12. Stock‑Based Compensation

Employee Equity Plans

The NextCure, Inc. 2015 Omnibus Incentive Plan (the “2015 Plan”) provides for the grant of awards of stock options, restricted stock awards, unrestricted stock awards and restricted stock units to employees, consultants and directors of the Company. The 2015 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors.

On May 3, 2019, the Company’s stockholders approved the NextCure, Inc. 2019 Omnibus Incentive Plan (the ‘‘2019 Plan’’), which became effective on May 8, 2019, the date on which the Company’s Registration Statement on Form S-1 (Reg. No. 333-230837) was declared effective (the “Effective Date”). The Company’s board of directors (the “Board”) determined not to make additional awards under the 2015 Plan following the effectiveness of the 2019 Plan. The 2019 Plan provides for the grant of awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards and cash bonus awards to the Company’s officers, employees, non-employee directors and other key persons (including consultants). The number of shares of common stock reserved for issuance under the 2019 Plan is 2,900,000 plus the number of shares of stock related to awards outstanding under the 2015 Plan that subsequently terminate by expiration or forfeiture, cancellation or otherwise without the issuance of such shares. The number of shares reserved for issuance under the 2019 Plan will automatically increase on January 1, 2020 and each January 1st thereafter during the term of the 2019 Plan by 4% of the number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or such lesser number of shares determined by the Board.

As of December 31, 2019, 2,661,566 shares were reserved for future issuance under the 2019 Plan.

Stock options granted under the 2015 Plan and 2019 Plan (together, the “Plans”) to employees generally vest over four years and expire after 10 years.

A summary of stock option activity for awards under the Plans is presented below:


	Options Outstanding and Exercisable
				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Number of	Exercise		Contractual	Value(1)
	Shares	Price		Life (Years)	(in thousands)
Outstanding as of January 1, 2018	506,586	$	0.94	9.0	$	137
Granted	1,570,136	$	5.92	9.9		—
Exercised	(5,599)	$	0.84	—		—
Forfeitures	(14,232)	$	1.11	—		—
Outstanding as of December 31, 2018	2,056,891	$	4.74	9.4	$	5,946
Granted	258,897	$	18.88	9.5		—
Exercised	(125,108)	$	0.96	7.4		—
Forfeitures	(20,468)	$	19.66	9.5		—
Outstanding as of December 31, 2019	2,170,212	$	6.51	8.6	$	—
Vested and expected to vest as of December 31, 2019	2,170,212	$	6.51	—	$	113,295
Exercisable as of December 31, 2019	716,393	$	3.75	—	$	39,370

(1)

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at December 31, 2019 and 2018.

The weighted average grant date fair value per share of stock options granted during the years ended December 31, 2019 and 2018 was $11.92 and $3.80, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was $7,225,000 and $38,000, respectively.

The aggregate grant date fair value of stock options and restricted stock vested during the year ended December 31, 2019 and 2018 was approximately $7,637,000 and $157,000, respectively.

The Company’s potential dilutive securities, which as of December 31, 2019 include common stock options, have been excluded from the computation of diluted net loss per share because the effect would be anti-dilutive. Therefore, the weighted average number of common shares used to calculate both basic and diluted net loss per common share is the same. The Company excluded 2,170,212 and 2,056,891 potential shares of common stock, presented based on amounts outstanding as of December 31, 2019 and 2018, respectively, from the computation of diluted net loss per common share for the periods indicated because including them would have had an anti-dilutive effect.

On May 3, 2019, the Company’s stockholders approved the NextCure, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective on the Effective Date. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code. A total of 240,000 shares of common stock were reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued under the ESPP will automatically increase on January 1, 2020 and each January 1st thereafter until expiration of the ESPP, in an amount equal to the lesser of (i) 1% of the number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, (ii) 480,000 shares of common stock and (iii) a number of shares of common stock determined by the administrator of the ESPP. As of December 31, 2019, no shares of common stock had been issued pursuant to the ESPP and 240,000 shares were reserved for future issuance thereunder.

Stock‑Based Compensation

The Company recorded stock‑based compensation expense of $1.9 million and $0.3 million during the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, there was $6.9 million of unrecognized compensation cost related to unvested stock‑based compensation arrangements granted under the Plans. This remaining compensation expense is expected to be recognized over a weighted-average period of three years as of December 31, 2019.

Stock‑based compensation expense recorded as research and development and general and administrative expenses is as follows:


	Year Ended
	December 31,
	2019		2018
Research and development	$	691	$	85
General and administrative		1,195		178
Total stock-based compensation expense	$	1,886	$	263

The assumptions used in the Black‑Scholes option‑pricing model for stock options granted were as follows:


	Year Ended
	December 31,
	2019		2018
Expected term	6.1	years	6.1	years
Expected volatility	69.7	%	69.7	%
Risk free interest rate	1.90	%	2.77	%
Expected dividend yield	—	%	—	%

Restricted Common Stock

In May 2016, the Company issued 62,237 shares of restricted common stock, which are restricted as to sale or transferability, under the 2015 Plan. These restrictions lapse over a four‑year period.