2. Significant Accounting Polices

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Significant Accounting Polices

Revenue Recognition.  Opexa recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 605, “Revenue Recognition.” ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) consideration is fixed or determinable; and (4) collectability is reasonably assured.

On February 4, 2013, Opexa entered into an Option and License Agreement (the “Merck Serono Agreement”) with Ares Trading SA (“Merck Serono”), a wholly owned subsidiary of Merck Serono S.A.  Pursuant to the terms, Merck Serono has an option to acquire an exclusive, worldwide (excluding Japan) license of Opexa’s Tcelna® program for the treatment of multiple sclerosis (“MS”).  Tcelna is currently in a Phase IIb clinical trial in patients with Secondary Progressive MS (“SPMS”). The option may be exercised by Merck Serono prior to or upon Opexa’s completion of the Phase IIb Trial.

On March 9, 2015 Opexa entered into a First Amendment of Option and License Agreement with Merck Serono, to amend the Merck Serono Agreement (the “Merck Serono Amendment”).  Opexa received $3 million in consideration for the activities described below:

(i)  Opexa will create a detailed Pre-Phase III Plan (including a GANTT chart containing key tasks, decision points, timing, budget and milestones) documenting all of the activities necessary for laboratory facilities both in the U.S. and Europe to reach operational readiness by the end of December 2016 (e.g., review and identification of a preferred contract manufacturing organization in Europe; set-up, identification and qualification of third parties for raw materials; validation of laboratory facilities in the U.S. and Europe; and a hiring plan for key personnel).  For Europe, the Pre-Phase III Plan would address the creation of a dedicated lab to support a Phase III trial, and for the U.S., the Pre-Phase III Plan would address the expansion of existing capabilities and infrastructure for a Phase III trial. The Joint Steering Committee (“JSC”) established pursuant to the Merck Serono Agreement will be responsible for reviewing, approving and ultimately overseeing Opexa’s completion of the Pre-Phase III Plan, which approval may not be unreasonably withheld or delayed.  The JSC will meet at least quarterly to advise and make specific recommendations with respect to the Pre Phase III Plan.  In the event the JSC has not approved the Pre-Phase III Plan prior to the end of the Option Period (as defined in the Merck Serono Agreement), the Option Period will be extended for 60 days following approval of the Pre Phase III Plan by the JSC.

(ii)  Opexa will provide Merck Serono updates and analysis on a blinded basis, grouped in patient batches according to Opexa’s analysis timetable, on the progress of Opexa’s immune monitoring program (the “Program”) being conducted in conjunction with Opexa’s ongoing Abili-T clinical trial, with such updates and analysis to be shared with Merck Serono within 30 days of Opexa’s initial assessment of such information.  Opexa will inform Merck Serono of any existing or future external bioinformatics vendor used by Opexa for the Program, and Merck Serono will have the right, at its expense, to review current and future data storage and integrity measures for the on-going Abili-T clinical trial.

Opexa evaluated the Merck Serono Amendment and determined that the $3 million payment from Merck Serono has stand-alone value.  Opexa’s continuing performance obligations, in connection with the $3 million payment, include the creation of the Pre-Phase III Plan and delivery of updates and analysis relating to the Program. As a stand-alone value term in the Merck Serono Amendment, the $3 million payment is determined to be a single unit of accounting, and is recognized as revenue on a straight-line basis over the period equivalent to the expected completion of the Pre-Phase III Plan in December 2016. Opexa includes the unrecognized portion of the $3 million as deferred revenue on the consolidated balance sheets.

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.

At March 31, 2015, Opexa had approximately $8.1 million in a savings account.  For the three months ended March 31, 2015, the savings account recognized an average market yield of 0.10%.  Interest income of $1,478 was recognized for the three months ended March 31, 2015 in the consolidated statements of operations.