Note 9 - Stock Options and Warrants

12 Months Ended

Dec. 31, 2013

Stock Option And Warrants [Abstract]

Stock Option And Warrants [Text Block]

9. Stock Options and Warrants

Stock Options:

During 2013 and 2012, no options were issued to consultants.

Directors, officers and consultants exercised no options in 2013 or 2012.

Stock option activity for the years ended December 31, 2012 and December 31, 2013 are summarized as follows:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in Years)		Grant Date Fair Value
Outstanding at December 31, 2011		3,641,792		$	0.07			3.84	$	238,850
Options granted		-			-			-		-
Options exercised		-			-			-		-
Options cancelled/expired		(1,789,000	)		(0.08	)		-		(134,167	)
Outstanding at December 31, 2012		1,852,792		$	0.06			3.24	$	104,683
Vested at December 31, 2012		1,852,792		$	0.06			3.24	$	104,683
Exercisable at December 31, 2012		1,852,792		$	0.06			3.24	$	104,683
Outstanding at December 31, 2012		1,852,792		$	0.06			3.24	$	104,683
Options granted		-			-			-		-
Options exercised		-			-			-		-
Options cancelled/expired		(100,000	)		0.08			-		(7,280	)
Outstanding at December 31, 2013		1,752,792		$	0.06			2.41	$	97,403
Vested at December 31, 2013		1,752,792		$	0.06			2.41	$	97,403
Outstanding at December 31, 2013		1,752,792		$	0.06			2.41	$	97,403

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.

Stock warrants:

On February 6, 2012, 724,487 warrants were issued as a result of having issued 693,069 shares for debt to Hope Capital 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 (724,487 additional warrants plus the 1,493,330 existing warrants) 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.

No warrants were exercised in 2013 or 2012.

A summary of the Company's stock warrant activity and related information for the years ended December 31, 2013 and December 31, 2012 is as follows:

	2013							2012
	Warrants			Price Range				Warrants			Price Range
Outstanding Beg. of Year		6,642,317		$	0.0202	-	0.10		8,730,190		$	0.03	-	0.10
Granted		-				-			724,487				0.0202
Cancelled/Expired		(4,354,817	)	$	(0.0202)	-	(0.10)		(2,812,360	)			(0.10)
Exercised		-				-			-				-
Outstanding End of Year		2,287,500		$	0.03	-	0.04		6,642,317		$	0.0202	-	0.10
Exercisable End of Year		2,287,500		$	0.03	-	0.04		6,642,317		$	0.0202	-	0.10

The weighted-average remaining contractual life of the warrants outstanding at December 31, 2013 is 0.99 years.

Derivative Liabilities:

On February 6, 2012, Amarillo Biosciences, Inc. issued 724,487 warrants as a result of having issued 693,069 shares for debt to Hope Capital 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 (724,487 additional warrants plus the 1,493,330 existing warrants) 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.

The fair value of warrants with embedded derivative feature was estimated at December 31, 2012 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 $0.0155; dividend yield 0.0%; expected volatility of 234.76%, risk-free interest rate of 0.14% and expected life of approximately 0.02 years (the remaining term of the warrants). The fair value of the 2,217,817 outstanding warrants was $4,217.

During the year ended December 31, 2012, Hope Capital, Inc. exercised its right to convert debt into shares of ABI Common Stock. The embedded conversion features in the debt conversion and redemption features were accounted for as a derivative liability.  The debt also included warrants which were valued as a liability and discount to the note, due to the unknown number of shares to be issued upon conversion of the debt, causing a lack of sufficient authorized shares to be available to settle the warrants. The derivative liabilities were marked-to-market each quarter with the change in fair value recorded in the income statement. At each respective conversion date, the derivative liabilities were remeasured with the changes in fair value recorded to the income statement. At full conversion of the debt the warrants were no longer deemed to be a liability and were returned to equity for $17,035.

Net derivative gain for 2013 was $4,217. In 2012, the derivative gain was $44,096.