaining Contract Term, Exercisable
6 years 11 months 1 day 
Intrinsic Value, Options
 
Outstanding Aggregate Intrinsic Value, beginning of period
$ 0 
Outstanding Aggregate Intrinsic Value, end of period
Exercisable Aggregate Intrinsic Value
$ 0 
6. Stock-Based Compensation (Details 1) (Warrants, USD $)
3 Months Ended
Mar. 31, 2017
Warrants
 
Class of Warrant or Right [Line Items]
 
Number of Shares, Outstanding at beginning of period
3,596,625 
Warrants, Forfeited and canceled
(127,894)
Number of Shares, Outstanding at end of period
3,468,731 
Number of Shares, Exercisable at end of period
3,468,731 
Weighted Average Exercise Price, Warrants
 
Weighted average exercise price, Outstanding at beginning of period
$ 12.39 
Weighted average exercise price warrants, Forfeited and canceled
$ 12.72 
Weighted average exercise price, Outstanding at end of period
$ 12.38 
Weighted average exercise price, Exercisable at end of period
$ 12.38 
Weighted Average Remaining Contract Term, Warrants
 
Weighted Average Remaining Contract Term, Outstanding at beginning of period
1 year 2 months 16 days 
Weighted Average Remaining Contract Term, Outstanding at end of period
1 year 
Weighted Average Remaining Contract Term, Exercisable
1 year 
Intrinsic Value, Warrants
 
Outstanding Aggregate Intrinsic Value, Beginning of period
$ 0 
Outstanding Aggregate Intrinsic Value, End of period
Exercisable Aggregate Intrinsic Value
$ 0 
6. Stock-Based Compensation (Details Narrative) (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Stock-based Compensation Details Narrative
 
 
Stock based compensation expense
$ 48,277 
$ 153,853 
Unamortized stock-based compensation expense
$ 235,340