Stock Option Plans

The Company records the fair value of stock options issued to employees and non-employees as of the grant date as stock-based compensation expense. Stock-based compensation expense for employees and non-employees is recognized over the requisite service period, which is typically the vesting period. Stock-based compensation costs included in the consolidated statements of operations are presented below:



	Year Ended December 31,
	2014		2013		2012
Cost of products	$	14	$	—	$	—
Cost of services	142		—		—
Research and development	4,817		514		377
Selling, general and administrative	16,876		2,407		1,081
Total	$	21,849	$	2,921	$	1,458

Intrexon Stock Option Plans

On April 18, 2008, Intrexon adopted the 2008 Equity Incentive Plan (the “2008 Plan”) for employees and nonemployees pursuant to which Intrexon’s board of directors may grant share based awards, including stock options, to officers, key employees and nonemployees. During 2011, the 2008 Plan was amended to increase the number of authorized awards under the 2008 Plan from 2,857,142 to 5,714,285. Upon the effectiveness of the 2013 Omnibus Incentive Plan (the “2013 Plan”), no new awards may be granted under the 2008 Plan. As of December 31, 2014, there were 1,747,494 stock options outstanding under the 2008 Plan.

On July 26, 2013, Intrexon adopted the 2013 Plan for employees and nonemployees pursuant to which Intrexon’s board of directors may grant share based awards, including stock options and shares of common stock, to employees, officers, consultants, advisors, and nonemployee directors. The 2013 Plan became effective upon the closing of the IPO. On June 9, 2014, Intrexon's shareholders voted to amend the 2013 Plan to increase the number of shares authorized for issuance under the 2013 Plan from 7,000,000 to 10,000,000. As of December 31, 2014, there were 6,576,050 stock options outstanding under the 2013 Plan, and there were 3,335,220 remaining shares available for Intrexon to grant under the 2013 Plan.

Stock options may be granted with an exercise price equal to or greater than the stock’s fair market value at the date of grant. Stock options may be granted with an exercise price less than the stock’s fair market value at the date of grant if the stock options are replacement options in accordance with certain U.S. Treasury regulations. Virtually all stock options have ten-year terms and vest no more than four years from the date of grant.

Intrexon uses the Black-Scholes option pricing model to estimate the grant-date fair value of all stock options. The Black-Scholes option pricing model requires the use of assumptions for estimated expected volatility, estimated expected term of stock options, risk-free rate, estimated expected dividend yield, and the fair value of the underlying common stock at the date of grant. Since Intrexon does not have sufficient history to estimate the expected volatility of our common stock price, expected volatility is based on the average volatility of peer public entities that are similar in size and industry. Intrexon estimates the expected term of all options based on previous history of exercises. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The expected dividend yield is 0% as Intrexon has not declared any common stock dividends to date and does not expect to declare common stock dividends in the near future. Prior to Intrexon’s IPO, the fair value of the underlying common stock is determined based on a valuation of Intrexon’s common stock. Subsequent to Intrexon’s IPO, the fair value of the underlying common stock is determined based on the quoted market price on the NYSE. Actual forfeitures are recorded when incurred and estimated forfeitures are reviewed and adjusted at least annually. The assumptions used in the Black-Scholes option pricing model for the years ended December 31, 2014, 2013 and 2012 are set forth below:



	2014	2013	2012
Valuation assumptions
Expected dividend yield	0%	0%	0%
Expected volatility	62%—64%	73%—75%	71%—76%
Expected term (years)	6.25	6.25	6.00
Risk-free interest rate	1.82%—2.14%	0.96%—1.86%	0.80%—1.10%

Stock option activity was as follows:



	Number of Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term
Balances at December 31, 2011	3,614,530		$	5.22		6.67
Granted	548,571		7.12
Exercised	(194,570	)	(2.43		)
Forfeited	(1,210,857	)	(6.30		)
Expired	(444,148	)	(2.29		)
Balances at December 31, 2012	2,313,526		5.90			7.87
Granted	989,709		13.06
Exercised	(88,764	)	(6.04		)
Forfeited	(335,746	)	(6.94		)
Expired	(38,077	)	(5.17		)
Balances at December 31, 2013	2,840,648		8.27			7.75
Granted	7,655,050		27.51
Exercised	(315,964	)	(4.80		)
Forfeited	(1,855,578	)	(24.00		)
Expired	(612	)	(7.12		)
Balances at December 31, 2014	8,323,544		22.59			8.64
Exercisable at December 31, 2014	1,448,434		8.27			6.25
Vested and Expected to Vest at December 31, 2014(1)	6,742,605		21.78			8.50


(1)	The number of stock options expected to vest takes into account an estimate of expected forfeitures.

Total unrecognized compensation costs related to nonvested awards at December 31, 2014, 2013 and 2012 were $62,281, $9,639 and $4,910, respectively, and are expected to be recognized over a weighted-average period of approximately three years.

The weighted average grant date fair value of options granted during 2014, 2013 and 2012 was $16.40, $12.91 and $4.60, respectively. The aggregate intrinsic value of options exercised during 2014, 2013 and 2012 was $6,350, $1,136 and $913, respectively. The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the fair value of Intrexon’s common stock for those shares that had exercise prices lower than the fair value of Intrexon’s common stock.

The following table summarizes additional information about stock options outstanding as of December 31, 2014:



					Options Outstanding						Options Exercisable
Range of Exercise Prices					Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value		Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value
$	0.39	—	$	9.67	1,747,494	$	6.49	6.25	$	36,772	1,293,184	$	6.07	5.90	$	27,746
$	15.39	—	$	22.77	2,603,300	21.74		9.32	15,084		57,000	19.77		9.05	442
$	24.73	—	$	28.69	260,750	26.21		9.74	363		8,250	28.25		8.63	1
$	29.95				1,000,000	29.95		9.21	—		—	—		0.00	—
$	30.72				2,712,000	30.72		9.22	—		90,000	30.72		9.22	—
					8,323,544	$	22.59	8.64	$	52,219	1,448,434	$	8.27	6.25	$	28,189

The following table summarizes additional information about stock options outstanding as of December 31, 2013:



					Options Outstanding						Options Exercisable
Range of Exercise Prices					Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value		Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value
$	0.39	—	$	5.91	658,051	$	3.15	4.96	$	13,592	571,116	$	2.78	4.63	$	12,003
$	7.12				1,194,887	7.12		7.80	19,931		546,805	7.12		7.77	9,121
$	9.67				701,710	9.67		9.41	9,915		107,142	9.67		9.41	1,514
$	19.83				225,500	19.83		9.96	895		—	—		0.00	—
$	26.76	—	$	28.69	60,500	27.33		9.67	—		2,500	28.69		9.62	—
					2,840,648	$	8.27	7.75	$	44,333	1,227,563	$	5.37	6.44	$	22,638

Intrexon currently uses authorized and unissued shares to satisfy share award exercises.

Other Plans

As of December 31, 2014, there were 397,000 options outstanding under the Exemplar membership interest unit option plan at a weighted average exercise price of $2.10 per unit of which 275,667 were exercisable.

As of December 31, 2014, there were 7,347,000 options outstanding under the AquaBounty 2006 Equity Incentive Plan at a weighted average exercise price of $0.31 per share of which 6,171,520 were exercisable. As of December 31, 2013, there were 6,624,000 options outstanding under the AquaBounty 2006 Equity Incentive Plan at a weighted average exercise price of $0.25 per share of which 6,052,000 were exercisable.