**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        DC 20549**
  **FORM
        10-QSB/A**
 **(Amendment
        No. 1)**
 
 **x
                  QUARTERLY REPORT
                  PURSUANT TO SECTION 13 OR 15(d) OF THE**
                **SECURITIES
                  EXCHANGE ACT OF 1934****For
                  the quarterly period ended March 31, 2007****o
                  TRANSITION REPORT
                  PURSUANT TO SECTION 13 OR 15(d) OF THE**
                **SECURITIES
                  EXCHANGE ACT**
 **For
        the transition period from**______**to**______****
  
 **Commission
        File Number: 001-33004**
 
 
 **Opexa
        Therapeutics, Inc.**
 (Exact
        name of Issuer as specified in is charter)
   **Texas**
                **76-0333165**(State
                    of Incorporation)
                (IRS
                    Employer Identification No.)
   **2635
        North Crescent Ridge Drive**
 **The
        Woodlands, Texas 77381**
 (Address
        of
        Principal Executive Offices)
 
 
 **(281)
        272-9331**
 Issuer’s
        Telephone Number, Including Area Code
 
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.   Yes x No o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).    Yes o   No
x
 
 Number
        of
        shares outstanding of the issuer's classes of common equity, as of November
        29,
        2007: 6,696,784 shares of common stock.
  Transitional
        Small Business Disclosure Format (Check
        one):    Yes o   No
x
 
 
  **OPEXA
        THERAPEUTICS INC.**
 **INDEX
        TO FORM 10-QSB/A**
 **March
        31, 2007**
 
 **Item**
              **Description**
              **Page**Explanatory
                  Note
              1**Part
                  I – FINANCIAL INFORMATION**Item
                  1
              Balance
                  Sheets as of March 31, 2007 and December 31, 2006
                  (unaudited) (RESTATED)
              2Statements
                of Expenses for the Three Months Ended March
                31, 2007 and 2006 and the Period from January 22, 2003 (Inception)
                to
                March 31, 2007 (unaudited) (RESTATED)
              3Statements
                of Cash Flows for the Three Months Ended
                March 31, 2007 and 2006 and the Period from January 22, 2003 (Inception)to
                March 31, 2007 (unaudited) (RESTATED)
              4Notes
                to Financial Statements
                (unaudited)
              5Item
                  2
              Management's
                  Discussion and Analysis
              10Item
                  3
              Controls
                  and Procedures
              17**Part
                  II**Item
                  1
              Legal
                  Proceedings
              18Item
                  2
              Recent
                  Sales of Unregistered Securities
              18Item
                  3
              Defaults
                  Upon Senior Securities
              18Item
                  4
              Submission
                  of Matters to a Vote of Security
                  Holders
              18Item
                  5
              Other
                  Information
              18Item
                  6
              Exhibits
              18Signatures
              19
  
  ***Explanatory
        Note***
 
 We
        are
        amending our Quarterly Report on Form 10-QSB for the for the quarter ending
        March 31, 2007 in connection with restating our consolidated financial
        statements for the three months ended March 31, 2007 and 2006 and for the
        period
        January 22, 2003(Inception) to March 31, 2007.  The restatement of our
        financial statements is the result of our determination that the intangible
        assets associated with the acquisition of Opexa Pharmaceuticals, Inc., the
        University of Chicago technology license and the Shanghai Institutes for
        Biological Sciences, Chinese Academy of Sciences of the Peoples Republic
        of
        China technology license should have been recorded as acquired in process
        research and development.
 
 The
        purpose of this amendment is to restate the accompanying financial statements
        for the reasons further described in Note 2 to the financial statements included
        in Item 1 (Financial Information) herein.
 
 -
            1
            -
  **PART
        I**
 
 **FINANCIAL
        INFORMATION**
 
 ITEM
        1. FINANCIAL STATEMENTS.
 **OPEXA
                    THERAPEUTICS, INC.****(a
                    development stage company)****BALANCE
                    SHEETS (RESTATED)****(unaudited)****Restated**
                
                
                **Restated****March
                    31,**
                
                
                **December
                    31,****2007**
                
                
                **2006****Assets**Current
                    assets:Cash
                    and cash equivalents
                
                $
                12,060,839
                
                
                $
                12,019,914Investment
                    in marketable securities
                
                
                -
                
                
                
                2,952,096Other
                    current assets
                
                
                782,037
                
                
                
                472,881Total
                    current assets
                
                
                12,842,876
                
                
                
                15,444,891Property
                    & equipment, net accumulated depreciation of $444,115 and $395,284,
                    respectively
                
                
                1,373,764
                
                
                
                1,361,377Total
                    assets
                
                $
                14,216,640
                
                
                $
                16,806,268**Liabilities
                    and Stockholders' Equity**Current
                    liabilities:Accounts
                    payable
                
                $
                1,105,273
                
                
                $
                868,862Stock
                    payable
                
                
                112,440
                
                
                
                112,440Accrued
                    expenses
                
                
                506,302
                
                
                
                135,069Note
                    payable
                
                
                1,500,000
                
                
                
                1,500,000Current
                    maturity of long term debt
                
                
                29,337
                
                
                
                14,080Derivative
                    liability
                
                
                -
                
                
                
                6,656,677Total
                    current liabilities
                
                
                3,253,352
                
                
                
                9,287,128Long
                    term liabilities:Loan
                    payable
                
                
                130,034
                
                
                
                96,242Total
                    liabilities
                
                
                3,383,386
                
                
                
                9,383,370Commitments
                    and contingencies
                
                
                -
                
                
                
                -Stockholders'
                    equity:Convertible
                    preferred stock, no par value, 10,000,000 shares
                
                
                -
                
                
                
                -authorized,
                    none issued and outstandingCommon
                    stock, $0.50 par value, 100,000,000 shares authorized,
                
                
                3,348,351
                
                
                
                3,348,3516,696,784
                    shares issued and outstandingAdditional
                    paid in capital
                
                
                74,500,068
                
                
                
                63,118,180Deficit
                    accumulated during the development stage
                
                
                (67,015,165
                )
                
                
                (59,043,633
                )Total
                    stockholders' equity
                
                
                10,833,254
                
                
                
                7,422,898Total
                    liabilities and stockholders' equity
                
                $
                14,216,640
                
                
                $
                16,806,268




-
          2
          -


**OPEXA
                    THERAPEUTICS, INC.****(a
                    development stage company)****STATEMENTS
                    OF EXPENSES (RESTATED)****Three
                    months ended March 31, 2007 and 2006 and the****Period
                    from January 22, 2003 (Inception) to March 31, 2007****(unaudited)****Restated****Inception****Restated**
                
                
                **Restated**
                
                
                **through****2007**
                
                
                **2006**
                
                
                **March
                    31, 2007**Research
                    and development
                
                $
                3,247,466
                
                
                $
                863,450
                
                
                $
                43,933,146General
                    and administrative
                
                
                849,786
                
                
                
                1,075,882
                
                
                
                15,056,255Depreciation
                
                
                48,831
                
                
                
                23,050
                
                
                
                334,086Loss
                    on disposal of assets
                
                
                -
                
                
                
                362
                
                
                
                482,309Operating
                    loss
                
                
                (4,146,083
                )
                
                
                (1,962,744
                )
                
                
                (59,805,796
                )Interest
                    income
                
                
                178,823
                
                
                
                19,621
                
                
                
                955,044Other
                    income
                
                
                -
                
                
                
                3,385
                
                
                
                77,003Gain
                    (loss) on derivative liability
                
                
                -
                
                
                
                254,140
                
                
                
                -Interest
                    expense
                
                
                (2,453
                )
                
                
                (429
                )
                
                
                (8,241,416
                )Net
                    loss
                
                $
                (3,969,713
                )
                
                $
                (1,686,027
                )
                
                $
                (67,015,165
                )Basic
                    and diluted loss per share
                
                $
                (0.59
                )
                
                $
                (0.82
                )
                
                N/AWeighted
                    average shares outstanding
                
                
                6,696,784
                
                
                
                2,065,430
                
                
                N/A
 -
            3
            -
 **OPEXA
                      THERAPEUTICS, INC.****(a
                      development stage company)****STATEMENTS
                      OF CASH FLOWS (RESTATED)****Three
                      months ended March 31, 2007 and 2006 and the****Period
                      from January 22, 2003 (Inception) to March 31, 2007****(unaudited)****Restated****Inception****Restated**
                  
                  
                  **Restated**
                  
                  
                  **through****2007**
                  
                  
                  **2006**
                  
                  
                  **March
                      31, 2007**Cash
                      flows from operating activitiesNet
                      loss
                  
                  $
                  (3,969,713
                  )
                  
                  $
                  (1,686,027
                  )
                  
                  $
                  (67,015,165
                  )Adjustments
                      to reconcile net loss to net cashused
                      in operating activitiesStock
                      payable for acquired research and development
                  
                  
                  
                  
                  
                  
                  
                  112,440Stock
                      issued for acquired research and development
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26,286,589Stock
                      issued for services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,861,400Stock
                      issued for debt in excess of principal
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  109,070Amortization
                      of discount on notes payable dueto
                      warrants and beneficial conversion feature
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,313,205Realized
                      (unrealized) gain on marketable securities
                  
                  
                  25,912
                  
                  
                  
                  -
                  
                  
                  
                  -Gain
                      on derivative liability
                  
                  
                  -
                  
                  
                  
                  (254,140
                  )
                  
                  
                  -Depreciation
                  
                  
                  48,831
                  
                  
                  
                  23,050
                  
                  
                  
                  334,086Debt
                      financing costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  365,910Option
                      and warrant expense
                  
                  
                  723,392
                  
                  
                  
                  484,392
                  
                  
                  
                  10,026,936Loss
                      on disposition of fixed assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  482,309Changes
                      in:Accounts
                      payable
                  
                  
                  236,411
                  
                  
                  
                  83,850
                  
                  
                  
                  680,974Marketable
                      securities
                  
                  
                  2,926,184
                  
                  
                  
                  -
                  
                  
                  
                  -Prepaid
                      expenses
                  
                  
                  (309,156
                  )
                  
                  
                  (25,965
                  )
                  
                  
                  (777,167
                  )Accrued
                      expenses
                  
                  
                  371,233
                  
                  
                  
                  29,393
                  
                  
                  
                  320,974Other
                      assets
                  
                  
                  -
                  
                  
                  
                  (62,734
                  )
                  
                  
                  (388,210
                  )Net
                      cash provided by (used in) operating activities
                  
                  
                  53,094
                  
                  
                  
                  (1,408,181
                  )
                  
                  
                  (21,286,649
                  )Cash
                      flows from investing activitiesPurchase
                      of property & equipment
                  
                  
                  (61,218
                  )
                  
                  
                  (92,629
                  )
                  
                  
                  (1,112,272
                  )Net
                      cash used in investing activities
                  
                  
                  (61,218
                  )
                  
                  
                  (92,629
                  )
                  
                  
                  (1,112,272
                  )Cash
                      flows from financing activitiesCommon
                      stock sold for cash, net of offering costs
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26,509,412Proceeds
                      from debt
                  
                  
                  49,049
                  
                  
                  
                  -
                  
                  
                  
                  8,013,962Repayments
                      on notes payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (63,614
                  )Net
                      cash provided by financing activities
                  
                  
                  49,049
                  
                  
                  
                  -
                  
                  
                  
                  34,459,760Net
                      change in cash and cash equivalents
                  
                  
                  40,925
                  
                  
                  
                  (1,500,810
                  )
                  
                  
                  12,060,839Cash
                      and cash equivalents at beginning of period
                  
                  
                  12,019,914
                  
                  
                  
                  2,560,666
                  
                  
                  
                  -Cash
                      and cash equivalents at end of period
                  
                  $
                  12,060,839
                  
                  
                  $
                  1,059,856
                  
                  
                  $
                  12,060,839Cash
                      paid for:Income
                      tax
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Interest
                  
                  
                  -
                  
                  
                  
                  429
                  
                  
                  
                  429NON-CASH
                      TRANSACTIONSIssuance
                      of common stock to Sportan shareholders
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  147,733Issuance
                      of common stock for accrued interest
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  525,513Conversion
                      of notes payable to common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,407,980Conversion
                      of accrued liabilities to common stock
                  
                  
                  -
                  
                  
                  
                  180,000
                  
                  
                  
                  197,176Conversion
                      of accounts payable to note payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  93,364Discount
                      on convertible notes relating to:-
                      warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,309,790-
                      beneficial conversion feature
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,715,973-
                      stock attached to notes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,287,440Reclassification
                      of derivative liabilities
                  
                  
                  6,656,677
                  
                  
                  
                  -
                  
                  
                  
                  6,656,677
  -
              4
              -
  **OPEXA
          THERAPEUTICS, INC.**
 **(a
          development stage company)**
 **NOTES
          TO FINANCIAL STATEMENTS**
 **(unaudited)**
 **NOTE
        1 – BASIS OF
        PRESENTATION**
 
 The
        accompanying unaudited interim financial statements of Opexa Therapeutics,
        Inc.,
        a development stage company, have been prepared in accordance with accounting
        principles generally accepted in the United States of America and the rules
        of
        the Securities and Exchange Commission and should be read in conjunction
        with
        the audited financial statements and notes thereto contained in Opexa’s latest
        Annual Report filed with the SEC on Form 10-KSB. In the opinion of management,
        all adjustments, consisting of normal recurring adjustments, necessary for
        a
        fair presentation of financial position and the results of operations for
        the
        interim periods presented have been reflected herein. The results of operations
        for interim periods are not necessarily indicative of the results to be expected
        for the full year.  Notes to the financial statements that would
        substantially duplicate the disclosure contained in the audited financial
        statements for the most recent fiscal year as reported in Form 10-KSB, have
        been
        omitted.
 
 
 **NOTE
        2**– **RESTATEMENT OF FINANCIAL STATEMENTS**
 
 The
        Company is restating these financial statements for the three months ended
        March
        31, 2006 and 2007 and for the period January 22, 2003 (Inception) to March
        31,
        2007.
 
 Following
        is a description of the restatements:
 
 The
        Company acquired Opexa Pharmaceuticals in October 2004 and originally accounted
        for the acquired in process research and development of $23,991,128 as
        intangible assets.  In November 2007 the Company re-evaluated its
        accounting for acquired research and development and upon further consideration
        of Paragraph 11(c) of Statement of Financial Accounting Standards No. 2 (SFAS
        No. 2) and accounting guidance from Financial Accounting Standards Board
        Interpretation No. 4 “Applicability of FASB Statement No. 2 to Business
        Combinations Accounted for by the Purchase Method” (FIN 4), the Company
        determined that these assets did not have an alternative future use at the
        date
        of acquisition. Therefore, they had no separate economic value and should
        be
        accordingly expensed to research and development in the period
        acquired.
 
 In
        February 2004, the Company obtained a license from the University of Chicago
        for
        an adult stem cell technology. Costs associated with the acquisition of this
        license were originally accounted for as an intangible asset.  The
        amounts originally capitalized as intangible assets were $3,051,706, $976,497
        and $112,440 for the years ended December 31, 2004, 2005 and 2006 respectively.
        Upon further consideration of Paragraph 11(c) of SFAS No. 2, the Company
        determined that these assets had not reached technological feasibility at
        the
        date of acquisition and had no alternative future use. Therefore, the intangible
        asset should have been expensed to in process research and development in
        the
        period acquired.
 
 In
        March
        2006, the Company obtained an exclusive worldwide license for the intellectual
        property rights and research results of an autologous T cell vaccine for
        rheumatoid arthritis from the Shanghai Institutes for Biological Sciences
        (SIBS), Chinese Academy of Sciences of the People's Republic of
        China.  The Company made a $125,000 license payment  and
        accounted for the license as an intangible asset.  Upon further
        consideration of Paragraph 11(c) of SFAS No. 2, the Company determined that
        this
        asset had not reached technological feasibility at the date of acquisition
        and
        had no alternative future use. Therefore, the intangible asset should have
        been
        expensed to in process research and development in the period
        acquired.
 
 In
        the
        Consolidated Statements of Expenses, the effect of the adjustments on operating
        expenses, loss from operations and net loss for each of the three months
        ended
        March 31, 2006 and 2007 and the period January 22, 2003 (Inception) to March
        31,
        2007 was as follows:
 
 -
            5
            -
  **Three
                    Months Ended March 31,****2007**
                
                
                **2006****As
                    Reported**
                
                
                **Adjustment**
                
                
                
                
                
                **As
                    Restated**
                
                
                **As
                    Reported**
                
                
                **Adjustment**
                
                
                
                
                
                **As
                    Restated**Research
                    and development
                
                $
                3,247,466
                
                
                $
                -
                
                
                (1)
                
                
                
                $
                3,247,466
                
                
                $
                738,450
                
                
                $
                125,000
                
                
                (1)
                
                
                
                $
                863,450General
                    and administrative
                
                
                849,786
                
                
                
                -
                
                
                
                
                
                
                
                849,786
                
                
                
                1,075,882
                
                
                
                -
                
                
                
                
                
                
                
                1,075,882Depreciation
                    and amortization
                
                
                461,106
                
                
                
                (412,275
                )
                
                (2)
                
                
                
                
                48,831
                
                
                
                432,333
                
                
                
                (409,283
                )
                
                (2)
                
                
                
                
                23,050Loss
                    on disposal of assets
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                362
                
                
                
                -
                
                
                
                
                
                
                
                362Operating
                    loss
                
                
                (4,558,358
                )
                
                
                412,275
                
                
                
                
                
                
                
                (4,146,083
                )
                
                
                (2,247,027
                )
                
                
                284,283
                
                
                
                
                
                
                
                (1,962,744
                )Interest
                    income
                
                
                178,823
                
                
                
                -
                
                
                
                
                
                
                
                178,823
                
                
                
                19,621
                
                
                
                -
                
                
                
                
                
                
                
                19,621Other
                    income
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                3,385
                
                
                
                -
                
                
                
                
                
                
                
                3,385Gain
                    (loss) on derivative liability
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                254,140
                
                
                
                -
                
                
                
                
                
                
                
                254,140Interest
                    expense
                
                
                (2,453
                )
                
                
                -
                
                
                
                
                
                
                
                (2,453
                )
                
                
                (429
                )
                
                
                -
                
                
                
                
                
                
                
                (429
                )Net
                    loss
                
                $
                (4,381,988
                )
                
                $
                412,275
                
                
                
                
                
                
                $
                (3,969,713
                )
                
                $
                (1,970,310
                )
                
                $
                284,283
                
                
                
                
                
                
                $
                (1,686,027
                )Basic
                    and diluted loss per share
                
                $
                (0.65
                )
                
                $
                0.06
                
                
                
                
                
                
                $
                (0.59
                )
                
                $
                (0.95
                )
                
                $
                0.14
                
                
                
                
                
                
                $
                (0.82
                )
  **January
                    22, 2003 (Inception) to****March
                    31, 2007****As
                    Reported**
                
                
                **Adjustment**
                
                
                
                
                **As
                    Restated**Research
                    and development
                
                $
                15,676,375
                
                
                $
                28,256,771
                
                (1)
                
                
                $
                43,933,146General
                    and administrative
                
                
                15,056,255
                
                
                
                -
                
                (2)
                
                
                
                15,056,255Depreciation
                    and amortization
                
                
                4,279,929
                
                
                
                (3,945,843
                )
                
                
                
                
                334,086Loss
                    on disposal of assets
                
                
                482,309
                
                
                
                -
                
                
                
                
                
                482,309Operating
                    loss
                
                
                (35,494,868
                )
                
                
                (24,310,928
                )
                
                
                
                
                (59,805,796
                )Interest
                    income
                
                
                955,044
                
                
                
                -
                
                
                
                
                
                955,044Other
                    income
                
                
                77,003
                
                
                
                -
                
                
                
                
                
                77,003Gain
                    (loss) on derivative liability
                
                
                -
                
                
                
                -
                
                
                
                
                
                -Interest
                    expense
                
                
                (8,241,416
                )
                
                
                -
                
                
                
                
                
                (8,241,416
                )Net
                    loss
                
                $
                (42,704,237
                )
                
                $
                (24,310,928
                )
                
                
                
                $
                (67,015,165
                )Basic
                    and diluted loss per share
                
                N/A
                
                
                N/A
                
                
                
                
                N/A
  (1)
              Adjustment
                  for capitalizing acquired research and development to intangible
                  assets
                  that should have been expensed to research and development (i)
                  for the
                  three months ended 3/31/2007 in the amount of $-0-, (ii) for the
                  three
                  months ended 3/31/2006 in the amount of $125,000 and (iii) the
                  period
                  inception to 3/31/2007 in the amount of
                  $28,256,771.
 (2)
              Reversal
                  of amortization of intangible assets that should have been expensed
                  to
                  research and development (i) for the three months ended 3/31/2007
                  in the
                  amount of $412,275, (ii) for the three months ended 3/31/2006 in
                  the
                  amount of $409,283 and (iii) the period inception to 3/31/2007
                  in the
                  amount of $3,945,843.
 
 In
        the
        Balance Sheet, the effect of the adjustments on Intangible Assets and
        Accumulated Deficit as of March 31, 2007 and December 31, 2006 was as
        follows:
  **March
                    31, 2007**
                
                
                **December
                    31, 2006****As
                    Reported**
                
                
                **Adjustment**
                
                
                
                
                **As
                    Restated**
                
                
                **As
                    Reported**
                
                
                **Adjustment**
                
                
                
                
                **As
                    Restated****Assets**Intangible
                    Assets
                
                $
                24,310,928
                
                
                $
                (24,310,928
                )
                (1)
                
                
                $
                -
                
                
                $
                24,723,203
                
                
                $
                (24,723,203
                )
                (1)
                
                
                $
                -**Stockholders'
                    Equity**Accumulated
                    Deficit
                
                $
                (42,704,237
                )
                
                $
                (24,310,928
                )
                (1)
                
                
                $
                (67,015,165
                )
                
                $
                (34,320,430
                )
                
                $
                (24,723,203
                )
                (1)
                
                
                $
                (59,043,633
                )
 (1)  Adjustment for capitalizing acquired research and
        development to intangible assets that should have been expensed to research
        and
        development, reversal of amortization of intangible assets that should have
        been
        expensed to research and development and reversal of impairment of intangible
        assets that should have been expensed to research and
        development.   Adjustments include:
 a.
              Adjustment
                  for capitalizing acquired research and development to intangible
                  assets
                  that should have been expensed to research and development as
                  of  3/31/2007 in the amount of $28,256,771 and as of December
                  31, 2006 in the amount of
                  $28,256,771.
 b.
              Reversal
                  of amortization of intangible assets that should have been expensed
                  to
                  research and development as of 3/31/2007 in the amount of $3,945,843
                  and
                  as of December 31, 2006 in the amount of
                  $3,533,568.
 
 -
            6
            -
 
 **NOTE
        2 – CASH AND CASH EQUIVALENTS**
 
 Opexa
        considers all highly liquid investments with an original maturity of three
        months or less, when purchased, to be cash equivalents. Investments with
        maturities in excess of three months but less than one year are classified
        as
        short-term investments and are stated at fair market value.
  The
        primary objectives for our 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.
  At
        March
        31, 2007, Opexa invested approximately $11.0 million in A-1/P-1 commercial
        paper
        with an average market yield of 5.38% and average time to maturity of less
        than
        one month. At March 31, 2007 $1.0 million was invested in a money market
        account
        with an average yield of 5.19%. Interest income of $178,823 was recognized
        for
        the three months ended March 31, 2007 in the statements of
        expenses.
 
 **NOTE
        3 – COMMITMENTS**
 
 In
        September 2006, Opexa entered into an Individual Project Agreement (IPA)
        with
        PharmaNet, LLC, a contract research organization focused on managing central
        nervous system trials.  Pursuant to such IPA, PharmaNet, LLC will
        provide Opexa with services in connection with its Phase IIb clinical
        trial. Under the terms of the IPA, Opexa is required to advance funds in
        the amount of (i) $400,000 for professional fees, (ii) $60,000 for out of
        pocket
        expenses and (iii) $175,000 for investigator grants.   The fee
        advance is applied 1/12th per month
        to
        invoices and replenished once 75% depleted.  The out of pocket advance
        will be held and applied to the final invoice.  The investigator grant
        advance will be used as a draw down advance and replenished once 75%
        depleted.  This process will continue until the end of the
        study.  In February 2007 made replenishment fee advances of $400,000
        for fees and $175,000 for investigator grants.  As of March 31, 2007
        the advance balance to PharmaNet, LLC was $674,026.
 
 **NOTE
        4 – LOAN PAYABLE**
 
 Loan
        payable consists of an equipment line of up to $250,000 with Wells Fargo
        of
        which $159,371 was outstanding as of March 31, 2007. This loan has an interest
        rate of 7.61% per annum, matures in May 2011 and is secured by Opexa’s furniture
        and equipment purchased with the loan proceeds.  Approximately $50,000
        was drawn against the equipment line in the first quarter.
 
 **NOTE
        5 – OPTIONS AND WARRANTS**
 
 During
        March 2007, Opexa issued 9,900 options to purchase common stock of Opexa
        to its
        new employees. These options are for a term of ten years, have an exercise
        price
        of $4.04 and vest over three years. Fair value of $36,805 was calculated
        using
        the Black-Scholes Model with a volatility of 103.91% and a discount rate
        of
        4.52%. A first quarter expense of $101 was recorded.
 
 -
            7
            -
  **NOTE
        6 – DERIVATIVE INSTRUMENTS**
 
 In
        June
        2006, Opexa evaluated the application of SFAS 133 and EITF 00-19 for all of
        its financial instruments and it was determined that certain of the warrants
        to
        purchase common stock issued by Opexa associated with the bridge note exchange
        and private placement offerings in June 2005 and July 2005 were derivatives
        that
        Opexa was required to account for as free-standing derivative instruments
        under
        GAAP.  These three series of warrants were considered at the time to be
        derivatives because the liquidated damage provision in the registration rights
        agreement covering each warrant resulted in the conclusion that it was more
        economic to issue registered shares than to issue unregistered shares and
        pay
        the penalty.  Because issuing registered shares is outside of Opexa’s
        control, Opexa concluded the warrants should be accounted for as derivative
        liabilities under SFAS 133 and EITF 00-19. As a result, Opexa reported the
        value
        of these derivatives as current liabilities on its balance sheet and reported
        changes in the value of these derivatives as non-operating gains or losses
        on
        its statements of operations in the consolidated financial statements beginning
        with the year ended December 31, 2005 and re-measured and reported on a
        quarterly basis thereafter based on the Black Scholes Pricing
        Model.
 
 In
        December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, Accounting
        for Registration Payment Arrangements (EITF 00-19-2). EITF 00-19-2 addresses
        an
        issuer’s accounting for registration payment arrangements. It specifies that the
        contingent obligation to make future payments or otherwise transfer
        consideration under a registration payment arrangement, whether issued as
        a
        separate agreement or included as a provision of a financial instrument or
        other
        agreement, should be separately recognized and measured in accordance with
        FASB
        Statement No. 5, Accounting for Contingencies. The guidance in EITF 00-19-2
        amends FASB Statements No. 133, Accounting for Derivative Instruments and
        Hedging Activities, and No. 150, Accounting for Certain Financial
        Instruments with Characteristics of both Liabilities and Equity, and FASB
        Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements
        for Guarantees, including Indirect Guarantees of Indebtedness of Others,
        to
        include scope exceptions for registration payment arrangements. EITF 00-19-2
        also requires additional disclosure regarding the nature of any registration
        payment arrangements, alternative settlement methods, the maximum potential
        amount of consideration and the current carrying amount of the liability,
        if
        any. This EITF is effective immediately for registration payment arrangements
        and the financial instruments subject to those arrangements that are entered
        into or modified subsequent to the date of issue of this EITF. For registration
        payment arrangements and financial instruments subject to those arrangements
        that were entered into prior to the issuance of this EITF, this is effective
        for
        financial statements issued for fiscal years beginning after December 15,
        2006,
        and interim periods within those fiscal years.
 
 Opexa
        evaluated the application of EITF 00-19-2 for all its financial instruments
        and
        determined that certain warrants to purchase common stock issued by Opexa
        associated with the bridge note exchange and private placement offerings
        in June
        2005 and July 2005 no longer qualified to be classified as derivative
        liabilities.  In addition, Opexa accounts for registration rights
        agreement penalties as contingent liabilities, applying the accounting guidance
        of Financial Accounting Standard No. 5, “Accounting for Contingencies” (“FAS
        5”). This accounting is consistent with views established by the FASB Staff
        Positions FSP EITF 00-19-2 “Accounting for Registration Payment Arrangements”,
        which was issued December 21, 2006. Accordingly, Opexa recognizes the damages
        when it becomes probable that they will be incurred and amounts are reasonably
        estimable.
 
 Certain
        4,600,000 shares of common stock and 2,513,720 warrants to purchase common
        stock
        are subject to a registration payment arrangement that provides if a resale
        registration statement is not effective for any period after April 13, 2007,
        the
        warrant holders may exercise their warrants on a cashless basis during the
        period the resale registration statement is not effective.  If Opexa
        fails to register, achieve effectiveness of registration or maintain
        effectiveness of registration of shares underlying the warrants and shares,
        they
        are required to make certain liquidated damage payments of 1.5% of the offering
        per month for every month in default with a maximum of 24%. Opexa does not
        believe these payments are probable and thus no contingent liability has
        been
        recorded.
 
 Certain
        1,272,356 shares of common stock and 1,714,410 shares of common stock issuable
        upon the exercise of common stock purchase warrants issued in June 2005 and
        July
        2005 are subject to a registration payment arrangement that provides
        if a resale registration statement is not effective for any period after
        the
        first anniversary of the warrant, the warrant holders may exercise their
        warrants on a cashless basis during the period the resale registration statement
        is not effective.  If Opexa fails to register, achieve effectiveness
        of registration or maintain effectiveness of registration of shares underlying
        the warrants and shares, they are required to make certain liquidated damage
        payments of 1.0% of the offering per month for the first calendar month of
        registration default and 2%  for every month in default after the
        first month. Opexa does not believe these payments are probable and thus
        no
        contingent liability has been recorded.
 
 -
            8
            -
  The
        impact
        of implementing EITF 00-19-2  for the first quarter resulted in a
        cumulative effect of a change in accounting principle with a decrease in
        the
        derivative liability of $6,656,677 and a decrease to beginning retained earnings
        of $4,001,819 reversing gains posted to date and a reclassification of the
        original value of the warrants from liability to equity of
        $10,658,496.
 
 **NOTE
        7 – SUBSEQUENT EVENTS**
 
 In
        April
        2007 the Amended and Restated License Agreement dated
        December 30, 2004, between Opexa and the University of Chicago with
        respect to certain payment obligations of Opexa was amended as follows: (i)
        the
        April 30, 2007 $1,500,000 cash payment obligation was extended until July
        31,
        2007; and (ii) the obligation to issue 21,623 shares of Opexa’s common stock
        issuable was extended until July 31, 2007, with $112,440 accrued at March
        31,
        2007.
  -
            9
            -
  **ITEM
        2.  MANAGEMENT'S DISCUSSION AND
        ANALYSIS**
 
 *The
        following discussion of our financial condition and results of operations
        should
        be read in conjunction with the accompanying financial statements and the
        related footnotes thereto.*
  **Forward-Looking
        Statements**
 
 Some
        of
        the statements contained in this report discuss future expectations, contain
        projections of results of operations or financial condition, or state other
        "forward-looking" information. The words "believe," "intend," "plan," "expect,"
        "anticipate," "estimate," "project," "goal" and similar expressions identify
        such statement was made. These statements are subject to known and unknown
        risks, uncertainties, and other factors that could cause the actual results
        to
        differ materially from those contemplated by the statements. The forward-looking
        information is based on various factors and is derived using numerous
        assumptions. Factors that might cause or contribute to such a discrepancy
        include, but are not limited to the risks discussed in this and our other
        SEC
        filings. We do not promise to update forward-looking information to reflect
        actual results or changes in assumptions or other factors that could affect
        those statements. Future events and actual results could differ materially
        from
        those expressed in, contemplated by, or underlying such forward-looking
        statements.
 
 The
        following discussion and analysis of our financial condition is as of March
        31,
        2007.  Our results of operations and cash flows should be read in
        conjunction with our unaudited financial statements and notes thereto included
        elsewhere in this report and the audited financial statements and the notes
        thereto included in our Form 10-KSB for the year ended December 31,
        2006.
 
 **Business
        Overview**
 
 Opexa
        Therapeutics, Inc. (the “Company”, “we”, “Opexa” or “Opexa Therapeutics”) is a
        biopharmaceutical company developing autologous cellular therapies to treat
        several major illnesses, including multiple sclerosis (MS), rheumatoid arthritis
        (RA), diabetes, and cardiovascular disease. These therapies are based on
        the
        Company’s proprietary T-cell and adult stem cell technologies.
  Opexa
        Therapeutics’ lead product, TovaxinTM, is a T-cell based therapeutic vaccine for
        MS licensed from the Baylor College of Medicine, which offers a unique and
        personalized approach to treating the disease by inducing an immune response
        against the autoimmune myelin peptide-reactive T-cells (MRTCs), which are
        believed to be responsible for the initiation of the disease
        process.
  TovaxinTM
        is currently in a Phase IIb clinical trial. Initial Phase I/II open-label
        human
        trials show that T-cell vaccination (TCV) appears to safely induce immune
        responses that deplete and regulate MRTCs. In two open-label Phase I/II clinical
        trials, the annualized relapse rates of patients were reduced by an average
        of
        approximately 90% compared to their prior history of relapses.  Some
        patients also appear to experience an improvement of their Kurtzke Expanded
        Disability Status Scale, a scoring method used to measure the disability
        of MS
        patients (EDSS).  Improvements in EDSS are not frequently observed in
        patients following treatment with other currently licensed therapies. Although
        the data from our Phase I/II trials appears to be promising, the Phase IIb
        trial
        is being conducted to confirm these results. Opexa Therapeutics believes
        that
        TovaxinTM could be ready for commercialization as early as 2011.
  We
        also
        hold an exclusive worldwide license for the intellectual property rights
        and
        research results of an autologous T-cell vaccine for RA from the Shanghai
        Institutes for Biological Sciences (SIBS), Chinese Academy of Sciences of
        the
        People's Republic of China.
  Opexa’s
        RA
        T-cell vaccination (TCV) technology is conceptually similar to
        TovaxinTM.  RA is an autoimmune T-cell-mediated disease in which
        pathogenic T-cells trigger an inflammatory autoimmune response of the synovial
        joints of the wrists, shoulders, knees, ankles and feet which causes pain,
        stiffness, and swelling around the joints and erosion into cartilage and
        bone.  The RA TCV technology allows the isolation of these pathogenic
        T-cells from synovial fluid drawn from a patient.  These T-cells will
        be grown to therapeutic levels and attenuated by gamma irradiation in our
        laboratory.  The attenuated T-cells will be injected subcutaneously
        into patients thereby inducing an immune response directed at the pathogenic
        T-cells in the patient’s body.  This immune response regulates the
        level of pathogenic T-cells and potentially allows the reduction of joint
        swelling in RA patients. Human trials that have been conducted in China show
        minimal side-effects and promising efficacy measured as a reduction of joint
        swelling following the T-cell vaccination.
  -
            10
            -
  We
        also
        have an exclusive license from the University of Chicago, through its prime
        contractor relationship with Argonne National Laboratory, to a stem cell
        technology in which adult multipotent stem cells are derived from monocytes
        (white blood cells) obtained from the patient’s own blood. We are initially
        pursuing indications in diabetes mellitus with our stem cell therapy and
        are
        conducting preclinical animal studies.
 
 The
        Company’s stem cell technology isolates novel multipotent stem cells derived
        from peripheral blood monocytes. *In vitro* experiments with
        monocyte-derived stem cells (MDSC) have shown their capacity to differentiate
        into a wide variety
        of cell
        types including pancreatic β cells.  We have demonstrated that these
        pancreatic islets clusters derived from MDSCs are composed of  three
        pancreatic cells types (a, b
        and d). These
        islet
        clusters are responsive to glucose and mimics the normal pulsatile pattern
        observed in human islets.****The importance of these stem
        cells is the ability to easily isolate them from an individual’s circulating
        monocytes, expand them and administer them back into the same patient. This
        autologous approach provides a method to overcome any rejection issues and
        the
        need for immunosuppressant drugs which are often associated with current
        islet
        cell transplantations. This technology may lead to the formation of an unlimited
        source of pancreatic islet cells suitable for an autologous cell therapy
        for the
        treatment of diabetes mellitus.
  **Critical
        Accounting Policies**
  ***General***
  The
        Financial Statements and Notes to Financial Statements contain information
        that
        is pertinent to this management’s discussion and analysis.  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States requires management to make estimates
        and assumptions that affect the reported amounts of assets and liabilities
        and
        disclosure of any contingent assets and liabilities.  Management
        believes these accounting policies involve judgment due to the sensitivity
        of
        the methods, assumptions and estimates necessary in determining the related
        asset and liability amounts.  Management believes it has exercised
        proper judgment in determining these estimates based on the facts and
        circumstances available to it at the time the estimates were
        made.  The significant accounting policies are described in the
        Company's financial statements.
  ***Accounting
        for Derivative Instruments***
 
 In
        December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, Accounting
        for Registration Payment Arrangements (EITF 00-19-2). EITF 00-19-2 addresses
        an
        issuer’s accounting for registration payment arrangements. It specifies that the
        contingent obligation to make future payments or otherwise transfer
        consideration under a registration payment arrangement, whether issued as
        a
        separate agreement or included as a provision of a financial instrument or
        other
        agreement, should be separately recognized and measured in accordance with
        FASB
        Statement No. 5, Accounting for Contingencies. The guidance in EITF 00-19-2
        amends FASB Statements No. 133, Accounting for Derivative Instruments and
        Hedging Activities, and No. 150, Accounting for Certain Financial
        Instruments with Characteristics of both Liabilities and Equity , and FASB
        Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements
        for Guarantees, Including Indirect Guarantees of Indebtedness of Others,
        to
        include scope exceptions for registration payment arrangements. EITF 00-19-2
        also requires additional disclosure regarding the nature of any registration
        payment arrangements, alternative settlement methods, the maximum potential
        amount of consideration and the current carrying amount of the liability,
        if
        any. This EITF is effective immediately for registration payment arrangements
        and the financial instruments subject to those arrangements that are entered
        into or modified subsequent to the date of issue of this EITF. For registration
        payment arrangements and financial instruments subject to those arrangements
        that were entered into prior to the issuance of this EITF, this is effective
        for
        financial statements issued for fiscal years beginning after December 15,
        2006,
        and interim periods within those fiscal years.  The impact of implementing
        EITF 00-19-2 in the first quarter 2007 resulted in a cumulative effect of
        a
        change in accounting principle with a debit to beginning retained earnings
        of
        $4,001,819 to reverse the income recognized in prior periods and a debit
        to the
        derivative liability account of $6,656,677 to reverse the remaining balance
        on
        the books at December 31, 2006 and a reversal of the total amount of $10,658,496
        to the paid in capital account.
  **Results
        of Operations and Financial Condition**
  *Three
        Months Ended March 31, 2007 Compared with the Three Months Ended March 31,
        2006*
 
 **Net
        Sales.**We recorded no sales for the three months ended March
        31, 2007 and 2006.
  **General
        and Administrative Expenses.**Our general and administrative expense was
        $849,786 for the three months ended March 31, 2007, as compared to $1,075,882
        for the three months ended March 31, 2006.  The decrease in expenses
        is primarily due to a decrease in stock compensation expenses, professional
        service fees and overhead expenses.  We anticipate increases in
        general and administrative expenses as we continue to develop and prepare
        for
        commercialization of our technology.
  -
            11
            -
  **Research
        and Development Expenses.**Research and development expense was
        $3,247,466 for the three months ended March 31, 2007, compared to $863,450
        for
        the three months ended March 31, 2006.   The increase in expenses
        was primarily due to the costs of the Phase IIb clinical trial for Tovaxin
        and
        research and development in support of pre-clinical diabetes stem cell
        therapies.  We have made and expect to continue to make substantial
        investments in research and development in order to develop and market our
        technology.  We expense research and development costs as incurred.
        Acquired research and development that has no alternative future use is expensed
        when acquired. We expect our research and development expense to increase
        as we
        continue to invest in the development of our technology.
  **Interest
        Expense.**  Interest expense was $2,453 for the three months
        ended March 31, 2007, compared to $429 for the three months ended March 31,
        2006. The increase in interest expense was primarily due to a loan payable
        consisting of an equipment line of up to $250,000 with Wells Fargo of which
        $159,371 was outstanding as of March 31, 2007.
  **Interest
        Income.**  Interest income was $178,823 for the three months
        ended March 31, 2007 compared to $19,621 for the three months ended March
        31,
        2006.  The increase was due to the investment of the cash proceeds
        from a 2006 equity financing in short term and cash equivalent
        investments.
  **Net
        loss.** We had a net loss for the three months ended March 31, 2007, of
        $3,969,713, or $0.59 per share (basic and diluted), compared with a net loss
        of
        $1,686,027, or $0.82 per share (basic and diluted), for the three months
        ended
        March 31, 2006. The increase in net loss is primarily due to the costs of
        the
        Phase IIb clinical trial for TovaxinTM.
  **Liquidity
        and Capital Resources**
 
 **Changes
        in cash flow.**Cash provided by operations for the three
        month period ended March 31, 2007 was $53,094, as compared to $1,408,181
        used by
        operations for the three months ended March 31, 2006. The decrease in cash
        used
        in operations is primarily due to the maturity of approximately $2.9 million
        in
        marketable securities and its reclassification to cash and cash
        equivalents.  Cash used in investing activities for the three month
        period ended March 31, 2007 was $61,218, as compared to $92,629 for the three
        months ended March 31, 2006.  The decrease was primarily due to a
        decrease in equipment purchases. Cash provided from financing activities
        for the
        three month period ended March 31, 2007 was $49,049, as compared to $ -0-
        for
        the three months ended March 31, 2006. The increase was due to a draw against
        the equipment credit line.
 
 **Liquidity**.  Historically,
        the Company has financed its operations primarily from the sale of its debt
        and
        equity securities.  As of March 31, 2007, the Company had cash, cash
        equivalents and marketable securities of approximately $12.1
        million.
  Our
        current burn rate is approximately $1,000,000 per month excluding capital
        expenditures.  We will need to raise additional capital to fund our working
        capital needs beyond the first quarter of 2008.  We must rely upon
        best efforts third-party debt or equity funding and we can provide no assurance
        that we will be successful in any funding effort. The failure to raise such
        funds will necessitate the curtailment of operations and impact the completion
        of the clinical trials.
  **Off-Balance
        Sheet Arrangements**
 
 As
        of March 31, 2007, we had no
        off-balance sheet arrangements.
 
 **Recent
        Accounting Pronouncements**
 
 **Registration
        Payment Arrangements***.*  In December 2006, the
        FASB issued FASB Staff Position (“FSP”) EITF 00-19-2 “Accounting for
        Registration Payment Arrangements” (“FSP EITF 00-19-2”) which specifies that the
        contingent obligation to make future payments or otherwise transfer
        consideration under a registration payment arrangement should be separately
        recognized and measured in accordance with SFAS No. 5, “Accounting for
        Contingencies.”    Adoption of FSP EITF 00-19-02 is required for
        fiscal years beginning after December 15, 2006. The impact of implementing
        EITF 00-19-2 for the first quarter resulted in a cumulative effect of a change
        in accounting principle with a decrease in the derivative liability of
        $6,656,677 and a decrease to beginning retained earnings of $4,001,819 reversing
        gains posted to date and a reclassification of the original value of the
        warrants from liability to equity of $10,658,496.
 
 -
            12
            -
  For
        the
        period ended March 31, 2007, there were no other changes to our critical
        accounting policies as identified in our annual report of Form 10-KSB for
        the
        year ended December 31, 2006.
 
 **Risk
        Factors**
 
 The
        following factors affect our
        business and the industry in which we operate. The risks and uncertainties
        described below are not the only ones we face. Additional risks and
        uncertainties not presently known or which we currently consider immaterial
        may
        also have an adverse effect on our business. If any of the matters discussed
        in
        the following risk factors were to occur, our business, financial condition,
        results of operations, cash flows, or prospects could be materially adversely
        affected.
  ***Our
        business is at an early stage of development.***
  Our
        business is at an early stage of development. We do not have any products
        in
        late-stage clinical trials or on the market. We are still in the early stages
        of
        identifying and conducting research on potential products. Only one of our
        products has progressed to the stage of being studied in human clinical trials
        in the U.S.  Our potential products will require significant research
        and development and preclinical and clinical testing prior to regulatory
        approval in the United States and other countries. We may not be able to
        develop
        any products, to obtain regulatory approvals, to enter clinical trials for
        any
        of our product candidates, or to commercialize any products. Our product
        candidates may prove to have undesirable and unintended side effects or other
        characteristics adversely affecting their safety, efficacy or cost-effectiveness
        that could prevent or limit their use. Any product using any of our technology
        may fail to provide the intended therapeutic benefits, or achieve therapeutic
        benefits equal to or better than the standard of treatment at the time of
        testing or production.
  ***We
        have a history of operating losses and do not expect to be profitable in
        the
        near future.***
  We
        have
        not generated any profits since our entry into the biotechnology business,
        have
        no source of revenues, and have incurred significant operating losses. We
        expect
        to incur additional operating losses for the foreseeable future and, as we
        increase our research and development activities, we expect our operating
        losses
        to increase significantly. We do not have any sources of revenues and may
        not
        have any in the foreseeable future.
  ***We
        will need additional capital to conduct our operations and develop our products
        and our ability to obtain the necessary funding is
        uncertain.***
  We
        need to
        obtain significant additional capital resources from sources including equity
        and/or debt financings, license arrangements, grants and/or collaborative
        research arrangements in order to develop products and continue our
        business.  As of March 31, 2007, we had cash, cash equivalents and
        marketable securities of approximately $12.1 million.  Our current
        burn rate is approximately $1,000,000 per month excluding capital
        expenditures. We will need to raise additional capital to fund our working
        capital needs beyond first quarter 2008.  We must rely upon best
        efforts third-party debt or equity funding and we can provide no assurance
        that
        we will be successful in any funding effort. The failure to raise such funds
        will necessitate the curtailment of operations and impact the completion
        of the
        clinical trials.
  The
        timing and degree of any future capital requirements will depend on many
        factors, including:
 ·
                the
                      accuracy of the assumptions underlying our estimates for capital
                      needs in
                      2007 and beyond;
 ·
              scientific
                  progress in our research and development
                  programs;
  ·
              the
                  magnitude and scope of our research and development
                  programs;
  ·
              our
                  ability to establish, enforce and maintain strategic arrangements
                  for
                  research, development, clinical testing, manufacturing and
                  marketing;
  ·
              our
                  progress with preclinical development and clinical
                  trials;
  ·
              the
                  time and costs involved in obtaining regulatory
                  approvals;
  ·
              the
                  costs involved in preparing, filing, prosecuting, maintaining,
                  defending
                  and enforcing patent claims; and
  ·
              the
                  number and type of product candidates that we
                  pursue.
  -
            13
            -
  We
        do not
        have any committed sources of capital, although we have issued and outstanding
        warrants that, if exercised, would result in an equity capital raising
        transaction.  Additional financing through strategic collaborations,
        public or private equity financings, capital lease transactions or other
        financing sources may not be available on acceptable terms, or at all.
        Additional equity financings could result in significant dilution to our
        stockholders. Further, if additional funds are obtained through arrangements
        with collaborative partners, these arrangements may require us to relinquish
        rights to some of our technologies, product candidates or products that we
        would
        otherwise seek to develop and commercialize ourselves. If sufficient capital
        is
        not available, we may be required to delay, reduce the scope of or eliminate
        one
        or more of our programs, any of which could have a material adverse effect
        on
        our financial condition or business prospects.
  ***Clinical
        trials are subject to extensive regulatory requirements, very expensive,
        time-consuming and difficult to design and implement.  Our products
        may fail to achieve necessary safety and efficacy endpoints during clinical
        trials.***
  Human
        clinical trials are very expensive and difficult to design and implement,
        in
        part because they are subject to rigorous regulatory requirements. The clinical
        trial process is also time consuming. We estimate that clinical trials of
        our
        product candidates will take at least several years to complete. Furthermore,
        failure can occur at any stage of the trials, and we could encounter problems
        that cause us to abandon or repeat clinical trials. The commencement and
        completion of clinical trials may be delayed by several factors,
        including:
  ·
              unforeseen
                  safety issues;
  ·
              determination
                  of dosing issues;
  ·
              lack
                  of effectiveness during clinical
                  trials;
  ·
              slower
                  than expected rates of patient
                  recruitment;
  ·
              inability
                  to monitor patients adequately during or after treatment;
                  and
  ·
              inability
                  or unwillingness of medical investigators to follow our clinical
                  protocols.
  In
        addition, we or the FDA may suspend our clinical trials at any time if it
        appears that we are exposing participants to unacceptable health risks or
        if the
        FDA finds deficiencies in our IND submissions or the conduct of these
        trials.
  ***We
        are dependent upon our management team and a small number of
        employees.***
  Our
        business strategy is dependent upon the skills and knowledge of our management
        team.  We believe that the special knowledge of these individuals
        gives us a competitive advantage.  If any critical employee leaves, we
        may be unable on a timely basis to hire suitable replacements to effectively
        operate our business.  We also operate with a very small number of
        employees and thus have little or no backup capability for their
        activities.  The loss of the services of any member of our management
        team or the loss of a number of other employees could have a material adverse
        effect on our business.
  ***We
        are dependent on contract research organizations and other contractors for
        clinical testing and for certain research and development activities, thus
        the
        timing and adequacy of our clinical trials and such research activities are,
        to
        a certain extent, beyond our control.***
  The
        nature
        of clinical trials and our business strategy requires us to rely on contract
        research organizations, independent clinical investigators and other third
        party
        service providers to assist us with clinical testing and certain research
        and
        development activities. As a result, our success is dependent upon the success
        of these outside parties in performing their responsibilities. Although we
        believe our contractors are economically motivated to perform on their
        contractual obligations, we cannot directly control the adequacy and timeliness
        of the resources and expertise applied to these activities by our contractors.
        If our contractors do not perform their activities in an adequate or timely
        manner, the development and commercialization of our drug candidates could
        be
        delayed.
  ***Our
        current research and manufacturing facility is not large enough to manufacture
        future stem cell and T-cell therapies.***
  We
        conduct
        our research and development in a 10,200 square foot facility in The Woodlands,
        Texas, which includes an approximately 800 square foot suite of three rooms
        for
        the manufacture of stem cell and T-cell therapies through Phase III
        trials.  Our current facility is not large enough to conduct
        commercial-scale manufacturing operations.  We will need to expand
        further our manufacturing staff and facility, obtain a new facility or contract
        with corporate collaborators or other third parties to assist with future
        drug
        production.
  -
            14
            -
  In
        the
        event that we decide to establish a commercial-scale manufacturing facility,
        we
        will require substantial additional funds and will be required to hire and
        train
        significant numbers of employees and comply with applicable regulations,
        which
        are extensive. We do not have funds available for building a manufacturing
        facility, and we may not be able to build a manufacturing facility that both
        meets regulatory requirements and is sufficient for our commercial-scale
        manufacturing.
  We
        may
        arrange with third parties for the manufacture of our future products. However,
        our third-party sourcing strategy may not result in a cost-effective means
        for
        manufacturing our future products.  If we employ third-party
        manufacturers, we will not control many aspects of the manufacturing process,
        including compliance by these third parties with the FDA’s current Good
        Manufacturing Practices and other regulatory requirements. We further may
        not be
        able to obtain adequate supplies from third-party manufacturers in a timely
        fashion for development or commercialization purposes, and commercial quantities
        of products may not be available from contract manufacturers at acceptable
        costs.
  ***Patents
        obtained by other persons may result in infringement claims against us that
        are
        costly to defend and which may limit our ability to use the disputed
        technologies and prevent us from pursuing research and development or
        commercialization of potential products.***
  A
        number
        of pharmaceutical, biotechnology and other companies, universities and research
        institutions have filed patent applications or have been issued patents relating
        to cell therapy, stem cells, T-cells, and other technologies potentially
        relevant to or required by our expected products. We cannot predict which,
        if
        any, of such applications will issue as patents or the claims that might
        be
        allowed. We are aware that a number of companies have filed applications
        relating to stem cells. We are also aware of a number of patent applications
        and
        patents claiming use of stem cells and other modified cells to treat disease,
        disorder or injury.
  If
        third
        party patents or patent applications contain claims infringed by either our
        licensed technology or other technology required to make and use our potential
        products and such claims are ultimately determined to be valid, there can
        be no
        assurance that we would be able to obtain licenses to these patents at a
        reasonable cost, if at all, or be able to develop or obtain alternative
        technology. If we are unable to obtain such licenses at a reasonable cost,
        we
        may not be able to develop some products commercially. There can be no assurance
        that we will not be obliged to defend ourselves in court against allegations
        of
        infringement of third party patents. Patent litigation is very expensive
        and
        could consume substantial resources and create significant uncertainties.
        An
        adverse outcome in such a suit could subject us to significant liabilities
        to
        third parties, require disputed rights to be licensed from third parties,
        or
        require us to cease using such technology.
  ***If
        we are unable to obtain future patents and other proprietary rights our
        operations will be significantly harmed.***
  Our
        ability to compete effectively is dependent in part upon obtaining patent
        protection relating to our technologies. The patent positions of pharmaceutical
        and biotechnology companies, including ours, are uncertain and involve complex
        and evolving legal and factual questions. The coverage sought in a patent
        application can be denied or significantly reduced before or after the patent
        is
        issued. Consequently, we do not know whether the patent applications for
        our
        technology will result in the issuance of patents, or if any future patents
        will
        provide significant protection or commercial advantage or will be circumvented
        by others. Since patent applications are secret until the applications are
        published (usually eighteen months after the earliest effective filing date),
        and since publication of discoveries in the scientific or patent literature
        often lags behind actual discoveries, we cannot be certain that the inventors
        of
        our licensed patents were the first to make the inventions covered by the
        patent
        applications or that the licensed patent applications were the first to be
        filed
        for such inventions. There can be no assurance that patents will issue from
        the
        patent applications or, if issued, that such patents will be of commercial
        benefit to us, afford us adequate protection from competing products, or
        not be
        challenged or declared invalid.
  ***Our
        competition includes fully integrated biopharmaceutical and pharmaceutical
        companies that have significant advantages over us.***
  The
        markets for therapeutic stem cell products, multiple sclerosis products,
        and
        rheumatoid arthritis products are highly competitive. We expect that our
        most
        significant competitors are fully integrated pharmaceutical companies and
        more
        established biotechnology companies. These companies are developing stem
        cell-based products and they have significantly greater capital resources
        and
        expertise in research and development, manufacturing, testing, obtaining
        regulatory approvals, and marketing than we currently do. Many of these
        potential competitors are further along in the process of product development
        and also operate large, company-funded research and development programs.
        As a
        result, our competitors may develop more competitive or affordable products,
        or
        achieve earlier patent protection or product commercialization than we are
        able
        to achieve. Competitive products may render any products or product candidates
        that we develop obsolete.
  -
            15
            -
  ***If
        we fail to meet our obligations under our license agreements, we may lose
        our
        rights to key technologies on which our business
        depends.***
  Our
        business depends on three licenses from third parties. These third party
        license
        agreements impose obligations on us, such as payment obligations and obligations
        to diligently pursue development of commercial products under the licensed
        patents. If a licensor believes that we have failed to meet our obligations
        under a license agreement, the licensor could seek to limit or terminate
        our
        license rights, which could lead to costly and time-consuming litigation
        and,
        potentially, a loss of the licensed rights. During the period of any such
        litigation, our ability to carry out the development and commercialization
        of
        potential products could be significantly and negatively affected. If our
        license rights were restricted or ultimately lost, our ability to continue
        our
        business based on the affected technology platform could be severely adversely
        affected.
  ***Restrictive
        and extensive government regulation could slow or hinder our production of
        a
        cellular product.***
  The
        research and development of stem cell therapies is subject to and restricted
        by
        extensive regulation by governmental authorities in the United States and
        other
        countries. The process of obtaining U.S. Food and Drug Administration, or
        FDA,
        and other necessary regulatory approvals is lengthy, expensive and uncertain.
        We
        may fail to obtain the necessary approvals to continue our research and
        development, which would hinder our ability to manufacture or market any
        future
        product.
  ***To
        be successful, our product candidates must be accepted by the health care
        community, which can be very slow to adopt or unreceptive to new technologies
        and products.***
  Our
        product candidates, if approved for marketing, may not achieve market acceptance
        since hospitals, physicians, patients or the medical community in general
        may
        decide to not accept and utilize these products. The product candidates that
        we
        are attempting to develop represent substantial departures from established
        treatment methods and will compete with a number of more conventional drugs
        and
        therapies manufactured and marketed by major pharmaceutical companies. The
        degree of market acceptance of any of our developed products will depend
        on a
        number of factors, including:
  ·
              our
                  establishment and demonstration to the medical community of the
                  clinical
                  efficacy and safety of our product
                  candidates;
 ·
                our
                      ability to create products that are superior to alternatives
                      currently on
                      the market;
 ·
              our
                  ability to establish in the medical community the potential advantage
                  of
                  our treatments over alternative treatment methods;
                  and
 ·
                reimbursement
                      policies of government and third-party
                      payers.
  If
        the
        health care community does not accept our products for any of the foregoing
        reasons, or for any other reason, our business would be materially
        harmed.
  ***There
        is currently a limited market for
        our common stock, andany
        trading market that exists in our common stock may be highly illiquid and
        may
        not reflect the underlying value of the Company’s net assets or business
        prospects.***
  Although
        our common stock is traded on the Nasdaq Global Market, there is currently
        a
        limited market for our common stock and there can be no assurance that an
        improved market will ever develop.  Investors are cautioned not to
        rely on the possibility that an active trading market may develop.
  ***As
        our share price is volatile, we may be or become the target of securities
        litigation, which is costly and time-consuming to
        defend.***
  In
        the
        past, following periods of market volatility in the price of a company’s
        securities or the reporting of unfavorable news, security holders have often
        instituted class action litigation. If the market value of our common stock
        experiences adverse fluctuations and we become involved in this type of
        litigation, regardless of the outcome, we could incur substantial legal costs
        and our management’s attention could be diverted from the operation of our
        business, causing our business to suffer.
  -
            16
            -
  ***Our
        "blank check" preferred stock could be issued to prevent a business combination
        not desired by management or our current majority
        shareholders.***
  Our
        articles of incorporation authorize the issuance of "blank check" preferred
        stock with such designations, rights and preferences as may be determined
        by our
        board of directors without shareholder approval. Our preferred stock could
        be
        utilized as a method of discouraging, delaying, or preventing a change in
        our
        control and as a method of preventing shareholders from receiving a premium
        for
        their shares in connection with a change of control.
  ***Future
        sales of our common stock in the public market could lower our stock
        price.***
  We
        may
        sell additional shares of common stock in subsequent public or private
        offerings. We may also issue additional shares of common stock to finance
        future
        acquisitions. We cannot predict the size of future issuances of our common
        stock
        or the effect, if any, that future issuances and sales of shares of our common
        stock will have on the market price of our common stock. Sales of substantial
        amounts of our common stock (including shares issued in connection with an
        acquisition), or the perception that such sales could occur, may adversely
        affect prevailing market prices for our common stock.
  ***We
        presently do not intend to pay cash
        dividends on our common stock.***
  We
        currently anticipate that no cash dividends will be paid on the common stock
        in
        the foreseeable future. While our dividend policy will be based on the operating
        results and capital needs of the business, it is anticipated that all earnings,
        if any, will be retained to finance the future expansion of the our
        business.
  **ITEM
        3. CONTROLS AND PROCEDURES**
 
 **(a)** **Evaluation
        of Disclosure Controls and Procedures.**
 
 We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed by us in the reports that we file or
        submit
        to the Securities and Exchange Commission under the Securities Exchange Act
        of
        1934, as amended, is recorded, processed, summarized, and reported within
        the
        time periods specified by the Securities and Exchange Commission’s rules and
        forms, and that information is accumulated and communicated to our management,
        including our principal executive and principal financial officers (whom
        we
        refer to in this periodic report as our Certifying Officers), as appropriate
        to
        allow timely decisions regarding required disclosure. Our management evaluated,
        with the participation of our Certifying Officers, the effectiveness of our
        disclosure controls and procedures as of March 31, 2007, pursuant to
        Rule 13a-15(b) under the Securities Exchange Act. Based upon that
        evaluation, our Certifying Officers concluded that, as of March 31, 2007,
        our
        disclosure controls and procedures were not effective for the reason described
        below:
 
 In
        connection with receiving comments from the Securities & Exchange Commission
        regarding our Annual Report on form 10-KSB filed March 16 2007, we reviewed
        the
        appropriateness of the capitalization of certain costs of acquiring various
        intellectual property rights versus treatment of such costs as a period expense
        for the period in which such rights were acquired. We identified deficiencies
        in
        our internal controls and disclosure controls related to the accounting for
        acquired research and development in accordance with Paragraph 11(c) of
        Statement of Financial Accounting Standards No. 2 (SFAS No. 2) and accounting
        guidance from Financial Accounting Standards Board Interpretation No. 4
“Applicability of FASB Statement  No. 2 to Business Combinations
        Accounted for by the Purchase Method” (FIN 4). We restated our consolidated
        financial statements for the year ended December 31, 2006 and for the interim
        periods ending March 31, 2007, June 30, 2007 and March 31, 2007, in order
        to
        correct the accounting in such financial statements with respect to acquired
        research and development that has no alternative future use. Since November
        2007, we have undertaken improvements to our internal controls in an effort
        to
        remediate these deficiencies by improving supervision and training of our
        accounting staff to understand and implement the requirements of complex
        accounting issues.  We have also adopted a policy whereby financial
        management, when dealing with the reporting of transactions that involve
        complex
        and unusual accounting matters, will formally research relevant accounting
        literature relating to the issues and, if necessary, retain the services
        of a
        qualified certified public accountant, other than our independent auditor,
        to
        assist us with respect to accounting for the transaction(s).
  **(b)** **Changes
          in Internal Control Over Financial Reporting.**
 
 There
          were
          changes in our internal control over financial reporting that occurred
          during
          our most recently completed fiscal year that have materially affected,
          or are
          reasonably likely to materially affect, our internal control over financial
          reporting.  We will continue to evaluate the effectiveness of internal
          controls and procedures on an on-going basis.
  -
            17
            -
  **PART
        II**
  **OTHER
        INFORMATION**
 
 **ITEM
        1. LEGAL PROCEEDINGS.**
 
 None.
 
 
 **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS.**
 
 None.
 
 **ITEM
        3 DEFAULTS UPON SENIOR SECURITIES.**
 
 None.
 
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**
 
 None.
 
 
 **ITEM
        5. OTHER INFORMATION.**
 
 None.
  
 **ITEM
        6. EXHIBITS.**
 
 Exhibit
                  10.1
              Fourth
                  Amendment to the Amended and Restated License Agreement with the
                  University of Chicago (1)
 
 Exhibit
                  31.1
              Chief
                  Executive Officer Certification Pursuant to Section 13a-14 of the
                  Securities Exchange Act (2)
  Exhibit
                    31.2
                Chief
                    Financial Officer Certification Pursuant to Section 13a-14 of
                    the
                    Securities Exchange Act (2)
 Exhibit
                      32.1
                  Certification
                      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                      Section 906 of
                      the Sarbanes-
                      Oxley Act of 2002 (2)
 Exhibit
                        32.2
                    Certification
                        Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                        Section 906 of
                        the Sarbanes-
                        Oxley Act of 2002 (2)
 
 (1)  Filed
              previously.
 (2)  Filed
        herewith.
  -
            18
            -
  **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
        caused this report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
 
  OPEXA
                THERAPEUTICS, INC.By:
              /s/ DAVID
                B. MCWILLIAMSDavid
                B. McWilliamsPresident
                and Chief Executive Officer
 By:
              /s/
                  LYNNE HOHLFELDLynne
                HohlfeldChief
                Financial Officer and Principal Accounting OfficerDate:
                November 29, 2007
 -
              19
              -