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8. STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2014

During the periods ended September 30, 2014 and 2013 the Company issued stock in payment of services and debts as follows:

For the nine month period ended September 30, 2014 the Board authorized the issuance of 25,471,666 shares of common stock in payment of services amounting to $523,408. In addition, 23,631,111 shares were issued during 2014 for stock shown as issuable as of December 31, 2013.

For the nine month period ended September 30, 2013 the Board authorized the issuance of 7,833,333 shares of common stock in payment of services amounting to $140,000. In addition 5,000,000 shares were authorized to be issued in payment of loans in the amount of $128,500, 4,500,000 shares were issued in payment of accounts payable amounting to $90,900 and 1,500,000 shares were authorized to be issued in payment of a patent in the amount of $30,000. Although authorized prior to September 30, 2013 6,600,000 of these shares were not issued until after September 30, 2013.

Independent contractors and consultants’ expense was based on the value of services rendered or the value of the common stock issued, if more reliably determined.

Stock Options and Warrants

On April 2, 2010, the Company adopted its 2010 Equity Incentive Plan, which authorized, among other forms of incentives, the issuance of stock options. Reserved for equity issuances under the 2010 Equity Incentive Plan are 50,000,000 shares of our common stock. No equity issuances have been made from the 2010 Equity Incentive Plan. Stock options, which may be tax qualified and non-qualified, are exercisable for a period of up to ten years at prices at or above market prices as established on the date of the grant.

Stock Options

Certain nonqualified stock options were issued during the period ended June 30, 2013 to a member of the board of directors as compensation for services performed. Stock option expense was $0 and $450,000 for the nine month periods ended September 30, 2014 and 2013, respectively.

	Weighted Number of Options		Weighted Average Exercise Price		Aggregate Remaining Contractual Life		Intrinsic Value

Outstanding at January 1, 2014		10,000,000	$	0.03		4.14	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Outstanding at September 30, 2014		10,000,000	$	0.03		3.05	$	—

Exercisable at September 30, 2014		10,000,000	$	0.03		3.05	$	—

The Company uses the Black-Scholes option pricing model to calculate the fair value of options. Significant assumptions used in this model include: