Note H — Equity

A summary of the stock option activity under the Company’s plans for the nine months ended September 30, 2016 is as follows:

	Number of		Weighted average
	shares		exercise price
Options outstanding at December 31, 2015		5,326,505	$	3.07
Options granted		2,542,527		7.10
Less:
Options exercised		2,395,015		1.61
Options canceled or expired		258,155		3.32
Options outstanding at September 30, 2016		5,215,862		5.67
Exercisable at September 30, 2016		1,162,128		3.74

Of the 5,215,862 outstanding options at September 30, 2016, 1,005,000 were variable accounted stock options issued to non-employees of the Company of which 117,500 options were vested and 887,500 options were unvested as of September 30, 2016.

The fair value of each stock option award granted during the nine months ended September 30, 2016 was estimated as of the grant date using a trinomial lattice model with the following weighted average assumptions:

	Nine Months Ended September 30, 2016
Expected term (in years)	1.0 - 4.5
Risk-free interest rate (%)		1.1%
Expected volatility (%)	46.5% - 56.7%
Dividend yield (%)		0.0%
Weighted average fair value/share at grant date	$	2.56

As of September 30, 2016, there was approximately $8.2 million of unrecognized share based compensation expense related to stock options that will be recognized over a weighted-average period of approximately 1.5 years. This includes $2.2 million in unrecognized expense related to the 887,500 shares of unvested variable accounted for stock options subject to fair value adjustment at the end of each reporting period based on changes in the Company’s stock price.

Stock based compensation expense recognized for stock options and restricted stock and included in the consolidated statements of operations was allocated as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Research and development expense	$	187	$	161	$	550	$	339
General and administrative expense		1,499		667		3,484		1,395
Total stock based compensation expense	$	1,686	$	828	$	4,034	$	1,734

Stock based compensation recorded in research and development relates to unvested options and warrants granted to a non-employee.

Common Stock Warrants

A summary of the warrant activity for the nine months ended September 30, 2016 is as follows:

	Number of			Weighted average
	shares			exercise price
Warrants outstanding at December 31, 2015		650,000		$	1.48
Warrants granted		—			—
Less:
Warrants exercised		(200,000	)		1.50
Warrants canceled or expired		—			—
Warrants outstanding at September 30, 2016		450,000			1.50
Exercisable at September 30, 2016		450,000			1.50

During the three months ended September 30, 2016 and 2015, we recorded $0 and $58,000 of warrant compensation expense, respectively. During the nine months ended September 30, 2016, we recorded warrant compensation gain of $10,075 and during the nine months ended September 30, 2015, we recorded $173,000 of warrant compensation expense, respectively. Warrant expense for the periods presented is recorded in research and development as the expense related to unvested performance based warrants granted to a non-employee. As of September 30, 2016 all warrants are fully vested.