10-K/A

U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K/A

(AMENDMENT NO.1)

(Mark One)

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2011

[    ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Commission File Number 0-20791

AMARILLO BIOSCIENCES, INC. (Exact name of Registrant as specified in its charter)
Texas (State of other jurisdiction of incorporation or organization)	75-1974352 (I.R.S. Employer Identification No.)
4134 Business Park Drive, Amarillo, Texas (Address of principal executive offices)	79110-4225 (Zip Code)
Issuer’s telephone number, including area code:	(806) 376-1741

Securities registered under Section 12(b) of the Exchange Act:  None.

Securities registered under Section 12(g) of the Exchange Act:  Common Stock, Par Value $.01

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  [  ] Yes   [√] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  [  ] Yes   [√] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past 90 days.  [√] Yes   [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [√] Yes   [  ] No

1

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12(b)(2) of the Exchange Act).  [  ] Yes   [√] No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $2,956,145 as of June 30, 2011

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 73,554,897 as of April 18, 2012

EXPLANATORY NOTE

This Amendment No. 1 to the annual report of Amarillo Biosciences, Inc. (the “Company”), amends the Company’s annual report for the year ended December 31, 2011 (the “Original Filing”), which was filed with the Securities and Exchange Commission (the “SEC”) on April 19, 2012, for the sole purpose of furnishing the Interactive Data File as Exhibit 101.

No other changes have been made to the Original Filing. This amended annual report continues to speak as of the filing date of the Original Filing, does not reflect events that may have occurred subsequent to the filing date of the Original Filing, and does not modify or update any related disclosures made in the Original Filing.

2

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Presentation Linkbase

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 19, 2012	AMARILLO BIOSCIENCES, INC.
	By:	/s/ Stephen T. Chen
		Stephen T. Chen
		Chairman, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Stephen T. Chen	Chairman, Chief Executive Officer	April 19, 2012
Stephen T. Chen
/s/ Bernard Cohen	Vice President, Chief Financial Officer	April 19, 2012
Bernard Cohen

3

EX-31.1A

Exhibit 31.1a

FORM OF CERTIFICATION

PURSUANT TO RULE 13a-14 AND 15d-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

CERTIFICATION

I, Stephen T. Chen, certify that:

1.           I have reviewed this annual report on Form 10-K of Amarillo Biosciences, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 (b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this  report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:       April 19, 2012                                                                         /s/ Stephen T. Chen

Name: Stephen T. Chen

Title: Chairman and Chief Executive Officer

EX-31.1B

 Exhibit 31.1b

FORM OF CERTIFICATION

PURSUANT TO RULE 13a-14 AND 15d-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

CERTIFICATION

I, Bernard Cohen, certify that:

1.           I have reviewed this annual report on Form 10-K of Amarillo Biosciences, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 (b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this  report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    April 19, 2012                                             /s/ Bernard Cohen

Name: Bernard Cohen

Title: Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Amarillo Biosciences, Inc. on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: April 19, 2012	By: Stephen T. Chen
	Stephen T. Chen Chairman, Chief Executive Officer
Date: April 19, 2012	By: Bernard Cohen
	Bernard Cohen Vice President, Chief Financial Officer

XML

Note 2 - Property, Equipment and Software

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

2. Property, Equipment and Software

Equipment is stated at cost less accumulated depreciation and consists of the following at December 31, 2011 and 2010:

	2011			2010
Furniture and equipment	$	38,221		$	38,221
Software		8,012			8,012
		46,233			46,233
Less: accumulated depreciation		(46,191	)		(44,884	)
Fixed Assets, net	$	42		$	1,349

Depreciation expense amounted to $1,307 and $2,972 for the years ended December 31, 2011 and 2010, respectively.

XML

Note 1 - Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Organization and Summary of Significant Accounting Policies

Organization and Business

Amarillo Biosciences, Inc. (the "Company” or “AMAR” or “Amarillo” or “ABI”), a Texas corporation formed in 1984, is engaged in developing biologics for the treatment of human and animal diseases. The Company is continuing its clinical studies as part of the process of obtaining regulatory approval from the United States Food and Drug Administration ("FDA"), so that commercial marketing can begin in the United States. The Company has developed a dietary supplement and an interferon alpha lozenge, but has not commenced any significant product commercialization activities.

Going Concern

These financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has not yet achieved operating income, and its operations are funded primarily from debt and equity financings. Losses are anticipated in the ongoing development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability.

The continuing operations of the Company and the recoverability of the carrying value of assets is dependent upon the ability of the Company to obtain necessary financing to fund its working capital requirements, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

There can be no assurance that capital will be available as necessary to meet the Company's working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected and the Company may cease operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

Fair Value of Financial Instruments

Under the Financial Account Standards Board Accounting Standards Codification (“FASB ASC”), we are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the fair value option. Consistent with Fair Value Measurement Topic of the FASB ASC, we implemented guidelines relating to the disclosure of our methodology for periodic measurement of our assets and liabilities recorded at fair market value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.

Our Level 1 assets and liabilities primarily include our cash and cash equivalents. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. The carrying amounts of accounts receivable, accounts payable, accrued liabilities, and notes payable approximate fair value due to the immediate or short-term maturities of these financial instruments. Our Level 2 liabilities consist of derivative liabilities. These are valued using observable inputs from readily available pricing sources for similar liabilities in active markets.

Stock-Based Compensation

Stock-based compensation expense is recorded in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest.

The fair value of each option granted in 2011 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0%, expected volatility of between 181% and 186%, risk-free interest rate between 0.73% and 1.2%, and expected life between 2 and 5 years.  The fair value of each option granted in 2010 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0%, expected volatility of between 159% and 188%, risk-free interest rate between 0.13% and 3.03%, and expected life between 0.08 and 10 years.

Cash and Cash Equivalents

The Company classifies investments as cash equivalents if the original maturity of an investment is three months or less.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure trade and notes receivable are not overstated due to uncollectibility.  The Company’s allowance is based on a variety of factors, including age of the receivable, significant one-time events, historical experience, and other risk considerations. The Company had no material accounts receivable and no allowance at December 31, 2011 and 2010.

Inventory

Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. The Company continually assesses the appropriateness of inventory valuations giving consideration to slow-moving, non-saleable, out-of-date or close-dated inventory. As of December 31, 2011 and 2010 the Company had $1,489 and $3,396, respectively, of inventory included in other current assets.

Property and Equipment

Property and equipment are stated on the basis of historical cost less accumulated depreciation.  Depreciation is provided using the straight-line method over the two to seven year estimated useful lives of the assets.

Patents and Patent Expenditures

AMAR holds patent license agreements and holds patents that are owned by the Company. All patent license agreements remain in effect over the life of the underlying patents. Accordingly, the patent license fee is being amortized over the estimated life of the patent using the straight-line method. Patent fees and legal fees associated with the issuance of new owned patents are capitalized and amortized over the estimated life of the patent.  Amortization expense amounted to $15,290 and $16,879 for the years ended December 31, 2011 and 2010, respectively.

Long-lived Assets

Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.  No impairment losses have been recorded since inception.

Income Taxes

The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized.

Revenue Recognition

Dietary supplement and interferon sales

Revenues for the dietary supplement and interferon sales are recognized when an arrangement exists, the price is fixed and it has been determined that collectibility is reasonably assured.  This generally occurs at the point when the goods are shipped to the customer.

Sublicense fee revenue

Sublicense revenue is calculated based on fees relating to a license.  Amarillo recognizes revenue on these sublicense fees in the month the revenue is generated by the licensee.

Royalty revenue

Royalty revenue is calculated based on royalty fees as a percent of net sales relating to a license.  Amarillo recognizes revenue on these royalty payments in the year the revenue is generated by the licensee.  HBL reported no sales of Bimron to Bio Vet for 2011 and 2010.

Research and Development

Research and development costs are expensed as incurred.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates are the assumptions used in the valuation models to determine the fair value of stock-based compensation and the fair value of the derivative liability.

Basic and Diluted Net Income (Loss) Per Share

Net income (loss) per share is based on the number of weighted average shares outstanding. In 2011, options and warrants outstanding were antidilutive. In 2010, 1,500 shares of preferred stock and 1,150,000 stock options had a dilutive effect of 1,500,000 and 347,222 shares, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and accounts receivable.

The Company has cash balances in a single financial institution which, from time to time, exceed the federally insured limit of $250,000.  No loss has been incurred related to this concentration of cash.

Other Concentrations

The Company and its sublicensees are reliant on a single, foreign supplier for its products.  The loss of this supplier could adversely affect the Company’s future revenues.  During 2011 the majority of revenue came from an option to sublicense fee.  There were no sublicense fees in 2010.  The loss of revenue from one of the revenue sources could adversely affect the Company’s future revenues.  Our supplier, HBL, is part of the Hayashibara Group of companies, which announced on February 2, 2011 on its website in Japan that it had filed a petition for corporate reorganization with the Tokyo District Court.

In a letter to customers dated February 2, 2011, Mr. Hideki Matsushima, who has been appointed by the Tokyo District Court to be the provisional administrator of HBL, made the following statements, “…I would like to inform you that we will endeavor to supply our products to our customers in a stable fashion. We believe that we will be able to ensure a stable supply of our products, since we have been permitted by the Tokyo District Court to pay our debts to our suppliers related to the purchase of raw materials for our products, on the condition that our suppliers will continue to do business with us under the pre-existing payment terms and conditions.”

The Company has not received any demand for payment of the outstanding loans with HBL through the date of this filing. See Note 3 for additional information.

Recent Accounting Pronouncements

In accordance with FASB ASC Topic 815, the Company reclassified warrants with embedded derivative feature (full-ratchet anti-dilution provision) to liabilities at fair value on January 1, 2009 and reported the change in fair value of the warrants for 2011 and 2010 as a component of other income.

Management does not anticipate that any recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition.

XML

Balance Sheets (USD $)	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 2,819	$ 4,332
Prepaid expense and other current assets	6,588	135,634
Total current assets	9,407	139,966
Property, equipment and software, net	42	1,349
Patents, net	105,556	118,038
Total assets	115,005	259,353
Current liabilities:
Accounts payable and accrued expenses	810,621	539,955
Accrued interest - related parties	841,294	751,294
Accrued expenses - related party	78,360	78,360
Derivative liabilities	114,659	59,784
Notes payable	70,000
Notes payable - related parties	2,285,000	2,200,000
Notes payable - convertible, net	18,533
Total current liabilities	4,218,467	3,629,393
Total liabilities	4,218,467	3,629,393
Commitments and contingencies
Stockholders' deficit
Preferred stock, $0.01 par value: Authorized shares - 10,000,000 Issued and outstanding shares - 1,700 at December 31, 2011 and 1,500 at December 31, 2010	17	15
Common stock, $0.01par value: Authorized shares - 100,000,000 Issued and outstanding shares - 71,559,789 at December 31, 2011 and 61,147,224 at December 31, 2010	715,598	611,472
Additional paid-in capital	31,328,479	30,835,300
Accumulated deficit	(36,147,556)	(34,816,827)
Total stockholders' deficit	(4,103,462)	(3,370,040)
Total liabilities and stockholders' deficit	$ 115,005	$ 259,353

XML

Statements of Stockholders' Deficit (Parentheticals) (Total Stockholders' Equity, USD $)	Dec. 31, 2011	Dec. 31, 2010
Exerciseof Optionsand Warrantsfor Cash Net [Member]
Issuance price		$ 0.10
Exerciseof Cashless Optionsand Warrants [Member]
Issuance price		$ 0.10
Issuancesof Convertible Preferred Stock Net [Member]
Issuance price	$ 100	$ 100
Issuanceof Common Stockfor Reductionin Debt [Member]
Issuance price	$ 0.04
Maximum [Member] | Fair Valueof Optionsand Warrants Issued [Member]
Issuance price		$ 0.85
Maximum [Member] | Issuanceof Common Stockfor Cashin Private Placementsand Under Stock Plan [Member]
Issuance price	$ 0.065	$ 0.10
Maximum [Member] | Issuanceof Common Stockfor Servicesand Salaries [Member]
Issuance price		$ 0.16
Maximum [Member] | Issuancefor Services [Member]
Issuance price	$ 0.09
Minimum [Member] | Fair Valueof Optionsand Warrants Issued [Member]
Issuance price		$ 0.04
Minimum [Member] | Issuanceof Common Stockfor Cashin Private Placementsand Under Stock Plan [Member]
Issuance price	$ 0.046	$ 0.035
Minimum [Member] | Issuanceof Common Stockfor Servicesand Salaries [Member]
Issuance price		$ 0.04
Minimum [Member] | Issuancefor Services [Member]
Issuance price	$ 0.031

XML

Condensed Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Cash flows from Operating Activities
Net income (loss)	$ (1,313,773)	$ 506,312
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	16,597	19,851
Common stock issued for salaries and services	422,411	52,604
Fair value of options granted	37,046	240,567
Inducement expense		4,457
Change in fair value of derivative liabilities	(36,468)	(1,668,336)
Amortization of debt discount	81,533
Gain on conversion of debt	(6,907)
Imputed interest on related party notes	17,100
Changes in operating assets and liabilities:
Prepaid expense and other current assets	129,046	(48,426)
Accounts payable and accrued expenses	253,710	218,433
Accrued interest - related parties	90,000	90,000
Net cash used in operating activities	(309,705)	(584,538)
Cash flows from Investing Activities
Investment in patents	(2,808)	(11,733)
Net cash used in investing activities	(2,808)	(11,733)
Cash flows from Financing Activities
Proceeds from exercise of warrants and options		138,200
Issuance of common stock for cash	88,000	304,415
Payment of dividends on preferred stock		1,228
Proceeds from convertible debt, net	(103,000)
Proceeds from notes payable	70,000
Payments on convertible debt	(53,000)
Proceeds from notes payable related party	85,000
Issuances of convertible preferred stock, net	18,000	135,000
Net cash provided by financing activities	311,000	576,387
Net decrease in cash	(1,513)	(19,884)
Cash and cash equivalents at beginning of period	4,332	24,216
Cash and cash equivalents at end of period	2,819	4,332
Supplemental Cash Flow Information
Cash paid for interest	6,679	3,893
Non-Cash Transactions
Common stock issued for convertible debt	14,750
Discount on convertible debt	103,000
Acquisition of warrants for note payable		200,000
Declared and unpaid dividends on preferred stock		$ 2,972

XML

Balance Sheets (Parentheticals) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Stockholders' deficit
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	1,700	1,500
Preferred stock, shares outstanding	1,700	1,500
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	71,559,789	61,147,224
Common stock, shares outstanding	71,559,789	61,147,224

XML

Note 10 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Commitments and Contingencies Disclosure [Text Block]

10. Commitments and Contingencies

Delinquent payroll

During 2010 and 2011, the Company curtailed payment of salaries payable to senior management of the Company. As of December 31, 2011, approximately $426,259 of unpaid salaries due to senior management of the Company is included in accounts payable and accrued expenses.  The significance of the amounts owed to senior management subjects the Company to the risk of resignation by these officers, as well as possible litigation.

Lease commitment

Our executive and administrative offices are located at 4134 Business Park Drive, Amarillo, Texas in a 1,800 square-foot facility rented by the Company. The lease expires on June 30, 2012 and our monthly rent is $1,025 per month. We believe that the facilities are well maintained and generally suitable and adequate for our current and projected operating needs.

Minimum Royalties

The agreement with Texas A&M University requires the Company to make minimum annual royalty payments of $7,500 through 2019.

Clinical Trial Costs

The Company currently has no obligations to pay third parties in 2011 for expenses related to ongoing clinical studies. The ongoing Phase 2 hepatis C clinical study and influenza study in Taiwan are funded by CytoPharm.

Litigation

The Company is not a party to any litigation and is not aware of any pending litigation or unasserted claims or assessments as of December 31, 2011.

XML

Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Apr. 16, 2012
Entity Information
Entity Registrant Name	AMARILLO BIOSCIENCES INC
Entity Central Index Key	0001014763
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding		73,554,897
Entity Public Float	$ 2,428,383
Document Information
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

XML

Note 11 - Related Party Transactions

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Related Party Transactions Disclosure [Text Block]

11. Related Party Transactions

The Company has relied significantly on HBL, a large shareholder of the Company, for a substantial portion of its capital requirements. In addition, HBL has purchased substantial amounts of the Company’s common stock from time to time.

HBL and the Company are parties to various license and manufacturing and supply agreements pursuant to which the Company licenses certain technology to or from HBL. HBL supplies formulations of its interferon alpha and other products to the Company at contractual prices. The Company pays HBL a 12% royalty on the first $100 million of interferon alpha net sales and a 10% royalty on additional net sales.

Additionally, the Company is obligated to pay HBL a percentage of sublicense fee income the Company receives.  We owed $78,360 of accrued sublicense fees to HBL on December 31, 2011.

HBL is obligated to pay the Company an 8% royalty on sales of oral interferon in Japan.  The Company recorded $0 in 2011 and $0 of royalties in 2010 from HBL animal health sales of oral interferon.

During 2011, The Company engaged the law firm of Underwood, Wilson, Berry, Stein and Johnson P.C. of which Mr. Edward Morris was a shareholder through March 15, 2011.  Mr. Morris also was, and continues to be, the Secretary of the Company.  During the twelve months ended December 31, 2011 the Company incurred approximately $29,714 of legal fees to said law firm. For the second and third quarters of 2011, Mr. Morris has had no connection with the above referenced law firm.  Mr. Morris remains the Secretary of the Company.

All future transactions and loans between the Company and its officers, directors and 5% shareholders will be on terms no less favorable to the Company than could be obtained from independent third parties. There can be no assurance, however, that future transactions or arrangements between the Company and its affiliates will be advantageous, that conflicts of interest will not arise with respect thereto or that if conflicts do arise, that they will be resolved in favor of the Company.

XML

Statements of Operations (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Revenues:
Product sales	$ 8,395	$ 5,150
Sublicense fee and royalty revenue	50,000
Total revenues	58,395	5,150
Cost of revenues:
Product sales	4,354	2,943
Total cost of revenues	4,354	2,943
Gross margin	54,041	2,207
Operating expenses:
Research and development expenses	281,107	433,357
Selling, general and administrative expenses	918,814	638,164
Total operating expenses	1,199,921	1,071,521
Operating loss	(1,145,880)	(1,069,314)
Other income (expense):
Derivative gain	36,468	1,668,336
Interest expense	(211,718)	(93,950)
Other income	7,357	1,240
Net income (loss)	(1,313,773)	506,312
Preferred stock dividend	(16,956)	(4,200)
Net income (loss) applicable to common shareholders	$ (1,330,729)	$ 502,112
Basic net income (loss) per average share available to common shareholders	$ (0.02)	$ 0.01
Diluted net income (loss) per average share available to common shareholders	$ (0.02)	$ 0.01
Weighted average common shares outstanding - basic	65,028,701	55,041,854
Weighted average common shares outstanding - diluted	65,028,701	56,889,076

XML

Note 5 - Common Stock

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

5. Common Stock

The Company has 100,000,000 shares of voting common shares authorized for issuance.  On December 31, 2011, the Company had 89,581,771 shares of common stock outstanding and reserved for issuance upon exercise of options and warrants and conversion of preferred stock.  The Company issued common stock in 2011 and 2010 as follows:

Common Stock Issued in 2011	Shares		Issue Price		Net Price
Private placements – cash		2,666,667	$	0.03	$	80,000
Directors, officers, consultants plan – cash		136,923		0.05-0.06		8,000
Directors, officers, consultants plan– services		7,358,975		0.046-0.09		422,411
Debt conversion – cashless		250,000		0.04		14,750
Total Common Stock Issued in 2011		10,412,565	$	0.03-0.09	$	525,161

Common Stock Issued in 2010	Shares		Issue Price		Net Price
Private placements – cash		2,137,000	$	0.10	$	202,200
Directors, officers, consultants plan – cash		2,922,143		0.031-0.04		102,215
Directors, officers, consultants plan – accrued salaries		162,884		0.07		11,402
Directors, officers, consultants plan– services		481,938		0.04-0.16		41,202
Options exercised – cash		3,332,000		0.04-0.10		138,200
Options exercised – cashless		70,258		0.10		-
Total Common Stock Issued in 2010		9,106,223	$	0.031-0.16	$	495,219

During the years ended December 31, 2011 and 2010, finder’s fees paid related to private placements of stock totaled $0 and $11,500 respectively, and are deducted from the paid in excess of par capital account on the balance sheet.

We have not paid any dividends to our common stock shareholders to date, and have no plans to do so in the immediate future.

We use the services of American Stock Transfer and Trust Company as our transfer agent.

XML

Note 4 - License, Sublicense, Manufacturing, Research and Supply Agreements

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

License And Sublicense Agreements [Text Block]

4. License, Sublicense, Manufacturing, Research and Supply Agreements

Manufacturing and Supply Agreements:

The Company was a party to the following manufacturing and supply agreements at December 31, 2011.

The Company has a joint development and manufacturing/supply agreement with HBL (the Development Agreement), a major stockholder under which HBL will formulate, manufacture and supply HBL interferon for the Company or any sublicensee. In exchange, HBL is entitled to receive a transfer fee, specified royalties and a portion of any payment received by the Company for sublicense of rights under this agreement. The agreement further provides that the Company sublicense to HBL the right to market HBL interferon for oral use in humans and in non-human, warm-blooded species in Japan, in exchange for the Company receiving a royalty fee based on net sales. The Company is the exclusive agent for the development of HBL interferon for non-oral use in humans and in non-human, warm-blooded species in North America, in exchange, HBL is entitled to receive a transfer fee based on units of interferon supplied and the agreement also provides that a royalty fee be paid to HBL.

A second amendment to the Development Agreement was executed extending the Development Agreement to March 12, 2005 and will be renewed automatically for successive three-year terms. The current expiration date of the Development Agreement is March 12, 2014.

The Company has a supply agreement with HBL under which the Company gained an exclusive right to purchase and distribute anhydrous crystalline maltose for the treatment of dry mouth (xerostomia). This exclusive supply agreement is worldwide, excluding Japan.

License and Sublicense Agreements:

The Company holds patent rights for which the Company has paid certain license fees under three license agreements. Under these agreements, the Company will pay the licensor a portion of any sublicense fee received by the Company with respect to the manufacturing, use or sale of a licensed product, as well as a royalty fee based on the net selling price of licensed products, subject to a minimum annual royalty.

The minimum cash royalty owed to Texas A&M University System for 2011 is $7,500 and $7,500 for 2010.  A total of $78,360 in sublicense fees are owed to HBL based on sublicense fee income earned by the Company during 2008 and 2009 and are included in accrued expenses – related party. There were no sublicense fees due to HBL for 2010 or 2011.  The Company has also entered into various sublicense agreements under which the Company is entitled to receive royalties based on the net sales value of licensed products.

Research Agreements:

The Company currently has no obligations to pay third parties in 2011 for expenses related to ongoing clinical studies. The ongoing Phase 2 hepatitis C clinical study and influenza study in Taiwan are funded by CytoPharm.

XML

Note 12 - Subsequent Events

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Subsequent Events [Text Block]

12.  Subsequent Events

On January 31, 2012, Hope Capital, Inc., exercised its right to convert debt into equity by sending a Notice of Conversion to ABI to convert $12,000 principal amount of the note dated May 24, 2011, into 579,710 shares of ABI Common Stock at $0.0207 per share.  The shares were issued in a timely manner in accordance with the covenants of the Note.  The Conversion Price used was the Variable Conversion Price as defined by the Note.  The principal balance of the note after the conversion was $28,000.

On February 3, 2012, Hope Capital, Inc., exercised its right to convert debt into equity by sending a Notice of Conversion to ABI to convert $14,000 principal amount of the note dated May 24, 2011, into 672,329 shares of ABI Common Stock at $0.0207 per share.  The shares were issued in a timely manner in accordance with the covenants of the Note.  The Conversion Price used was the Variable Conversion Price as defined by the Note.  The principal balance of the note after the conversion was $14,000.

On February 6, 2012, Hope Capital, Inc., exercised its right to convert debt into equity by sending a Notice of Conversion to ABI to convert $14,000 principal amount of the note dated May 24, 2011, into 693,069 shares of ABI Common Stock at $0.0202 per share.  The shares were issued in a timely manner in accordance with the covenants of the Note.  The Conversion Price used was the Variable Conversion Price as defined by the Note.  The principal balance of the note after the conversion was $0.00.

On January 6, 2012, Paul and Marian Tibbits purchased 100 shares of Series 2010-A Convertible Preferred Stock for $100 per share.  The total amount of the transaction was $10,000 and the Par Value was $0.01 per share. On January 26, 2012, Paul and Marian Tibbits purchased 123 shares of Series 2010-A Convertible Preferred Stock for $81.3008 per share.  The total amount of the transaction was $10,000 and the Par Value was $0.01 per share.

On February 8, 2012, 1,339 shares of Series 2010-A Convertible Preferred Stock was issued to Paul and Marian Tibbits for debt (850 shares at $100 per share for $85,000 principal of Notes #2 – 6), accrued interest on debt (253 shares at $100 per share for $25,300), accrued and unpaid preferred dividends (232 shares at $100 per share for dividends of $23,197), and accrued and unpaid interest on unpaid preferred dividends (4 shares at $100 per share for interest on unpaid dividends of $379).

A new warrant was issued to Warrant Strategies, Inc. on February 6, 2012.  On February 6, 2012, Amarillo Biosciences, Inc. issued 693,069 shares for debt at $0.0202 per share. The Base Share Price for this dilutive issuance was $0.0202 per share.  ABI sent a Dilutive Issuance Notice to Warrant Strategies, Inc. on February 6, 2012.  The notice was sent pursuant to the Series A Common Stock Purchase Warrant dated June 16, 2009, Section 3(b), “…the Exercise Price shall be reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise price issuable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.

ABI issued a new Purchase Warrant dated February 6, 2012 reflecting the new Warrant Share amount of 2,217,817 shares and an adjusted Exercise Price of $0.0202 per share.  The new warrant was sent to Warrant Strategies, Inc. and return of the old warrant was requested.

On February 9, 2012, 50,000 shares of S-8 registered common stock were issued to Kimball Miller for payment of June 2011 consulting services.

On February 22, 2012, the Board of Directors appointed Stephen T. Chen, PhD as Chairman of the Board and Chief Executive Officer. Dr. Joseph Cummins will remain as President and became Chief Operating Officer. Dr. Chen has been a director of the company since February 1996.

On January 24, 2012, $10,000 was received from Steve Chen.  This was a short-term interest-free loan for operations. On February 23, 2012, $50,000 was received from Steve Chen.  This was an equity contribution to be used for operations. On February 27, 2012, $80,000 was received from Steve Chen.  This was an equity contribution to be used to repay previous loans. On February 28, 2012, $70,000 was disbursed by wire to Shen An Chou to repay short-term, interest-free loan of December 17, 2011. On February 28, 2012, $10,000 was disbursed by wire to Steve Chen to repay short-term, interest-free loan of January 24, 2012. On March 8, 2012, $20,000 was received from Steve Chen.  This was an equity contribution to be used for operations. On March 14, 2012, $20,000 was received from Steve Chen.  This was an equity contribution to be used for operations. On March 30, 2012, $12,000 was received from Steve Chen. This was an equity contribution to be used for operations. On April 4, 2012, $13,000 was received from Steve Chen. This was an equity contribution to be used for operations.

XML

Note 8 - Stock Options and Warrants

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

8.  Stock Options and Warrants

Stock Options:

During 2011, 100,000 options were issued to consultants, and we recognized $7,280 of expense related to these options and 2,231,792 existing options for employees were cancelled and reissued changing the exercise price and expiration date, we recognized $29,766 of expense related to these options. During 2010, 13,750,000 options were issued to consultants, advisors, directors, employees and two former employees, and we recognized $127,693 of expense related to these options.

We recognized $112,874 in 2010 of employee options expense, related to previously issued options.  No more costs remain to be recognized for these options.

Directors, officers and consultants exercised no options in 2011 and 245,000 options in 2010 via an incentive program.  See “ Stock Option and Warrant Exercise Incentive” below for more details about 2010 stock option and warrant exercises.

Stock option activity for the years ended December 31, 2010 and December 31, 2011 are summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2009		6,603,404		$	0.31		1.98	$	1,527,990
Options granted		13,750,000			0.04		0.89		127,693
Options exercised		(3,495,000	)		0.04		0.20		73,179
Options cancelled/expired		(12,171,667	)		0.10		-		662,316
Outstanding at December 31, 2010		4,686,737		$	0.26		2.67	$	920,188
Vested at December 31, 2010		4,686,737		$	0.26		2.67	$	920,188
Exercisable at December 31, 2010		4,686,737		$	0.26		2.67	$	920,188
Outstanding at December 31, 2010		4,686,737		$	0.26		2.67	$	920,188
Options granted		2,331,792			0.05		4.87		114,800
Options exercised		-			-		-		-
Options cancelled/expired		(3,376,737	)		0.32		-		796,138
Outstanding at December 31, 2011		3,641,792		$	.07		3.84	$	238,850
Vested at December 31, 2011		3,641,792		$	.07		3.84	$	238,850
Exercisable at December 31, 2011		3,641,792		$	.07		3.84	$	238,850

Options reserved for the Director, employee and consultant stock option plan but not issued (16,950,000) are not included in the table above. This stock may be utilized for other purposes if not used for the plans. The weighted-average remaining contractual life of the options is 3.84 years.

Stock warrants:

During 2010, 2,137,000 warrants were issued together with private placement sales of 2,137,000 shares of stock.  The total purchase price for private placement stock and warrants was recognized as the cost to purchase the stock with convertible debt, and dilutive issuance issued to Warrant Strategies. During 2011, 3,332,831 warrants were issued together with private placement sales of 2,666,667 shares of stock. On November 5, 2011, Amarillo Biosciences, Inc. sold 2,666,667 private placement shares at $0.03 per share along with 1,000,000 warrants exercisable at $0.03 per share.  The relative fair value of the 1,000,000 warrants was estimated to be $22,826 using the Black-Scholes option pricing model based on the following assumptions: estimated dividend yield 0%, expected volatility 197%, risk free interest rate 0.25%, and expected life of 3 years. The Base Share Price for this dilutive issuance was $0.03 per share.

No warrants were exercised in 2011 or 2010.

A summary of the Company's stock warrant activity and related information for the years ended December 31, 2010 and December 31, 2011 is as follows:

	2011						2010
	Warrants			Price Range			Warrants			Price Range
Outstanding Beg. of Year		8,457,359		$	0.10-0.20			18,320,359		$	0.10-0.20
Granted		3,332,831			0.03-0.04			2,137,000			0.10
Cancelled/Expired		(3,060,000	)		(0.20	)		(12,000,000	)		(0.10	)
Exercised		-			-			-			-
Outstanding End of Year		8,730,190		$	0.03-0.10			8,457,359			0.10-0.20
Exercisable End of Year		8,730,190		$	0.03-0.10			8,457,359			0.10-0.20

The weighted-average remaining contractual life of the warrants outstanding at December 31, 2011 is 1.45 years.

Derivative Liabilities:

In 2008, the Company sold preferred stock with attached warrants. As of December 31, 2009, there were 12,447,999 of these warrants outstanding. These warrants contain an anti-dilution ratchet provision. The Company is at risk of triggering the warrant anti-dilution provisions in the future if stock is sold below $0.10 per share to any non-exempt parties.  Holders of options and warrants prior to January 8, 2008 plus officers, directors and consultants under stock plans approved by outside board of director members are exempt from the anti-dilution provisions. In 2010, a Director of the Company purchased 12,000,000 of these warrants from the holder, along with their outstanding shares of stock in the Company, for $200,000. In December 2010, the Company agreed to buy the 12,000,000 warrants from the Director for $200,000. A verbal agreement was reached for the purchase price, with interest at 0.43% per annum in December 2010, which was formally executed as a promissory note in January 2011.The warrants were retired due to the purchase by the Company. As of December 31, 2010, 447,999 of the warrants with the anti-dilution provision remained outstanding. A new warrant was issued to Warrant Strategies, Inc. on November 7, 2011. On November 5, 2011, Amarillo Biosciences, Inc. sold 2,666,667 private placement shares at $0.03 per share along with 1,000,000 warrants exercisable at $0.03 per share.  The Base Share Price for this dilutive issuance was $0.03 per share.  ABI sent a Dilutive Issuance Notice to Warrant Strategies, Inc. on November 7, 2011.  The notice was sent pursuant to the Series A Common Stock Purchase Warrant dated June 16, 2009, Section 3(b), “…the Exercise Price shall be reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise price issuable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.

ABI issued a new Purchase Warrant dated November 7, 2011 reflecting the new Warrant Share amount of 1,493,330 shares and an adjusted Exercise Price of $0.03 per share.  The new warrant was sent to Warrant Strategies, Inc. and return of the old warrant was requested.

The anti-dilution provision was determined by management to be an embedded derivative, and was recognized as a liability in accordance with ASC 815 as of January 1, 2009. The Company measures the fair value of the liability at the end of each reporting period, with changes in value recorded as part of other income or expense.

The fair value of warrants with embedded derivative feature was estimated at December 31, 2011 with the binomial Black-Scholes option-pricing model using the following assumptions: probability of anti-dilution ratchet of 75%; a probable reset share price of $0.0202; dividend yield 0.0%; expected volatility of 197.99%, risk-free interest rate of 0.25% and expected life of approximately 1.03 years (the remaining term of the warrants). The fair value of the 1,493,330 outstanding warrants was $46,461 .

Due to the purchase described above, 12,000,000 warrants were retired in December 2010. Consequently, the fair value of these warrants was $0. The decrease in the fair value of the liability for these warrants was recorded as part of the change in fair value of the derivative liability.

Net derivative gains for 2011 were $36,468. In 2010, the derivative gain was $1,668,336.

Stock Option and Warrant Exercise Incentive:

In November 2009, the Board approved an incentive to encourage option and warrant holders (“Holders”) to exercise their options or warrants. Holders were allowed, for a limited time, to exercise up to one-third of the options or warrants they held, at an exercise price of $0.10 per share and, for each option or warrant so exercised, two additional options or warrants were converted to cashless options or warrants, and deemed exercised immediately on a cashless basis with an exercise price of $0.10. The Board extended the exercise incentive until January 22, 2010.

The Company determined that this was a modification of equity instruments, and accounted for the inducement under ASC Topic 718. For option and warrant holders who accepted the inducement and exercised their instruments under the terms noted above, an incremental fair value of the inducement was determined using the Black-Scholes option pricing model, with the following assumptions: dividend yield 0.0%, expected volatility of 147-216%, risk free interest rate 0.14 - 2.37%, and expected life of 0.13-5.36 years.  The Company recognized $4,457 of expense related to the inducement in 2010.

The activity resulting from the exercise of warrants and options under this incentive is as follows:

	Options/Warrants Exercised 2010		Common Stock Issued		Release of Reserved into Available Shares		Net Cash to Company
Options		245,000		152,258		92,742	$	8,200
Warrants		-		-		-		-
Total		245,000		152,258		92,742	$	8,200

XML

Note 6 - Preferred Stock

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Preferred Stock [Text Block]

6.  Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized for issuance which is issuable in series.

The Board of directors authorized the issuance of up to 10,000 shares of Series 2010-A 10% Convertible Preferred Stock on July 29, 2010.  Each preferred share is convertible into 1,000 common shares ($100 stated value per share divided by $0.10).  Dividends are payable quarterly at 10% per annum in cash or stock at the option of the preferred stock Holder.  Stock dividend payments are valued at the higher of $0.10 per share of common stock or the average of the two highest volume weighted average closing prices for the 5 consecutive trading days ending on the trading day that is immediately prior to the dividend payment date.  During 2011, a total of 200 shares of Series 2010-A 10% Convertible Preferred Stock were issued to a Director.  Net proceeds totaled $18,000 after $2,000 of brokerage commissions.  The preferred stock is convertible into 200,000 shares of restricted common stock.  In 2011, the Company recorded $16,956 of dividends related to the 1,700 shares of preferred stock outstanding. Of this amount, $16,956 was unpaid as of December 31, 2011.

XML

Note 7 - Stock Option and Stock Plans

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Share-based Compensation, Option and Incentive Plans, Director Policy [Policy Text Block]

7. Stock Option and Stock Plans

Stock Plans *	Issue Date Range	Total Shares Authorized		Shares Issued		Shares Remaining
2008 Stock Incentive Plan	5/23/08 – 10/11/11		600,000		463,420		136,580
2008 Executive Officers Compensatory Stock Plan	7/10/08 – 9/17/08		200,000		51,563		148,437
2008 Amended and Restated Directors, Officers and Consultants Stock Purchase Plan	10/22/08 – 8/3/11		8,000,000		7,766,791		233,209
2009 Consultants Stock Grant Plan	7/13/09 – 10/31/09		100,000		50,000		50,000
Non Stock Plan Issuances	6/2/08 – 3/12/10		929,562		205,863		723,699

Stock Option Plans *	Issue Date Range	Total Options Authorized**		Options Issued		Options Remaining
2009A Officers, Directors, Employees and Consultants Nonqualified Stock Option Plan ***	04/30/09 – 3/8/11		20,000,000		3,050,000		16,950,000
Non Stock Option Plan Issuances	06/30/08 – 12/16/08		1,056,912		1,056,912		0

*       The Board of Directors has approved all stock, stock option and stock warrant issuances.

**     One option reserves one share of common stock.

***  This plan replaces and supersedes in their entirety the Company’s Outside director and Advisor Stock Option Plan, as amended and restated as of May 11, 1999; the Company’s 1996 Employee’s Stock Option Plan, as amended and restated as of May 11, 1999; and the Company’s First Amended 2006 Employee’s Stock Option and Stock Bonus Plan; provided however, that options already issued and outstanding under said superseded plans shall continue to be outstanding and exercisable in accordance with their terms, as such may have been extended or re-priced from time to time, and the terms of any applicable option agreements entered into between the Company and the Optionee.

XML

Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Income Tax Disclosure [Text Block]

9. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. The Company’s deferred tax asset of approximately $7,970,000 and $8,790,000 at December 31, 2011 and 2010 respectively, was subject to a valuation allowance of $7,970,000 and $8,790,000 at December 31, 2011 and 2010 respectively, because of uncertainty regarding the Company’s ability to realize future tax benefits associated with the deferred tax assets. Deferred tax assets were comprised primarily of net operating loss carryovers under the cash method of accounting used by the Company for federal income tax reporting. The valuation allowance decreased by $820,000 in 2011 and decreased by $390,000 in 2010, due to the changes in the Company’s net operating loss carryover amounts.

At December 31, 2011, the Company has net operating loss carryforwards of approximately $23,445,000 for federal income tax purposes expiring in 2012 through 2031.  The ability of the Company to utilize these carryforwards may be limited should changes in stockholder ownership occur.

The difference between the reported income tax provision and the benefit normally expected by applying the statutory rate to the loss before income taxes results from the change during 2011 and 2010 of the deferred tax asset valuation allowance. As a result, the reported effective tax rate is 0%.

XML

Statements of Stockholders' Deficit (USD $)	Preferred Stock	Common Stock	Additional Paid in Capital	Accumulated Deficit	Total Stockholders' Equity
Balance at Dec. 31, 2009		$ 520,410	$ 30,051,134	$ (35,318,939)	$ (4,747,395)
Balance (in shares) at Dec. 31, 2009		52,041,001
Net income (loss)				506,312	506,312
Fair value of options and warrants issued			240,567		240,567
Exercise of options and warrants for cash, net		33,320	104,880		138,200
Exercise of options and warrants for cash, net (in shares)		3,332,000
Exercise of cashless options and warrants		703	(703)
Option-warrant inducement expense			4,457		4,457
Issuance of common stock for cash in private placements and under stock plan		50,591	253,824		304,415
Issuance of common stock for cash in private placements and under stock plan (in shares)		5,059,143
Issuance of common stock for services and salaries		6,448	46,156		52,604
Issuance of common stock for services and salaries (in shares)		644,822
Issuances of convertible preferred stock, net	15		134,985		135,000
Issuances of convertible preferred stock, net (in shares)	1,500
Preferred stock dividends				(4,200)	(4,200)
Balance at Dec. 31, 2010	15	611,472	30,835,300	(34,816,827)	(3,370,040)
Balance (in shares) at Dec. 31, 2010	1,500	61,147,224
Net income (loss)				(1,313,773)	(1,313,773)
Fair value of options and warrants issued			37,046		37,046
Issuance of common stock for cash in private placements and under stock plan		28,036	59,964		88,000
Issuance of common stock for cash in private placements and under stock plan (in shares)		2,803,590
Issuance of common stock for services and salaries		73,590	348,821		422,411
Issuance of common stock for services and salaries (in shares)		7,358,975
Issuances of convertible preferred stock, net	2		17,998		18,000
Issuances of convertible preferred stock, net (in shares)	200
Preferred stock dividends				(16,956)	(16,956)
Issuance of common stock for reduction in debt		2,500	12,250		14,750
Issuance of common stock for reduction in debt (in shares)		250,000
Imputed interest on notes			17,100		17,100
Balance at Dec. 31, 2011	$ 17	$ 715,598	$ 31,328,479	$ (36,147,556)	$ (4,103,462)
Balance (in shares) at Dec. 31, 2011	1,700	71,559,789

XML

Note 3 - Notes Payable

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Debt Disclosure [Text Block]

3. Notes Payable

The Company has two $1,000,000 notes payable under an unsecured loan agreement with HBL dated July 22, 1999.  The annual interest rate on unpaid principal from the date of each respective note is 4.5 percent, with accrued interest being payable at maturity.  $1,000,000 was payable on or before June 3, 2008.  The other $1,000,000 was payable on or before August 28, 2008.  Although we are currently in default of the notes, HBL has not demanded payment through the date of this filing.

The Company has a line of credit with Wells Fargo for $20,000, with interest at the prime rate plus 6.75 percent. There was an outstanding balance at December 31, 2011 and 2010 of $19,978 and $1,822, respectively, which is included in accounts payable and accrued expenses. This line is used from time to time for purchases.  The Company paid $2,005 and $1,577 of interest under the line of credit in 2011 and 2010, respectively.

In 2010, the Company entered into a verbal agreement with Paul Tibbits, a Director, to purchase 12,000,000 warrants held by him for $200,000. The agreement included interest at 0.43% per annum, with no stated maturity date, and no collateral. A promissory note in the amount of $200,000 to Paul Tibbits was executed on January 10, 2011. This note was in default at year end and now accrues interest at the default rate of 10% per annum.

On March 9, 2011, a promissory note (Note #2) in the amount of $20,000 to Paul Tibbits was executed.  The term of the note is 183 days and is due on September 8, 2011.  The annual interest rate is .0054 (.54 %)(or 10% if in default). This note was in default at year end, but was settled on February 8, 2012.

On April 6, 2011, a promissory note (Note #3) in the amount of $40,000 to Paul Tibbits was executed.  The note is a demand note or if no demand is made, the note matures on October 8, 2011.  The annual interest rate is .0054 (.51%)(or 10% if in default).  This note was in default at year end, but was settled on February 8, 2012.

On April 15, 2011, the Company entered into a convertible debt agreement with Asher Enterprises, Inc. and Hope Capital, Inc.  The note was in the amount of $63,000 at an annual interest rate of 14% on a 365-day basis with a maturity date of April 14, 2012.  All or any part of the outstanding and unpaid principle of the note along with any accrued and unpaid interest (at the option of the Borrower) can be converted into the Company’s common stock at any time during the term of the note. On October 27, 2011, Hope Capital, Inc. exercised its right to convert debt into equity by sending a Notice of Conversion to ABI to convert $10,000 principal amount of the note dated April 15, 2001, into 250,000 shares of ABI Common Stock at $0.04 per share.  The shares were issued in a timely manner in accordance with the covenants of the Note.  The Conversion Price used was the Fixed Conversion Price.  On December 22, 2011, ABI paid the remaining balance ($53,000) of the note dated April 15, 2011 along with accrued interest of $3,216.33.  This amount was wired to the lender and received on December 22, 2011.  Asher Enterprises, Inc. subsequently acknowledged the receipt of the funds and returned the original Note marked “Paid”.

On May 24, 2011, the Company entered into a second convertible debt agreement with Asher Enterprises, Inc. and Hope Capital Inc.  The note was in the amount of $40,000 at an annual interest rate of 14% on a 365-day basis with a maturity date of May 31, 2012. All or any part of the outstanding and unpaid principle of the note along with any accrued and unpaid interest (at the option of the Borrower) can be converted into the Company’s common stock at any time during the term of the note. The reserve requirement for the second note was 3,500,000 common shares.

On September 7, 2011, a promissory note (Note #4) in the amount of $10,000 to Paul Tibbits was executed.  The note is a demand note and if no demand is made, the note is due on October 7, 2011.  The annual interest rate is .0026 (.26%)(or 10% if in default). This note was in default at year end, but was settled on February 8, 2012.

On October 12, 2011, a promissory note (Note #5) in the amount of $10,000 to Paul Tibbits was executed.  The note is a demand note and if no demand is made, the note is due on January 13, 2012.  The annual interest rate is .0016 (.16%)(or 10% if in default). This note was in default prior to being settled on February 8, 2012.

On December 13, 2011, a promissory note (Note #6) in the amount of $5,000 to Paul Tibbits was executed.  The note is a demand note and if no demand is made, the note is due on March 13, 2012.  The annual interest rate is .0019 (.19%)(or 10% if in default). This note was settled on February 8, 2012.

On December 16, 2011, Shen An Chou, wired $70,000 ($69,982 net of an $18 international wire fee) to the Company as a short-term non-interest-bearing loan for operations.  The agreement was verbal only and no note was executed.  Due to the short-term nature of the loan, no interest rate was assigned to the loan.  The loan was repaid in full on February 28, 2012.