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VITAE PHARMACEUTICALS, INC filed this Form S-1 on 08/12/2014
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Vitae Pharmaceuticals, Inc.

Notes to the Financial Statements (Continued)

For the Years Ended December 31, 2013 and 2012

2. Summary of Significant Accounting Policies and Basis of Accounting (Continued)

time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

        The Company utilizes significant estimates and assumptions in determining the fair value of its common stock. The Board determined the estimated fair value of the Company's common stock based on a number of objective and subjective factors, including external market conditions affecting the biotechnology industry and the prices at which the Company sold shares of redeemable convertible preferred stock, the superior rights and preferences of securities senior to the Company's common stock at the time, and the likelihood of achieving a liquidity event, such as an IPO or sale of the Company.

        Stock-based compensation expense recognized in accordance with ASC 718 for the years ended December 31, 2013 and 2012:

  Year Ended
December 31,
  2013   2012  

Research and development

  $ 18,920   $ 114,591  

General and administrative

    80,933     165,619  

Total stock-based compensation

  $ 99,853   $ 280,210  

Income Taxes

        Income taxes are recorded in accordance with ASC Topic 740, Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

        The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes interest and penalties accrued on any unrecognized tax benefits within the provision for income taxes on the Statement of Operations. As of December 31, 2013 and 2012, the Company does not have any significant uncertain tax positions.

Net Income Per Common Share

        The Company uses the two-class method to compute net income per common share because the Company has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings available to common stockholders for the period, after an allocation of earnings to participating securities, to be