Note H – Equity

A summary of the stock option activity under the Company’s plans for the three months ended June 30, 2017 is as follows:

	Number of		Weighted average
	shares		exercise price
Options outstanding at December 31, 2016		5,136,110	$	5.76
Options granted		1,993,998		7.54
Less:
Options exercised		329,819		3.14
Options canceled or expired		53,265		2.34
Options outstanding at June 30, 2017		6,747,024		6.44
Exercisable at June 30, 2017		2,195,147		5.33

Of the 6,747,024 outstanding options at June 30, 2017, 1,240,834 were variable accounted stock options issued to non-employees of the Company of which 453,333 options were vested and 787,501 options were unvested as of June 30, 2017.

The fair value of each stock option award granted during the six months ended June 30, 2017 was estimated as of the grant date using a trinomial lattice model with the following weighted average assumptions:

	Six Months Ended June 30, 2017
Expected term (in years)	3.0 - 4.0
Risk-free interest rate (%)		1.3%
Expected volatility (%)	47.6% - 53.0%
Dividend yield (%)		0.0%
Weighted average fair value/share at grant date	$	2.23

As of June 30, 2017, there was approximately $7.7 million of unrecognized share based compensation expense related to stock options that will be recognized over a weighted-average period of approximately 1.3 years. This includes approximately $1.6 million in unrecognized expense related to the 787,501 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 June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Research and development expense	$	285	$	372	$	327	$	363
General and administrative expense		1,637		1,188		2,725		1,985
Total stock based compensation expense	$	1,922	$	1,560	$	3,052	$	2,348

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

Common Stock Warrants

A summary of the warrant activity for the six months ended June 30, 2017 is as follows:

	Number of		Weighted average
	shares		exercise price
Warrants outstanding at December 31, 2016		450,000	$	1.50
Warrants granted		—		—
Less:
Warrants exercised		450,000		1.50
Warrants canceled or expired		—		—
Warrants outstanding at June 30, 2017		—		—
Exercisable at June 30, 2017		—		—

During the three months ended June 30, 2017 and 2016, we recorded $0 and $74,000 of warrant compensation expense, respectively. During the six months ended June 30, 2017, we recorded $0 of warrant compensation expense and during the six months ended June 30, 2016 we recorded a warrant compensation gain of $10,000, respectively. Warrant expense (gain) for the periods presented is recorded in research and development as the expense is related to unvested performance based warrants that were granted to a non-employee. As of June 30, 2017, there were no outstanding warrants, in addition all warrants were fully vested for both the three and six months ended June 30, 2017.