Note 4. Common Stock Options and Warrants

9 Months Ended

Sep. 30, 2012

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

4.     Common Stock Options and Warrants.  On February 6, 2012, Amarillo Biosciences, Inc. issued 724,487 warrants as a result of having issued common shares for debt to Hope Capital at $0.0202 per share (and triggering the existing anti-dilution ratchet) on February 6, 2012. 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 old Warrant Share amount was 1,493,330.  The new Warrant Shares, in the amount of 724,487, brought the new Warrant Share amount to 2,217,817.)  The new warrant was sent to Warrant Strategies, Inc. and return of the old warrant was requested.

The Black-Scholes option pricing model was utilized to value the Warrant Strategies warrants for the quarter ended September 30, 2012 under the following assumptions:  dividend yield 0.0%, expected volatility 231.51%, risk free interest rate 0.14%, and expected life of approximately 0.2739726 years.  The valuation for the remaining 2,217,817 warrants outstanding on September 30, 2012, was $10,563.  The derivative gain for the third three months of 2012 was $15,096 making the net derivative gain of $35,899 for the first nine months of 2012.

A summary of the Company’s stock warrant activity and related information for the period ended September 30, 2012 is as follows:

	Warrants			Price Range
Outstanding December 31, 2011		8,730,190		$	0.03	-	0.10
Granted		724,487				0.0202
Cancelled/Expired		(2,212,360	)			0.10
Exercised		-				-
Outstanding September 30, 2012		7,242,317		$	0.0202	-	0.10
Exercisable September 30, 2012		7,242,317		$	0.0202	-	0.10

A summary of the Company’s stock option activity and related information for the period ended September 30, 2012 is as follows:

	Options			Price Range
Outstanding December 31, 2011		3,641,792		$	0.04	-	0.40
Granted		-				-
Cancelled/Expired		(910,000	)		0.065	-	0.40
Exercised		-				-
Outstanding September 30, 2012		2,731,792		$	0.04	-	0.125
Exercisable September 30, 2012		2,731,792		$	0.04	-	0.125