form10-k_12312013.htm

10-K 1 form10-k_12312013.htm FORM 10-K 12-31-13 form10-k_12312013.htm

U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K

(Mark One)

[ X ]	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the Fiscal Year Ended December 31, 2013

[ ]	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] 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 whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [√] No

Indicate by check mark whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange 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 Exchange Act of 1934 during the past 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 if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K (Sec.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, and accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 [ ] (do not check if smaller reporting company)		Smaller reporting company [√]

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

As of December 31, 2013, there were outstanding 73,291,008 shares of the registrant’s common stock, par value $.01, which is the only class of common or voting stock of the registrant and 3,262 shares of the issuer’s preferred stock. As of that date, the aggregate market value of 52,709,563 shares of common stock held by non-affiliates of the registrant (based on the closing price of $0.001 for the common stock on the OTC BB.AMAR December 31, 2013) was approximately $52,710. Shares of common stock held by officers, directors and each shareholder owning ten percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates.

The number of shares of the Registrant’s common stock outstanding as of April 15, 2014 was 73,291,008.

PART I

The following contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those discussed in the forward-looking statements as a result of certain factors, including those set forth in “Management’s 2014 Plan of Operations” as well as those discussed elsewhere in this Form 10-K. The following discussion should be read in conjunction with the Financial Statements and the Notes thereto included elsewhere in this Form 10-K.

ITEM 1.

BUSINESS.

General

We are a Texas corporation formed in 1984 that is engaged in developing biologics for the treatment of human and animal diseases. Our current focus is research aimed at the treatment of human disease indications, particularly influenza, hepatitis C, thrombocytopenia, and other indications using natural human interferon alpha that is administered in a proprietary low dose oral form.

We currently own or license five issued patents related to the low-dose oral delivery of interferon and we own one issued patent on our dietary supplement, Maxisal®. We currently have one pending patent which applies low dose oral interferon to the treatment of Thrombocytopenia. In our history, we have completed more than 100 pre-clinical (animal) and human studies on the safety and efficacy of low-dose orally administered interferon. On October 31, 2013, Amarillo Biosciences, Inc., (ABI) filed a voluntary petition in the Northern District of Texas, for protection under Chapter 11 of Title 11 of the U.S. code. The purpose of the filing was to give the Company time to restructure organizationally and financially.

Current Status

To date, ABI remains in Chapter 11 Bankruptcy. The Company has been in contact with its creditors. At the time of the filing, the Company had $101,089 of assets and $4,787,127 of liabilities. There were two secured creditors, one unsecured priority claim, and thirty-nine (39) unsecured non-priority creditors with which ABI is aware. The prescribed meeting of creditors and deadlines (also known as the 341 Hearing) was properly noticed and subsequently held on December 10, 2013, at 10:15 A.M. No creditors’ committee was formed. On or about March 6, 2014, an Official Committee of Equity Holders was appointed by the U.S. Trustee for Region 6. To date, no action has been taken by that committee. The Company filed its Plan of Reorganization and Disclosure Statement on February 27, 2014. There was a hearing to consider approval of the Company’s Disclosure Statement on Thursday, March 27, 2014 at 2:00 P.M.

Technology

Injectable interferon is FDA-approved to treat some neoplastic, viral and autoimmune diseases. Many patients experience moderate to severe side effects, causing them to discontinue injectable interferon therapy. Our main product is a natural human interferon alpha that is delivered into the oral cavity as a lozenge in low (nanogram) doses. The lozenge dissolves in the mouth where interferon binds to surface (mucosal) cells in the mouth and throat, resulting in stimulation of immune mechanisms. Orally delivered interferon has been shown to activate hundreds of immune system genes in the peripheral blood. Human studies have shown that oral interferon is safe and effective against viral and autoimmune diseases. Oral interferon is given in concentrations 10,000 times less than that usually given by injection. The Company’s low dose formulation results in almost no side effects, in contrast to high dose injectable interferon, which causes adverse effects in at least 50% of recipients.

The Company also has a dietary supplement product, Maxisal® that is useful in the symptomatic relief of dry mouth.

Governmental or FDA approval is required for our principal product. Our progress toward approval is discussed under each specific indication, below.

We believe that our technology is sound and can be commercialized. Due to occurrences in the interferon market over the past several years, we have been unsuccessful at such commercialization.

Strategic Alliance with HBL

Hayashibara Biochemical Laboratories, Inc. (“HBL”) was established in 1970 to engage in research and development as a subsidiary of Hayashibara Company, Ltd. In 1987, HBL successfully accomplished the mass production of human cells in an animal host by producing human cells in hamsters. This made it possible to economically produce a natural form of human interferon alpha and other biologics. HBL also developed technology relating to the production of interferon alpha-containing lozenges by which the stability of the interferon alpha can be maintained at room temperature. We believe that the use of such lozenges gives us advantages over competitive technologies in terms of cost, taste and ease of handling.

On March 13, 1992, we entered into a Joint Development and Manufacturing/Supply Agreement with HBL (the “Development Agreement”). As of February 1, 2012, HBL began operating under the name Hayashibara Company, Ltd. (“HBC”) as a wholly-owned subsidiary of Nagase Corporation. In correspondence received April 23, 2012, HBC informed us that they had decided to permanently halt production of interferon. Subsequently, ABI was informed that HBC was preparing a letter of notification that the Development Agreement would be terminated. On September 23, 2012, the expected notification letter was received, and the Development Agreement was officially terminated as of December 22, 2012.

Among other things, the Development Agreement provided us with a source of natural human interferon alpha for use in the Company’s interferon alpha-containing products. Termination of the Development Agreement leaves the Company without a current source of interferon with which to conduct clinical trials and ultimately commercialize a product. The Company is exploring its options and is talking with alternate suppliers of interferon.

ABI’s thirty years of data has been generated from the numerous studies performed using natural human interferon. Since human interferon is virtually impossible to obtain, those studies will have to be repeated using recombinant interferon. Repeating the studies will be both costly and time consuming. While the pharmaceutical industry is creating and marketing new and effective anti-viral medications, ABI believes that there is still sufficient time to develop commercialize low dose interferon for treatment of such diseases as Influenza, Chronic Cough in COPD, Hepatitis B, C, and D, and Thrombocytopenia caused by other diseases and as a side effect of treatment of other diseases.

Strategic Alliance with CytoPharm

On May 15, 2013, the Company entered into a CIT Patents Agreement with CytoPharm, Inc. (CP) a former licensee for oral IFN technology in Taiwan and China. This agreement establishes the ownership, inventorship, prosecution, maintenance, use and commercialization of a patent regarding treatment of thrombocytopenia with oral IFN that developed out of a study conducted by CP under a previous License and Supply Agreement.

Strategic Alliance with Bumimedic

In January 2006, a license and distribution agreement was executed with Bumimedic (Malaysia) Sdn. Bhd, a Malaysian pharmaceutical company that is a part of the Antah HealthCare Group, to market our low-dose interferon (natural human IFN) in Malaysia. Given the problems associated with the natural human interferon supply, it is likely that the agreement with Bumimedic will be terminated as the Company can no longer supply Bumimedic with natural human IFN produced by Hayashibara. Once the problems associated with the interferon supply are solved, the Company will most likely endeavor to enter into another such agreement with Bumimedic.

Strategic Alliance with Intas Pharmaceuticals

On January 7, 2010, the Company entered into a License and Supply Agreement with Intas Pharmaceuticals Ltd., an India-based pharmaceutical company with three decades of experience in the healthcare industry and a global presence in 42 countries worldwide. Given the problems associated with the natural human interferon supply, it is likely that the agreement with Intas will be terminated as the Company can no longer supply them with natural human IFN produced by Hayashibara. Once the problems associated with the interferon supply are solved, the Company will most likely endeavor to enter into another such agreement with Intas Pharmaceuticals.

Patents and Proprietary Rights

Since inception, the Company has worked to build an extensive patent portfolio for low-dose orally administered interferon. This portfolio consists of patents with claims that encompass method of use or treatment, and/or composition of matter and manufacturing. As listed below, we presently own or license six issued patents, including one patent on our dietary supplement.

Patents with Method of Treatment Claims for Interferon Alpha

1. “TREATMENT OF BACTERIAL INFECTION WITH ORAL INTERFERON-ALPHA” as described and claimed in U.S. Patent No. 5,817,307 issued October 1998, Licensed. Expiration: October 2015.

2. "TREATMENT OF AUTOIMMUNE DISORDERS WITH ORAL INTERFERON" as described and claimed in U.S. Patent No. 5,846,526 issued December 1998, Licensed. Expiration: December 2015.

3. "TREATMENT OF FIBROMYALGIA WITH LOW DOSE INTERFERON" as described and claimed in U.S. Patent No. 6,036,949 issued March 2000, Owned. Expiration: March 2018.

4. "INTERFERON-ALPHA MEDIATED UPREGULATION OF AQUAPORIN EXPRESSION" as described and claimed in U.S. Patent No. 6,506,377 issued January 2003, Owned. Expiration: November 2019.

Patents with Formulation Claims

5. "INTERFERON DOSAGE FORM AND METHOD THEREFOR" as described and claimed in U.S. Patent No. 6,372,218 B1 issued April 2002, Licensed. Expiration: April 2019.

6. "COMPOSITION AND METHOD FOR PROMOTING ORAL HEALTH" as described and claimed in U.S. Patent No. 6,656,920 B2 issued December 2003, Owned. Expiration: April 2021.

There are no current patent litigation proceedings involving us.

Cost of Compliance with Environmental Regulations

We incurred no costs to comply with environment regulations in 2013.

Competition

The pharmaceutical industry is an expanding and rapidly changing industry characterized by intense competition. We believe that our ability to compete will be dependent in large part upon our ability to successfully reorganize, recapitalize, redevelop and test our products and continually enhance and improve our products and technologies. In order to do so, we must effectively utilize and expand our research and development capabilities and, once developed, expeditiously convert new technology into products and processes, which can be commercialized. Competition is based primarily on scientific and technological superiority, technical support, availability of patent protection, access to adequate capital, the ability to develop, acquire and market products and processes successfully, the ability to obtain governmental approvals and the ability to serve the particular needs of commercial customers. Corporations and institutions with greater resources than us, therefore, have a significant competitive advantage. Our potential competitors include entities that develop and produce therapeutic agents for treatment of human and animal disease. These include numerous public and private academic and research organizations and pharmaceutical and biotechnology companies pursuing production of, among other things, biologics from cell cultures, genetically engineered drugs and natural and chemically synthesized drugs. Almost all of these potential competitors have substantially greater capital resources, research and development capabilities, manufacturing and marketing resources and experience than us. Our competitors may succeed in developing products or processes that are more effective or less costly than any that may be developed by us or that gain regulatory approval prior to our products. We also expect that the number of competitors and potential competitors will increase as more interferon alpha products receive commercial marketing approvals from the FDA or analogous foreign regulatory agencies. Any of these competitors may be more successful than us in manufacturing, marketing and distributing its products. There can be no assurance that we will be able to compete successfully.

United States Regulation

Before products with health claims can be marketed in the United States, they must receive approval from the FDA. To receive this approval, any drug must undergo rigorous preclinical testing and clinical trials that demonstrate the product candidate’s safety and effectiveness for each indicated use. This extensive regulatory process controls, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of pharmaceutical products.

In general, before any ethical pharmaceutical product can be marketed in the United States, the FDA will require the following process:

•	preclinical laboratory and animal tests;
•	submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin;
•	adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use;
•	pre-approval inspection of manufacturing facilities and selected clinical investigators;
•	Submission of a New Drug Application (NDA) to the FDA; and
•	FDA approval of an NDA, or of an NDA supplement (for subsequent indications or other modifications, including a change in location of the manufacturing facility).

Substantial financial resources are necessary to fund the research, clinical trials, and related activities necessary to satisfy FDA requirements or similar requirements of state, local, and foreign regulatory agencies. At such time as ABI undertakes to commercialize any of its products, all necessary preclinical testing, clinical trials, data review, and approval steps will be judiciously executed to insure that the product satisfies all regulatory requirements at all levels.

505(b)(2)

ABI has historically followed and will continue to follow the traditional approval process for New Drugs as set out in Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act. If an alternative path to FDA approval for new or improved formulations of previously approved products is scientifically and economically feasible and beneficial to the Company and the public, ABI may choose to follow this alternative path as established by section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. This section of the Act permits the applicant to rely on certain preclinical or clinical studies conducted for an approved product as some of the information required for approval and for which the applicant has not obtained a right of reference. The process of approval under 505(b)(2) will be followed as judiciously as 505(b)(1) or any regulation.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. ABI may choose to seek approval for a product satisfying the definition of and Orphan Drug if that product can be used to treat such an indication. Orphan drug designation does not convey any advantage in or shorten the duration or rigidity of the regulatory review and approval process.

Foreign Regulation

In addition to regulations in the United States, a variety of foreign regulations govern clinical trials and commercial sales and distribution of products in foreign countries. Whether or not the Company obtains FDA approval for a product, the Company must obtain approval of a product by the comparable regulatory authorities of foreign countries before the Company can commence clinical trials or market the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

The policies of the FDA and foreign regulatory authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of investigational drugs or approval of new diseases for existing products and could also increase the cost of regulatory compliance. It is not possible to predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

Research and Development

During the years ended December 31, 2013 and 2012, the Company incurred research and development expenses of $132,962 and $199,599, respectively. An integral part of the reorganization process is to refocus and realign research and development activities. If a satisfactory replacement source of interferon is located and will serve the goals of the Company, adequate funds to conduct research and development will be allocated. These research activities could include revitalization of the Company’s core technology. Additionally, any number of other attractive technologies might be investigated.

Employees

The Company has 3 full-time and 1 part-time employees based in Amarillo, Texas. Of these employees, 2 are executive officers and 1 works in administrative and research and development capacities. The fourth employee is the Company’s general counsel. Consultants in business and research development are also engaged as needed.

ITEM 2. DESCRIPTION OF PROPERTY.

Our executive and administrative offices are located at 4134 Business Park Drive, Amarillo, Texas in a 1,800 square-foot facility rented by us. The lease expires on June 30, 2014 and our monthly rent is $1,045 per month. We believe that the facilities are well maintained and generally suitable and adequate for our current and projected operating needs.

ITEM 3. LEGAL PROCEEDINGS.

Chapter 11 Reorganization Risks.

We filed for reorganization under Chapter 11 of the Bankruptcy Code on October 31, 2013 and are subject to the risks and uncertainties associated with the Chapter 11 Cases.

For the duration of our Chapter 11 Case, our operations, including our ability to execute our business plan, are subject to the risks and uncertainties associated with bankruptcy. Risks and uncertainties associated with our Chapter 11 Case includes the following:

•

our creditors or other third parties may take actions or make decisions that are inconsistent with and detrimental to the plans we believe to be in the best interests of the Company;

•

we may be unable to obtain court approval with respect to certain matters in the Chapter 11 Case from time to time;

•

the court may not agree with our objections to positions taken by other parties;

•

we may not be able to confirm and consummate a Chapter 11 plan of reorganization or may be delayed in doing so;

•

we may not be able to obtain and maintain normal credit terms with vendors, strategic partners and service providers;

•

we may not be able to continue to invest in our products and services, which could hurt our competitiveness;

•

we may not be able to enter into or maintain contracts that are critical to our operations at competitive rates and terms, if at all;

•

we may be exposed to risks associated with third parties seeking and obtaining court approval to (i) terminate or shorten our exclusivity period to propose and confirm a plan of reorganization, (ii) appoint a Chapter 11 trustee or (iii) convert the cases to Chapter 7 liquidation cases; and

These risks and uncertainties could affect our business and operations in various ways. For example, negative events, the positions we take in court, or publicity associated with our Chapter 11 Case could adversely affect our relationships with vendors and partners which in turn could adversely affect our operations and financial condition, particularly if the Chapter 11 Case is protracted. Because of the risks and uncertainties associated with our Chapter 11 Case, the ultimate impact of events that occur during these proceedings will have on our business, financial condition and results of operations cannot be accurately predicted or quantified. If any one or more of these risks materializes, it could affect our ability to continue as a going concern.

Operating under Chapter 11 may restrict our ability to pursue our business strategies.

Under Chapter 11, transactions outside the ordinary course of business will be subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events or take advantage of certain opportunities. We must obtain Bankruptcy Court approval to, among other things:

•

engage in certain transactions with our vendors;

•

buy or sell assets outside the ordinary course of business;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

•

borrow for our operations, investments or other capital needs or to engage in other business activities that would be in our interest.

Chapter 11 Bankruptcy Actions by Date

The following table discloses the major events of the case since filing the voluntary petition on October 31, 2013. The entire series of events and filings can be viewed in their entirety by going to the following website: www.upshotservices.com/amarillobiosciences#

Date	Notes	Action or Document Name
October 31, 2013		Filed Voluntary Petition for Reorganization Chapter 11
November 1, 2013	SEC Form 8K	Public Disclosure of filing Chapter 11 Petition
November 1, 2013		Applied to Hire Underwood Law Firm as Counsel; Roger S. Cox
November 6, 2013		Filed motions to Pay: Critical Vendors, Personnel, Utilities & Insurance; Orders to Pay were received in due course
November 12, 2013		Filed SEC 10Q for 3rd Quarter of 2013; Additional Chapter 11 Disclosures included with 10Q
November 21, 2013		Filed Summary of Schedules and Statement of Financial Affairs
November 21, 2013		Filed List of Equity Security Holders
December 6, 2013		Motion to Authorize Post-Petition Financing Facility; Requested Expedited Hearing for Post-Petition Financing Facility
December 8, 2013		Order Granted Approving Retention and Employment of Counsel for Debtor in Possession (Underwood Law Firm; Roger Cox, Lead)
December 10, 2013		Creditors Hearing (341 Meeting) No Creditors Committee Formed
December 20, 2013		Interim Order Granting Post-Petition Financing Facility
December 23, 2013		Order Entered Establishing Interim Compensation and Reimbursement Procedure for Ordinary Course Professionals; Includes Barnes & Thornburg, LLP – Special Counsel for Intellectual Property; LBB & Associates, Ltd., LLC – Auditors and SEC Accountants; Johnson & Sheldon, PC. – Tax Accountants and Advisors
December 30, 2013		Retainer Distribution Authorized for October 31 through November 27, 2013
December 31, 2013		Debtor Filed Motion to Assume Unexpired Lease of Non-Residential Real Property – Corporate Office
January 15, 2014		Final Order Filed Granting Motion to Authorize Post-Petition Financing Facility
January 17, 2014		Filed Amended Summary of Schedules
January 17, 2014		Filed Motion to Extend Exclusivity Period (to and including April 29, 2014) Motion Subsequently Granted on or About February 18, 2014
February 12, 2014		Motion Filed for Immediate Entry of Order Establishing Procedures for Certain Transfers of Debtor’s Common Stock
February 12, 2014		Interim Order Entered Establishing Procedures for Certain Transfers of Debtor’s Common Stock

Date

Notes

Action or Document Name

February 13, 2014	SEC Form 8K	On February 13, 2014, the Bankruptcy Court entered an Interim Order Establishing Procedures for Certain Transfers of Debtor’s Common Stock (see http://www.upshotservices.com/amarillobiosciences go to Court Docket then Docket Number 96). The Interim Order remains in effect until further order of the Bankruptcy Court. The Interim Order has been set for hearing at 10:00 am, February 27, 2014, at which time it may be extended, modified, or terminated. The Interim Order affects only shareholders owning beneficially, or expecting to acquire, 3,285,000 or more shares of the Company’s Common Stock (i.e., approximately 4.5%).
February 18, 2014		An order was entered granting the Debtor’s motion to assume the unexpired lease of the non-residential real property which is the ABI Corporate office.
February 18, 2014		The order was filed noticing the entry of an order on February 14, 2014, extending the exclusivity period of the debtor
February 19, 2014		Motion was filed requesting the second distribution of retainer for the Law firm.
February 20, 2014		Amended Schedule F with Summary Tables was filed; Schedule F is the list of unsecured non-priority creditors
February 21, 2014		Debtor filed Plan of Reorganization
February 21, 2014		Debtor filed Disclosure Statement for Plan of Reorganization
February 21, 2014		Debtor filed motion for Approval of Disclosure Statement
February 21, 2014		Debtor filed a Notice of Filing of Disclosure Statement and Notice of Hearing to be Held on March 27, 2014
February 21, 2014		The Company filed its Plan of Reorganization and Disclosure Statement under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Northern District of Texas, Amarillo Division, case No. 13-20393-11, on February 21, 2014
February 24, 2014		Debtor filed a motion for approval of the Disclosure Statement
February 26, 2014		Received Notice of Shareholder Status (form) resulting from entry of the order establishing procedures for certain transfers of Debtor’s common stock; Document indicated that Peter Quaisser may be a Substantial Shareholder based on the definition contained in the original motion.
February 26, 2014		Received Notice of “Substantial Shareholder” Status for Yasushi Chikagami and Akie Chikagami
February 26, 2014		Received Notice of “Substantial Shareholder” Status for Paul Tibbits
March 3, 2014		Debtor filed Notice of Receipt of Notice of Intent to Acquire Stock from Sue Burickson; the Notice was originally received on February 27, 2014
March 5, 2014		Debtor filed Objection to the following Proofs of Claim: No. 13 by Patricia A. Folkerth; No. 4 by Luay Ashoo; No. 5 by Sue Burickson; No. 6 by Dr. Irving Slesar; No. 7 by Abraham Burickson; No 8 by Patricia M. Calcedo; No. 10 by Paul Spitz;

Date

Notes

Action or Document Name

March 5, 2014		The following Notices of Hearing for April 10, 2014 were filed: Debtor’s Objection to Proof of Claim for – No. 13, Patricia A. Folkerth; No. 4 by Luay Ashoo; No. 5 by Sue Burickson; No. 6 by Dr. Irving Slesar; No. 7 by Abraham Burickson; No 8 by Patricia M. Calcedo; No. 10 by Paul Spitz;
March 6, 2014		Filing of Second Interim Order (Entered March 5, 2014) Establishing Procedures for Certain Transfers of Debtor’s Common Stock
March 6, 2014		The U.S. Trustee for Region 6 appointed the following equity holders to the Official Committee of Equity Holders: Sue Burickson, William R. Gooch, M.D., and Irving Slesar, M.D.
March 2014		Debtor filed Objection to the following Proofs of Claim: No. 15 by Kay Bergmann March 6, 2014; No. 11 Jody L. Hagemann March 10, 2014; No. 18 Trisha A Brown March 13 2014;
March 2014		The following Notices of Hearing for April 10, 2014 were filed: Debtor’s Objection to Proof of Claim for – No. 15 by Kay Bergmann March 6, 2014; No. 11 Jody L. Hagemann March 10, 2014; No. 18 Trisha A Brown March 13 2014;
March 7, 2014		Debtor filed Motion to Extend Proof of Claim Filing deadline for Bio-Stasis International, Inc.
March 11, 2014		Order (entered March 10, 2014) Granting Debtor’s Motion to Extend Proof of Claim Filing Deadline for Bio-Stasis International, Inc
March 11, 2014		A notice of a hearing for April 10, 2014 was filed; the items included: The Notice of Intent to Purchase, Acquire, or Accumulate Amarillo Biosciences, Inc. Common Stock submitted by Sue Burickson (Doc. No. 122) and the Debtor’s Objection to Notice of Intent to Purchase, Acquire, or Accumulate Amarillo Biosciences, Inc. Common Stock Filed by Sue Burickson (Doc. No. 127)
March 19, 2014		Debtor filed an amendment to the Statement of Financial Affairs; the Notice of the amendment was properly filed
March 20, 2014		Debtor filed a Certificate of No Objection in reference to the motion for the second distribution of retainer
March 21 2014		An order was entered approving the second distribution of retainer to the Law firm for the period November 28, 2013 through January 31, 2014
		Monthly Operating Reports Were Filed for November, 2013; December, 2013; January, 2014, and February, 2014
March 27, 2014		Filing and disclosure of Notice of Disclosure Statement Revisions
March 27, 2014		Filing and disclosure of Amended Disclosure Statement for Plan of Reorganization
March 27, 2014		Hearing conducted to approve Debtor’s Disclosure Statement
March 28, 2014		Order entered approving Debtor’s Disclosure Statement, Notice of Confirmation Hearing, and Setting date for voting and filing objections to confirmation of Debtor’s Plan

Date

Notes

Action or Document Name

April 1, 2014		Filed, published, noticed parties of interest, and disclosed Notice of Hearing of Debtor’s Plan of Reorganization
April 2, 2014	SEC Form 8K	The Court held a hearing to consider approval of the Company’s proposed Disclosure Statement on March 27, 2014. The Court found that the Disclosure Statement contains “adequate information,” and on March 28 entered an ORDER APPROVING DEBTOR’S DISCLOSURE STATEMENT, NOTICE OF CONFIRMATION HEARING, AND SETTING DATE FOR VOTING AND FILING OBJECTIONS TO CONFIRMATION OF DEBTOR’S PLAN. The Debtor’s Plan of Reorganization, Disclosure Statement, the aforesaid Order, and all other court filings can be viewed online (see http://www.upshotservices.com/amarillobiosciences under “court docket”). The hearing on confirmation of Debtor’s Plan of Reorganization was set for May 20, 2014 at 1:00 p.m.
April 10, 2014	SEC Form 8K	Disclosed Notice of Hearing on Confirmation of Debtor’s Plan of Reorganization

The Plan of Reorganization was filed with the Bankruptcy Court in the Northern District of Texas on February 21, 2014 along with the Disclosure Statement. The Disclosure Statement was amended and filed as the Amended Disclosure Statement on March 27, 2014. The Amended Disclosure Statement was approved by the Court and an Order of Approval entered on March 28, 2014. A Confirmation Hearing for the Plan of Reorganization was scheduled for May 20, 2014. The proper noticing procedures were executed and all necessary notices and ancillary materials were sent to all of the proper parties of interest in the case on or before the deadline for notification of parties, April 10, 2014.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

AMARILLO DIVISION

IN RE:	§
	§
Amarillo Biosciences, Inc.,	§	Case No. 13-20393-RLJ-11
	§
Debtor.	§

DEBTOR’S PLAN OF REORGANIZATION

AMARILLO BIOSCIENCES, INC., Debtor and Debtor in Possession (“ABI” or “Debtor”), submits this Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code:

ARTICLE 1

Definitions

1.01. ABI: Amarillo Biosciences, Inc., the Debtor and Debtor in Possession in this case.

1.02. Administrative Expense Claims: Claims that arise from those expenses described in Section 503 of the Bankruptcy Code.

1.03. Affiliate: For purposes of the Plan, “Affiliate” has the meaning found in Section 101 of the Bankruptcy Code.

unliquidated as to amount; and in either case, a claim: (i) to which no objection has been timely filed by any party-in-interest, or (ii) that has been allowed by order of the Court that has become final and is no longer subject to appeal.

1.05. Allowed Unsecured Claim of Yang: The unsecured claim of Yang arising from Yang’s funding of the continuing operating expenses of Debtor pre-petition, accrued and unpaid obligations of Debtor under the Pre-Petition Credit Documents, and from funding provided pursuant to the Post-Petition Loan Agreement, but excluding the amount of the Allowed Secured Claim of Yang. The Class Two Claim of Yang.1

1.06. Allowed Priority Claim: An Allowed Claim for which the holder asserts and is determined to be entitled to priority under Section 507, et seq., of the Bankruptcy Code in an amount allowed by final order of the Court. Administrative Expense Claims or Class One Claims.

1.07. Allowed Secured Claim of Yang: An Allowed Secured Claim against Debtor held by Yang, secured by substantially all of Debtor’s assets, in particular its tangible and intangible personal property. This claim relates to the secured portion of Debtor’s obligations to Yang under the Pre-Petition Credit Documents. The Class Three Claim of Yang.

1.08. Allowed Unsecured Claims of General Unsecured Creditors: An unsecured Allowed Claim against Debtor that is not an Allowed Priority Claim or an Allowed Unsecured Claim of a creditor in Class Two or Class Five. The Class Four Claims.

1.09. Applicable Federal Rate: The applicable federal rate of interest as determined pursuant to Section 1274(d) of the Internal Revenue Code (“IRC”).

1.010. Bankruptcy Code: The United States Bankruptcy Code as codified at 11 U.S.C. § 101, et seq. Text references to statutory code sections refer to the Bankruptcy Code unless otherwise indicated.

1.011. Bankruptcy Court: United States Bankruptcy Court for the Northern District of Texas, Amarillo Division (or a successor court having bankruptcy jurisdiction).

1.012. Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure, and where appropriate, the applicable local rules of the Bankruptcy Court.

1.013. Bar Date: The deadline fixed by the Court as the last day for filing a proof of claim. As of the date of this Plan, that date was set as March 10, 2014 for non-governmental claimants.

1.014. Ballot Deadline: The deadline for submitting ballots to vote to accept or reject this Plan. The Ballot Deadline will be set in an order of the Bankruptcy Court upon or after approval of the Disclosure Statement.2

1.015. Cash Contribution: Funds to be paid by Yang upon the Effective Date to Debtor to be used by Debtor to consummate this Plan, including the distributions to the Unsecured Creditors as set forth in the Plan. The Cash Contribution is in the amount of $250,000.00.

1.016. Causes of Action: Causes of action held by Debtor or the Estate against third parties, including Chapter Five Causes of Action.

1.017. Chapter Five Causes of Action. Any claim or action arising under Section 510, 544 – 551 (inclusive), or 553, or otherwise arising under the Bankruptcy Code.

1 This does not include claims, if any, that Yang or any Affiliate of Yang may acquire or have acquired from a third party; the Allowed Unsecured Claim of Yang and the Allowed Secured Claim of Yang is limited to funds actually advanced by Yang to ABI.

2 It is anticipated that the order approving a disclosure statement will include a specific date that will serve as the Ballot Deadline.

1.018. Common Equity: All issued and outstanding common stock in or to ABI as of October 31, 2013 (73,291,008 issued and outstanding shares).

1.019. Common Equity Security Holders: Holders of any common stock issued pre-petition by Debtor. The Class Eight Interest Holders.

1.020. Confirmation: Approval of the Plan by the Court, which shall occur the date upon which the Confirmation Order is entered.

1.021. Confirmation Order: The order of the Court confirming the Plan of Reorganization.

1.022. Consummation: The time when the last act required under the Plan has been completed.

1.023. Debtor: Amarillo Biosciences, Inc. (“ABI”), a Texas corporation whose principal office is in Amarillo, Texas, the Debtor and Debtor-in-Possession (“DIP”) in this case.

1.024. Dollars: United States dollars. Any reference to currency or monetary values in this Plan is to United States dollars.

1.025. Effective Date: Twenty-eight (28) days following the entry of the Confirmation Order or such other date as agreed upon by Debtor and Yang following Confirmation.

1.026. Equity Security Holders: The Common Equity Security Holders and the Preferred Equity Security Holders, whenever referenced collectively.

1.027. FINRA: Financial Industry Regulatory Authority; www.finra.org.

1.028. General Unsecured Creditors: Those creditors who hold allowed unsecured claims, other than (and excluding any claim of) Yang.

1.029. Governmental Effective Date: Thirty days following the later of the governmental bar date or the Effective Date.

1.030. Hayashibara: Hayashibara Co., Ltd., of Okayama, Japan, now the purported owner and holder of the HBL Notes.

1.031. HBL: Hayashibara Biochemical Laboratories, Inc., the original holder of the HBL Notes.

1.032. HBL Notes: Two promissory notes, each in the original principal amount of one million each ($1,000,000.00), originally payable to HBL, now purportedly held by Hayashibara.

1.033. IRC: The United States Internal Revenue Code of 1954, as amended, as codified at Title 26, United States Code.

1.034. Insider: Insider is given the meaning found in Section 101(31) of the Bankruptcy Code.

1.035. Nagase: Nagase & Co., Ltd. On information and belief, Nagase is an affiliate of Nagase America Corp., and it is the owner or parent company of Hayashibara.

1.036. New ABI: ABI (as of the filing of this Plan, the Debtor) on and after: (i) the Effective Date and (ii) the closing of the reverse stock split and the issuance of new common stock under this Plan.

1.037. Petition Date: The date on which Debtor filed its petition for relief, October 31, 2013.

1.038. Plan: This Plan of Reorganization, including the addendum, attached to and incorporated in the Plan.

1.039. Post-Confirmation Forbearance Agreement: An agreement between Yang and Debtor providing for forbearance on collection of Yang’s security interest in the Yang Collateral for a minimum period of twelve months after the Effective Date, consistent with the terms of this Plan.

1.040. Post-Petition Financing Claim: The claim of Yang arising from Yang’s funding of the continuing operating expenses of Debtor, pursuant to the Post-Petition Loan Agreement, part of the Allowed Unsecured Claim of Yang.

1.041. Post-Petition Loan Agreement: That certain Loan Agreement entered into by and between Debtor and Yang on December 20, 2013 (effective as of the Petition Date), and approved by the Court in an interim order on December 20, 2013 (Doc. No. 66) and in a final order entered January 15, 2014 (Doc. No. 86).

1.042. Preferred Equity: All issued and outstanding shares of Class 2010-A preferred stock in ABI, being 3,262 shares that are believed held by Tibbits.

1.043. Preferred Equity Security Holders: Holders of any equity securities that have preference rights over general equity securities. The only known Preferred Equity Security Holder is Paul Tibbits, who is believed to hold 3,262 shares out of 10,000 authorized Class 2010-A preferred stock.

1.044. Pre-Petition Credit Documents: The July 19, 2013 Promissory Note from ABI to Yang (renewal of prior debt); the July 25, 2013 Promissory Note from ABI to Yang; the Security Agreement dated July 25, 2013, between ABI and Yang; any other pre-petition documents evidencing the pre-petition claim of Yang.

1.045. Retained Assets: The assets of Debtor that will revest in Debtor on the Effective Date, subject to the Allowed Secured Claim of Yang. The Retained Assets will be and include all assets of Debtor’s estate.

1.046. SEC: Securities and Exchange Commission - United States of America.

1.047. Secured Claims: Allowed secured claims of any creditor whose claim is secured by a valid, perfected security interest in pre-petition property of Debtor, other than Yang. The Class Six Claims.

1.048. Tibbits: Paul Tibbits, and to the extent she has any direct or marital property interest, his spouse, Marian Tibbits.

1.049. Unclassified Claims: Claims that pursuant to Section 1123(a)(1) of the Bankruptcy Code are not classified and that includes collectively all claims accorded priority pursuant to Sections 507(a)(1), 507(a)(2), and 507(a)(8) of the Code.

1.050. Unsecured Creditors: All Unsecured Creditors, other than Yang, holding unsecured claims that are not Allowed Priority Claims; generally, the Class Four and Class Five Claimants.

1.051. Yang: The Yang Group, Taiwan, is an association, the principal of which is Patrick Ng of Canada. Yang is the creditor holding the Class Two and Class Three Claims and the “secured party” under the Yang Financing Statement.

1.052. Yang Collateral: The assets pledged by Debtor in accordance with the Pre-Petition Credit Documents, including any proceeds, which currently secure the Class Three Secured Claim of Yang.

ARTICLE 2

Classification of Claims

Administrative Expense Claims that are accorded priority pursuant to Section 507(a)(1) and Allowed Priority Claims pursuant to Sections 507(a)(2) and 507(a)(8) are not separately classified.

2.01.

Class One: Allowed Priority Claims under Section 507(a)(3) to (a)(7) of the Bankruptcy Code.

2.02.

Class Two: Allowed Unsecured Claim of Yang.

2.03.

Class Three: Allowed Secured Claim of Yang.

2.04.

Class Four: Allowed Unsecured Claims of General Unsecured Creditors.

2.05.

Class Five: Administrative Convenience Claims.

2.06.

Class Six: Allowed Secured Claims, other than the Secured Claim of Yang.

2.07.

Class Seven: The interests of the Preferred Equity Security Holders.

2.08.

Class Eight: The interests of the Common Equity Security Holders.

2.09.

Class Nine: The interests of the holders of Warrants and Options.

ARTICLE 3

Treatment of Claims and Interests

Except as expressly provided in this Plan, all classes of claims are impaired to some extent under the Plan.

3.01. Unclassified Administrative Claims. Administrative Expense Claims that are accorded priority pursuant to Section 507(a)(1) and Allowed Claims under 507(a)(2) are not impaired and shall receive cash in the full amount of each such claim on the later of: (i) the Effective Date, or (ii) ten days after such claim becomes an Allowed Claim, unless the holder of the claim agrees to less favorable treatment. It is not believed that there are any such claims in this category other than administrative claims owing Debtor’s counsel and Debtor’s other retained professionals, which claims will be paid subject to Court approval from the post-petition financing provided by Yang.

3.02. Unclassified Tax Claims. Allowed Priority Claims pursuant to Section 507(a)(8) are not impaired and shall be paid as follows:

1. Claims that are equal to or less than $1,000 in amount will be paid in full on or within sixty (60) days after the Governmental Effective Date;

2. Claims that are greater than $1,000 in amount will be paid, at the option of Debtor: (a) in full on or within sixty (60) days after the Governmental Effective Date, or (b) by deferred annual cash payments over the next four (4) years. Each of the deferred annual payments will be twenty-five percent (25%) of the Allowed Claim amount, plus interest as determined pursuant to 11 U.S.C. § 511, with the first payment due one (1) year after the Governmental Effective Date. Debtor expressly reserves the right to prepay any deferred Unclassified Tax Claim; and

3. Except as may otherwise be agreed to by the parties, within sixty (60) days after the Governmental Effective Date, New ABI shall file its objection to the allowance of a claim pursuant to Section 507(a)(8) that is disputed. Ten (10) days after the entry of a final order allowing the amount, if any, of such claim, the allowed portion of all such disputed claims shall be paid consistent with the provisions above. It is not believed that there are any such unpaid claims in this category.

3.03. Class One. Allowed Priority Claims under Section 507(a)(3) to (a)(7) of the Bankruptcy Code shall be paid in cash in full on the Effective Date of the Plan, unless otherwise agreed by the applicable claimant. Class One is not impaired under the Plan.

3.04 Class Two. The Allowed Unsecured Claim of Yang is deemed allowed in an amount to be determined on the Effective Date. This amount consists of:

a.	$1,256,792.89 principal plus accrued interest, advanced by Yang pursuant to the Pre-Petition Credit Documents;

b.	Plus all amounts advanced as of the Effective Date by Yang to Debtor, including that evidenced by the Post-Petition Loan Agreement;

c.	Plus any amount required to be paid by Yang to pay Administrative Expense Claims;

d.	Less the deemed value of Yang’s Secured Class Three Claim in the amount of $150,000.00.3

Yang shall receive 80% of the equity interest in New ABI in exchange for extinguishment of its Class Two Claim against Debtor and payment of the Cash Contribution. Upon issuance of 80% of the equity interest in New ABI to Yang, Debtor will have no further obligation for payment of the Class Two Claim. Class Two is impaired under the Plan.

3.05 Class Three. On the Effective Date, the Class Three Secured Claim of Yang shall be deemed allowed in the amount of $150,000.00, secured by the same assets that secured Yang’s pre-petition secured claim (See Texas Financing Statement No. 13-0029795076). This claim shall bear interest at the Applicable Federal Rate, and be fully amortized and paid as follows: five (5) consecutive equal annual installments of combined principal and interest, beginning September 1, 2014, and continuing on the same date of each succeeding year until September 1, 2018, when the obligation is due and payable in full.

3.06. Class Four. Each of the General Unsecured Creditors holding an Allowed Claim (and who has not elected Administrative Convenience treatment under Class Five) will be paid an amount equal to six percent (6%) of its Allowed Claim no later than ninety (90) days after the later of the Effective Date or final resolution of all claim objections. Objections to any Class Four Claims must be filed within twenty-eight (28) days after the Effective Date. Upon distribution of the amount set forth in this paragraph, the remaining balance of the Class Four Claims will be discharged with respect to Debtor, and Debtor will have no further obligation for payments to Class Four Claimants. A claimant’s negotiation of any check or instrument evidencing this distribution will be deemed to be in full and complete satisfaction of all claims of that claimant against the Debtor or any Affiliate of the Debtor. Class Four is impaired.

3.07. Class Five (Administrative Convenience). Any holder of a Class Four Claim may elect to accept Administrative Convenience treatment, as follows: any holder of an allowed Class Four Claim who timely elects Administrative Convenience treatment under this Class Five will be paid the lesser of: (i) its Allowed Claim amount (without interest) or (ii) $500.00 within twenty-eight (28) days after the Effective Date.

To elect Administrative Convenience treatment, a claimant must elect such treatment in writing on or before the Ballot Deadline.4

A claimant’s negotiation of any check or instrument evidencing this distribution will be deemed to be in full and complete satisfaction of all claims of that claimant against the Debtor or any Affiliate of the Debtor. Class Five is impaired.

3.08. Class Six. Any Class Six Secured Claims will be paid by New ABI according to the terms of the existing loan and security documents. Each secured claimant will retain its respective security interests in the collateral securing its claim. To the extent a Class Six Claimant is under-secured, (a) it will have no

3 The net amount of this Class Two Claim is not less than $1,216,765.12 as of the date this Plan is filed. It may increase in amount based on post-petition advances from Yang to ABI.

4 The form and mechanism for exercising this election will be set forth on the Class Four Ballot form.

recourse for such deficiency against New ABI, and (b) it may seek to have its deficiency treated as a Class Four Allowed Unsecured Claim, subject to objections of New ABI. To the Debtor’s best knowledge and belief, no such claims exist in this class. Class Six is impaired under the Plan.

3.09. Class Seven (Preferred Equity). The interests of the Preferred Equity Security Holders of ABI will be canceled on the Effective Date, which cancellation shall be deemed to occur simultaneously with the issuance of new stock to Yang as described in the Plan; provided, however, that the Preferred Equity Security Holders will be deemed to have been issued 3,262,000 shares of Common Equity immediately prior to the reverse split of the Common Equity as contemplated under Class Eight.5 This is more fully described in the Addendum to this Plan. Upon issuance of the new (common) stock in New ABI to the Preferred Equity Security Holders, the remaining balance of any Class Seven Claims or interests will be discharged, and Debtor will have no further obligation for payments to Class Seven Claimants or interests.6 Class Seven is impaired under the Plan.

3.010. Class Eight (Common Equity). The interests and claims of the Common Equity Security Holders of ABI will be canceled on the Effective Date, which cancellation shall be deemed to occur simultaneously with the issuance of new stock in New ABI to Yang and the implementation of a reverse stock split for all Common Equity Security Holders7 as described in the Addendum to this Plan. Upon issuance of the new stock in New ABI, and implementation of the reverse stock split, Debtor will have no further obligation for payments or other consideration to Class Eight Interests. Class Eight is impaired under the Plan, and it is deemed to have rejected the Plan.

3.011. Class Nine (Warrants and Options). The interests and claims of the holders of any warrants or options to purchase common stock in ABI will be treated as follows: warrants and options will be converted by a negative factor of 19 (consistent with the 1:19 reverse stock split in Class Eight) so that each 19 warrants or options would be reduced to one (1), with all other conversion or exercise rights to remain in effect, as to the newly issued stock in New ABI, subject, however, to a proportionate conversion in the per-share purchase price, as more specifically set forth in the Plan Addendum. The specific conversion affecting known warrants and options holders is set forth in the Plan Addendum. Class Nine is impaired under the Plan, and it is deemed to have rejected the Plan.

3.012. Cancellation and Issuance of Stock. The deemed conversion of the Preferred Equity, the reverse split of the Common Equity, and issuance of stock in New ABI as contemplated by this Plan are set forth and more fully described in Article 4 and in the Plan Addendum.

ARTICLE 4

Implementation of the Plan

4.01. Except as otherwise provided in the Plan, New ABI will remain in possession and ownership of all of the assets of Debtor (i.e., all assets of the estate will vest in New ABI), without any liquidation of assets being contemplated by this Plan, and it will continue to maintain and operate Debtor’s assets and affairs, post-confirmation. After the Effective Date, additional capitalization and financing of New ABI may be made on an as-needed basis by Yang. All liens and security interests of Yang in the Yang Collateral and the Retained Assets will be preserved and remain in full force and effect. New ABI will take such actions as required by Yang to enforce, preserve, and otherwise maintain such liens and encumbrances, including without limitation executing any new documents, financing statements, or other instruments. Documentation acceptable to Debtor and Yang will be executed and delivered to implement the Plan.

5 This deemed issuance is in addition to any existing common equity ownership – see the Plan Addendum.

6 Accrued, unpaid dividends, if any, that were due and unpaid as of the Petition Date will be treated under Class Four.

7 Including the deemed converted interest of the Preferred Equity Security Holders.

4.02. Prior to the Effective Date, Debtor will estimate the amount of Administrative Expense Claims to be paid and pay such claims.8 If Debtor has insufficient funds to pay such claims, then Yang will pay, or make arrangements to pay, such estimated claims pursuant to this Plan. (Any such items paid by Yang will become part of the Financing Claim of Yang.)

4.03. On or before the Effective Date, Debtor will arrange post-Confirmation financing with Yang sufficient to fund payments necessary to pay all Class One Claims, if any.

4.04. On or before the Effective Date, Yang shall pay into Debtor the Cash Contribution, to be utilized consistent with this Plan.

4.05.

On the Effective Date, Debtor shall become “New ABI” for purposes of this Plan and shall:

Pay the claims amounts, if any, due for Unclassified Claims or Class One Claims pursuant to the terms of the Plan;

Grant and convey a security interest in the Retained Assets and the Yang Collateral to Yang for its Class Three Claim; and

Cancel all of the stock of the Preferred Equity Security Holders (subject to the conversion to common equity described in the Plan Addendum), implement a reverse stock split for all Common Equity Security Holders and issue new stock in New ABI as stated in this Plan. All stock certificates of the Preferred Equity Security Holders will be deemed canceled, and the Common Equity Security Holders will undergo the reverse stock split upon the extinguishment of the Allowed Unsecured Claim of Yang and issuance of the new stock in New ABI under this Plan. Debtor will issue new New ABI stock to Yang and the Preferred Equity Security Holders and implement the reverse stock split for all Common Equity Security Holders on the Effective Date in exchange for extinguishment of the Allowed Unsecured Claim of Yang, Yang’s payment of the Cash Contribution, and otherwise in satisfaction of the Class Seven and Eight interests and claims, respectively.9

4.06. Upon becoming the owner of the stock in New ABI, Yang, as the holder of 80% of the issued and outstanding common stock in New ABI, may immediately elect or appoint new directors, who may immediately appoint new officers.

4.07. Within twenty-eight (28) days after the Effective Date, New ABI shall disburse the Administrative Convenience payments to those creditors with allowed claims electing treatment under Class Five (Administrative Convenience).

4.08. Subject to the claims objection process contemplated by the Plan, ABI will disburse cash necessary to treat the holders of Allowed Claims as provided in Article 3 of the Plan.

ARTICLE 5

Executory Contracts

5.01. Executory Contracts and Unexpired Leases. All contracts of insurance and all of the leases entered into by Debtor, as lessee, in the ordinary course of business and that remain as property of Debtor as of the Effective Date shall be deemed assumed by, and assigned to, New ABI as of the Effective Date (the “Assumed Leases”). In addition to the Assumed Leases, the additional leases and executory contracts set forth herein shall be assumed by Debtor, and deemed assigned to New ABI, as of the Effective Date. Such additional leases and executory contracts are: None.

8 Subject to approval of fees and expenses incurred by professional persons.

9 See the Plan Addendum for more detailed treatment of Classes Seven, Eight, and Nine.

Any lease or executory contract that is not an Assumed Lease or that is not listed in this Section shall be deemed rejected as of the Effective Date unless a motion to assume such lease or executory contract is filed prior to Confirmation. The Debtor may implement a procedure for estimating claims for voting purposes, including claims, if any, from contract rejection.

5.02. Allowance and Payment of Cure Sum Claims. Any entity whose executory contract or lease is assumed by New ABI pursuant to the Plan must file its cure sum claim10 with the Court within thirty (30) days after the Effective Date (“Cure Sum Claim Bar Date”), or the right to assert such cure sum claim shall be deemed forever waived and barred.

Except as may otherwise be agreed to by the parties, within twenty-one (21) days after the Cure Sum Claim Bar Date, New ABI will pay all undisputed cure sum claims or file its objection to the Allowance of any cure sum claims that are disputed.

All disputed cure sum claims will be paid within ten (10) days after entry of a final order determining the amount of such cure sum claim; provided, however, that New ABI may, in its sole discretion, reject any previously assumed contract or lease to which it has interposed an objection to the allowance of the cure sum claim, within two (2) business days after the entry of a final order allowing the cure sum claim.

5.03. Bar Date for Filing Proofs of Claim Relating to Rejected Executory Contracts and Leases. If the rejection of an executory contract or unexpired lease gives rise to a claim, that claim will be forever disallowed, barred, and will be unenforceable against Reorganized Debtor, unless that claim is filed within thirty (30) days after the latter of the Effective Date or the date on which New ABI elects to reject a contract or lease otherwise previously assumed by the Plan.

ARTICLE 6

Releases and Injunctions

6.01. Discharge of Debtor. Except as otherwise provided in the Plan or the Confirmation Order, the rights afforded under the Plan and the treatment of all claims, and interests of Equity Security Holders under the Plan will be in exchange for and in complete satisfaction, discharge, release, and cancellation of all claims against the Debtor and the interests of the Equity Security Holders of any nature whatsoever, including, without limitation, any interest accrued on any claim from and after the Petition Date, against Debtor, New ABI, or any of their respective assets and properties, including subsidiaries of New ABI. (Consistent with the treatment set forth herein with respect to the Class Three Allowed Secured Claim of Yang, that secured claim is not discharged and will be paid according to this Plan, as it may be amended, and all liens and security interests of Yang in and to the Yang Collateral and Retained Assets shall be preserved and remain in full force and effect.) Except as otherwise provided in the Plan or the Confirmation Order, the Confirmation shall, as of the Effective Date:

1. Discharge Debtor and New ABI from all claims, demands, liabilities, other debts, or interests that arose on or before the Effective Date, and all debts of the kind specified in Sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, whether or not:

a. A proof of claim based on such debt is filed or deemed filed pursuant to Section 501 of the Bankruptcy Code;

b. Such claim is allowed pursuant to Section 502 of the Bankruptcy Code; or

c. The holder of a claim has accepted the Plan.

10 In other words, the amount of money claimed as necessary for Debtor or the Reorganized Debtor to cure a past default.

2. Terminate and cancel all rights and interests of the Preferred Equity Security Holders and the Common Equity Security Holders;11 and

3. Preclude all persons from asserting against New ABI, its successors, Affiliates, or its assets or properties, any other or further claim based upon any act or omission, transaction, or other activity of any kind or nature that occurred prior to the Effective Date.

6.02. Injunction Related to the Discharge. Except as otherwise provided in the Plan or the Confirmation Order, all persons and entities, including the Equity Security Holders, that have held, currently hold, or may hold equity security interests, claims, or other debts or liabilities against Debtor or New ABI that are discharged pursuant to the terms of the Plan are PERMANENTLY ENJOINED, on and after the Effective Date, from taking any of the following actions on account of any such claims, debts, liabilities, or equity security interests:

1. Commencing or continuing in any manner any action or other proceeding of any kind with respect to any such claim, debt, liability, or equity security interests, or right, other than to enforce any right pursuant to this Plan;

2. Enforcing, attaching, collecting, or recovering in any manner any judgment, award, decree, or order against Debtor, New ABI, their Affiliates, or their property or interests in property, on account of any such claim, debt, liability, or equity security interests;

3. Creating, perfecting, or enforcing any lien or encumbrance against Debtor, New ABI, or their property or interests in property on account of any such claim, debt, liability, or equity security interest;

4. Asserting any right of setoff, subrogation, or recoupment of any kind against any debt, liability, or obligation due to Debtor or New ABI or against its property or interests in property on account of any such claim, debt, liability, or equity security interest; and

5. Commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan or the Confirmation Order.

Such injunction extends to and for the benefit of any successor of Debtor, including, without limitation, New ABI and its respective property and interests in property. Any entity injured by any willful violation of such injunction shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages, from the willful violator.

6.03. Terms of Bankruptcy Injunction or Stays. All injunctions or stays provided for in Section 362 of the Bankruptcy Code, or otherwise, and in existence at Confirmation, remain in full force and effect until the Effective Date.

6.04. Releases by Holders of Claims. On the Effective Date, in exchange for and in consideration of, among other things, the payments set forth in this Plan by or on behalf of Debtor for the benefit of holders of Allowed Claims, the financing provided to Debtor and the present and future undertakings in accordance with the terms of the Plan, each holder of a claim or interest (including equity) shall be deemed to release and forever waive and relinquish, unconditionally: all claims, debts, obligations, demands, liabilities, suits, judgments, damages, rights, and Causes of Action, whatsoever (other than the right to enforce Debtor’s or New ABI’s obligations under the Plan and the contracts, instruments, releases, and other agreements and documents delivered under the Plan), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, then existing or thereafter arising, in law, equity, or otherwise that are based in whole or in part upon any transactions or matters with Debtor, or in connection with this bankruptcy case,

11 Subject, however, to the simultaneous issuance of stock in New ABI under this Plan.

the Plan, or the Disclosure Statement that occurred or could have occurred on or prior to the Effective Date against ABI and its agents, officers, directors, employees, professionals, or its successors and assigns, including New ABI (collectively, “the Released Persons”).

6.05. Injunction Related to Releases. The Confirmation Order will constitute an injunction permanently enjoining the commencement or prosecution by any person or entity, including, without limitation, Equity Security Holders, whether directly, derivatively, or otherwise, of any claim, demand, debt, liability, cause of action, or right that is released, discharged, or waived pursuant to the Plan against the Released Persons.

6.06. Exculpation. From and after the Effective Date, and except as provided by the Plan, neither Yang nor any of its respective members, officers, directors, employees, professionals (e.g., lawyers or accountants), lenders, or other representatives, shall have or incur any liability to any holder of a Claim, Preferred Equity Securities, or Common Equity Securities for any act or omission in connection with, related to, or arising out of the bankruptcy case, the pursuit of Confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan (including objections to, and settlements of, claims under the Plan), except for willful misconduct or gross negligence. Yang and each of its respective members, officers, directors, employees, professionals, lenders, or other representatives shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan.

To the extent Yang has a lien on (or security interest in) any Causes of Action that the estate became entitled to bring at any time pre- or post-petition, Yang and New ABI shall release Debtor and the Released Persons, and other professionals from liability for or on any such Causes of Action. This release(s) shall be effectuated by independent agreement and documentation executed contemporaneous with Confirmation of the Plan. (This release does not affect the right of Yang, in its sole discretion, to pursue any such Causes of Action against unreleased third parties.)

ARTICLE 7

Additional Provisions

7.01. Vesting of Property. Upon Confirmation of the Plan and except as otherwise provided in this Plan, all of the property of the Chapter 11 estate shall vest in New ABI. Such vesting is expressly subject to the duties of New ABI and the rights of Yang as set forth in this Plan.

7.02. Retention of Jurisdiction. Until full consummation of the Plan, the Bankruptcy Court shall retain jurisdiction for the following purposes:

1. The determination of all questions and disputes regarding title to the assets of the estate, and determination of all Causes of Action, controversies, disputes, or conflicts, whether or not subject to action pending as of the date of Confirmation, between Debtor and any other party-in-interest;

2. The correction of any defect, curing of any omission, or reconciliation of any inconsistency in the Plan, the order of Confirmation, or other document or instrument as may be necessary to carry out the purposes and intent of the Plan;

3. The modification of this Plan after Confirmation;

4. The enforcement and interpretation of the terms and conditions of this Plan, which specifically includes hearing objections to claims and resolution of disputes with respect to Retained Residuals and leases to which Debtor is a party; and

5. The entry of any order necessary to enforce the title, rights, and powers of Debtor, and to impose such limitations, restrictions, terms, and conditions as the Bankruptcy Court may deem necessary.

7.03. Discrepancies. In the event of a discrepancy between the terms of the Plan and the Disclosure Statement, the terms of the Plan shall control.

7.04. Future Earnings. All income of Debtor shall be paid to New ABI, subject only to the continued perfected liens and security interests of Yang.

7.05. Causes of Action. All of the Causes of Action, will be retained by and remain the property of New ABI, except as set forth in this Plan. Without limitation, the Causes of Action include any rights or claims arising under Chapter 5 of Title 11 and any claims or causes of action arising out of any infringement upon the Debtor’s patents or other intellectual property.

7.06. No Waiver. Nothing contained herein shall constitute a waiver or release of any claim, counterclaim, or dispute that Debtor may have regarding the validity of any claim or lien by way of a subsequent adversary proceeding or amendment to the Plan in the event this Plan is not confirmed as filed. The treatment outlined in this Plan is for the purposes of this Plan only and only in the event of Confirmation of this Plan, and Debtor reserves the right to provide for different treatment of any claim in any amended or supplemental plan submitted by Debtor under this or any other chapter of the Bankruptcy Code.

7.07. Values. Any values set forth or referenced in this Plan are Debtor’s estimate based only upon work performed by Debtor, Debtor’s counsel, or independent accountants hired by Debtor. In the event of a valuation hearing, Debtor reserves the right to present and rely upon expert appraisal testimony that may contradict the values set forth herein. These values (and those referenced in the accompanying disclosure statement) are also subject to further orders of the Bankruptcy Court.

7.08. Other Definitions. Except as expressly provided herein (as allowed under the Bankruptcy Code), reference is made to the definitions set forth at Section 101 of the Bankruptcy Code.

7.09. Revocation. Debtor reserves the right to revoke and withdraw this Plan at any time prior to its Confirmation.

7.010. Exemption from Transfer Taxes. Pursuant to Section 1129(c) of the Bankruptcy Code, no tax may be assessed or collected upon any issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer pursuant to this Plan.

7.011 Statutory Fees. All fees payable pursuant to 20 U.S.C. § 1930(a) shall be paid each quarter until this case is converted, dismissed, or a final decree closing this case is entered (whichever occurs first).

ARTICLE 8

Compliance with Confirmation Requirements

8.01. Compliance with Laws and Good Faith. Debtor believes that the Plan complies with all provisions of Chapter 11 and any other applicable provision of the Bankruptcy Code, that the Plan has been proposed in good faith and not by any means forbidden by law, and that all fees, charges, or amounts required to be paid before Confirmation have been paid.

ARTICLE 9

Procedure for Filing and Allowance of Claims and Interests

9.01. Debtor has scheduled, to its knowledge, all claims and interests. The failure of any claimant or holder of an interest that is scheduled to file a proof of claim or proof of interest before the claims deadline set by the Court will be deemed agreement to the manner in which the claim or interest was scheduled, except that a secured creditor will be entitled to the benefits of Section 506 of the Bankruptcy Code in the event its collateral is of a value in excess of its claim.

ARTICLE 10

Exhibits

10.01. The following exhibits and addenda are attached to and incorporated in this Plan:

Plan Addendum: Treatment of Equity / Warrants and Options

DATED: February 21, 2014

Respectfully submitted,

AMARILLO BIOSCIENCES, INC.

By:__/s/ Bernard Cohen______________________

Bernard Cohen, Vice President and CFO

Respectfully submitted,

__/s/ Roger S. Cox__________________________

ROGER S. COX, State Bar No. 04956200

Underwood Law Firm, P.C.

P.O. Box 9158

Amarillo, TX 79105-9158

(806) 242-9651; FAX (806) 349-9485

Email: roger.cox@uwlaw.com

Counsel for the Debtor in Possession

ADDENDUM

to Plan of Reorganization

TREATMENT OF EQUITY / WARRANTS AND OPTIONS

A-1. COMMON EQUITY – REVERSE SPLIT

1. 16,000,000 shares of common stock in New ABI will be issued to Yang, effective immediately upon the expiration and cancellation of the Preferred Equity (and subject to funding of the Cash Contribution by Yang).

2. The Common Equity Security Holders will undergo a reverse stock split on the basis of one (1) New ABI common share received for every nineteen (19) Old ABI common shares held pre-split, as of a record date to be set by the Directors of ABI pursuant to Section 6.101(b) of the Texas Business Organizations Code, which date shall be no more than 60 days prior to the implementation of said reverse stock split. The New ABI common shares received pursuant to the reverse split shall not be in addition to, but shall replace, the Old ABI common shares held pre-split, and such Old ABI common shares shall be returned to the status of authorized, but unissued common shares.

3. It is the intention of this Plan that upon the Effective Date and closing and funding of this Plan, Yang will own 80% of the common stock in New ABI and the Common Equity Security Holders and Preferred Equity Security Holders will, in the aggregate, own 20% of the common stock in New ABI. In the event the reverse stock split contemplated by subparagraph 2 above results in a partial number of shares for any holder, that holder’s shares will be rounded down to the next whole number. In the event this results in

an aggregate share amount greater or less than 4,000,000 shares, the number of shares issued to Yang will increase or decrease by a proportionate amount so that the Yang interest in New ABI as of closing will remain as nearly close as possible, without issuance of fractional shares, to 80%.

A-2. CONVERSION OF PREFERRED EQUITY INTERESTS

1. As stated in Paragraph 3.09 of the Plan, the interests of the Preferred Equity Security Holders will be cancelled; however, the Preferred Equity Security Holders will be treated as if their Preferred Equity was converted to Common Equity, immediately prior to the record date defined in Paragraph 2 above. This will be based on a conversion rate of 1 to 1000, so that for each share of Preferred Stock, the holder will be deemed to hold 1000 shares of Common Equity for purposes of Plan treatment and participation in the reverse split of common stock.

2. Specifically, the Debtor believes there is one holder of Preferred Equity: 3,262 shares of Preferred Equity held by Paul Tibbits (or Paul Tibbits and wife, Marian Tibbits). This is described in Section 1 of the Plan as the Preferred Equity.

3. Based on the deemed conversion of 3,262 shares of Preferred Equity held by Tibbits, Tibbits will be deemed to be holder(s) of 3,262,000 additional shares of Common Equity as of confirmation. Thus, assuming Tibbits already holds 11,163,278 shares of Common Equity, Tibbits would be treated as if Tibbits held an aggregate of 14,425,278 shares of Common Equity for purposes of treatment under Class Eight.

4. Subject to the foregoing, as of the Effective Date, all existing Preferred Equity will be cancelled and terminated. (All cancelled shares will be returned to the status of authorized, but unissued shares.)

A-3. EXEMPTIONS FROM SECURITIES LAWS

1. Issuance of the new stock in New ABI and the implementation of the reverse stock split will be exempt from registration under Section 1145 of the Bankruptcy Code, which exempts certain securities issued under a plan of reorganization under the Bankruptcy Code from registration under the Securities Act of 1933 or any state or local laws otherwise requiring registration.

2. Nothing in this Plan, however, is intended to preclude the SEC or any other governmental agency from exercising its police or regulatory powers with respect to the Debtor or any other person.

A-4. NEW ABI COMMON STOCK – RESTRICTION ON CERTAIN TRADING

1. All of the shares of the common stock in New ABI issued pursuant to the Plan, including without limitation those shares issued to implement the reverse stock split, will be duly authorized, validly issued, fully paid, and non-assessable. New ABI may use its best efforts to list the stock on a national securities exchange when deemed appropriate by the directors of New ABI.

2. Issuance and allocation of any common stock in New ABI will be structured to ensure that the issuance qualifies as an exchange subject to Section 382(l)(5) of the Internal Revenue Code, as applicable. In addition, any such stock will be subject to trading restrictions, as necessary, to prevent an “ownership change” within the meaning of Section 382 of the IRC from occurring following the Effective Date.

A-5. WARRANTS AND OPTIONS – CLASS NINE

1. As stated in the Plan, warrants and options to purchase any common stock in ABI will be converted on a ratio of 19:1 so that each 19 options or warrants, respectively, will be converted to one (1).12

2. Upon Plan confirmation, the holder will be able to exercise the warrant or option at the adjusted per-share price shown in the following tables. The Plan does not change the expiration date of any option or warrant, or any other terms, all of which will continue to be governed by the applicable option or warrant agreement(s).

3. The following tables identify all outstanding warrants and options known to ABI, together with the applicable conversions as a result of the Plan.

TABLE 1

Table 1
Warrants Outstanding 2013
1	2	3	4	5	6	7	8	9	10
GRANTEE	ISSUE DATE	EXPIRATION DATE	TERM	NUMBER OF WARRANTS	EXERCISE PRICE	Total Exercise Price = Exercise. Price X no. of Warrants	Squeezed Down Number of Warrants	Adjusted Exercise Price of the Warrants	Total Adjusted Exercise Price
Asher Enterprises	4/15/2011	4/15/2014	3	787,500	$ 0.04	$ 31,500	41,447	$ 0.76	$ 31,500
Asher Enterprises	5/27/2011	5/27/2014	3	500,000	$ 0.04	$ 20,000	26,315	$ 0.76	$ 20,000
Yasushi Chikagami	11/5/2011	11/5/2015	4	1,000,000	$ 0.03	$ 30,000	52,631	$ 0.57	$ 30,000
Total				2,287,500		$ 81,500	120,394		$ 81,500

TABLE 2

Table 2
Options Outstanding 2013
EMPLOYEE	ISSUE DATE	EXPIRATION DATE	TERM IN Years	NUMBER OF OPTIONS	EXERCISE PRICE	Total Exercise Price = Exercise Price X no. of Options	Squeezed Down Number of Options	Adjusted Exercise Price of the Options	Total Adjusted Exercise Price
Charles BlitzerA	10/20/2010	10/20/2015	5	-	$ -	$ -	-	$	$ -
Steve Chen	04/30/09	04/30/14	5	200,000	$ 0.125	$ 25,000	10,526	$ 2.375	$ 25,000
Steve Chen	7/29/2010	7/29/2015	5	100,000	$ 0.065	$ 6,500	5,263	$ 1.235	$ 6,500
Bernard Cohen	10/27/2011	10/27/2016	5	50,000	$ 0.050	$ 2,500	2,631	$ 0.95	$ 2,500
Joe Cummins	10/27/2011	10/27/2016	5	1,190,000	$ 0.050	$ 59,500	62,631	$ 0.95	$ 59,500
Chrystal Shelton	10/27/2011	10/27/2016	5	112,792	$ 0.050	$ 5,640	5,936	$ 0.95	$ 5,640
TOTAL				1,652,792		$ 99,139	86,987		$ 99,139
A Charles Blitzer's Options Expired 90 days after his contract expired and he did not execute another. He has no options now.

# # # END OF ADDENDUM # # #

12 For example, an option to purchase 38 shares of common stock at $1.00 each would be converted to an option to purchase two (2) shares at $19.00 each.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

Common Stock

The Company is presently traded on the OTC Bulletin Board under the symbol AMARQ. Our common stock is presently considered a “penny stock” and is subject to such market rules. The range of high and low bids as quoted on the OTC Bulletin Board for each quarter of 2013 and 2012 was as follows:

	2013				2012
Quarter	$ High		$ Low		$ High		$ Low
First		0.035		0.013		0.0499		0.033
Second		0.0275		0.0133		0.045		0.018
Third		0.0275		0.018		0.0269		0.010
Fourth		0.016		0.0008		0.029		0.0131

The quotations reflect inter-dealer bids without retail markup, markdown, or commission, and may not represent actual transactions. As of December 31, 2013, the Company had approximately 1,687 shareholders of record.

The Company has 100,000,000 shares of voting common shares authorized for issuance As of December 31, 2013, a total of 80,593,300 shares of common stock were either outstanding (73,291,008) or reserved for issuance upon exercise of options and warrants or conversion of convertible preferred stock (7,302,292). No common stock was issued during 2013.

On July 12, 2013, ABI and PAN Consulting, Ltd. entered into and executed a Settlement Agreement and Release whereby ABI paid $5,500 in full and final settlement of any and all claims held or asserted by PAN Consulting, Ltd. and PAN Consulting, Ltd. agreed to endorse and deliver to ABI any and all stock certificates evidencing an aggregate of 263,889 shares of ABI common stock. The terms of the agreement also included termination of the contract executed in 2006 by the parties.

The Company issued common stock in 2013 and 2012 as follows:

Common Stock Issued in 2013

Issue Price

Net Price

None

Total Common Stock Issued in 2013

Common Stock Issued in 2012	Shares		Issue Price		Net Price
Directors, officers, consultants plan– services		50,000	$	0.035	$	1,750
Debt conversion – cashless		1,945,108		0.0202-0.0208		74,091
Total Common Stock Issued in 2012		1,995,108	$	0.0202-0.035	$	75,841

During the years ended December 31, 2013 and December 31, 2012, there were no finder’s fees paid related to private placements of stock.

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.

Preferred Stock

The shareholders have authorized 10,000,000 shares of preferred stock shares for issuance.

There was no Series 2010-A 10% Convertible Preferred Stock issued in 2013.

The Company accrued $32,390 of dividends on preferred stock during 2013.

Stock Options and Warrants

During 2013, no options or warrants were issued to consultants, advisors, directors, employees, or investors. Consequently, there were no related expenses.

Directors, officers and consultants did not exercise any options in 2013 or 2012, see table below.

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

	2013					2012
	Options			Price		Options			Price
Outstanding Beg. Of Year		1,852,792		$	0.04-0.125		3,641,792		$	0.04-0.40
Granted		-			-		-			-
Cancelled/Expired		(100,000	)		0.075		(1,789,000	)		0.05-0.40
Exercised		-			-		-			-
Outstanding End of Year		1,752,792			0.04-0.125		1,852,792			0.04-0.125
Exercisable End of Year		1,752,792			0.04-0.125		1,852,792			0.04-0.125

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 2.41 years.

During 2013, there were no private placement sales of common stock and no warrants issued.

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 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.

As of December 31, 2012, Warrant Strategies, Inc. owned 2,217,817 warrants. These warrants expired unexercised and worthless at the close of business on January 8, 2013.

Notes Payable

Related Party

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 the maturity. One $1,000,000 note was payable on or before June 3, 2008. The other $1,000,000 note was payable on or before August 28, 2010. Although we are currently in default of the notes, HBL has not demanded payment. During 2008, the Company paid HBL $200,000 of interest on these notes. The principal and accrued interest through October 31, 2013 is listed on Schedule F of the Summary of Schedules filed by ABI with the United States Bankruptcy Court. Schedule F is the List of Unsecured Non-priority (Creditors’) Claims. The claim is also scheduled in Class Four – General Unsecured Creditors of the Plan of Reorganization in the amount of $3,006,753.

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, using the Applicable Federal Rate (AFR) 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. The note was still outstanding as of December 31, 2013. This debt is listed on Schedule F of the Summary of Schedules filed by the Company with the United States Bankruptcy Court. Schedule F is the list of Unsecured Non-priority (Creditors’) Claims. The Claim is also scheduled in Class Four – General Unsecured Creditors of the Plan of Reorganization. The debt includes $200,000 of principal and $35,056 of pre-petition interest accrued through October 31, 2013.

As of February 8, 2012, the Company had promissory notes totaling $85,000 to Paul Tibbits. The principal of the debt, $85,000, was paid to Mr. Tibbits with 850 shares of the Company’s Series 2010-A 10% Convertible Preferred Stock Additionally, on February 8, 2012, the Company paid $48,878 to Mr. Tibbits for unpaid Preferred Dividends, interest on Notes Payable, and interest on unpaid Preferred Dividends. This amount was paid with 489 shares of the Company’s Series 2010-A 10% Convertible Preferred Stock. The total conveyance of preferred shares on February 8, 2012, was 1,339. The Company accrued the following Dividends on Preferred Stock for Mr. Tibbits in each of the following time periods: February 9, 2012 through December 31, 2012, $30,851; January 1, 2013 through October 31, 2013, $26,992; and November 1, 2013 through December 31, 2013, $5,398. The Company also accrued interest on unpaid dividends for the same periods in 2012 and 2013 in the respective amounts $4,628 and $1,458. Interest on the $200,000 Note Payable was also accrued for February 8, 2012 through December 31, 2012, $18,167, and for January 1, 2013, through October 31, 2013, $16,889.

Non-Related Party

The Yang Group transferred cash to ABI through Dr. Stephen Chen, ABI CEO, and subsequently wired the funds to the Company for working capital loans to be used for operations; total cash received from The Yang Group through Dr. Chen for 2012 was $547,958. During 2013 through July 19, 2013, cash received through Dr. Chen was $428,835. The advances were short term, without due dates, and with no stated interest rates or any other terms.

On July 19, 2013, the unsecured funds advanced from The Yang Group through Dr. Chen ($976,793), were reduced to a promissory note made payable by Amarillo Biosciences, Inc. to the Yang Group, The note was a demand note with no certain due date with an annual interest rate of 23/100 of one percent (.23%) due on unpaid principal from the date of funding. The interest rate was based on the Applicable Federal Rate (AFR) in force for the month in which the note was executed. The note carried a 10% annual interest rate on material, unpaid amounts. There was no penalty for prepayment of outstanding amounts.

On July 25, 2013, The Yang Group began advancing funds under a new promissory note which is secured by substantially all of the assets of the Company. The note is a revolving/advancing note for $300,000 or so much thereof as may from time to time have been advanced. The annual interest rate as to each advance thereunder, is at the short term Applicable Federal Rate (AFR) determined under Section 1274(d) of the Internal Revenue Code of 1986, for the month in which such advance was received. As of December 31, 2013, $280,000 had been advanced under the secured note.

An order of the Bankruptcy Court approved a Post-Petition Financing Facility on January 15, 2014. The Facility is an unsecured, priority basis financing facility approving up to $285,000 of funds to be advanced as needed. To date, $164,972 has been advanced under the Post-Petition Financing Facility. The source of funds under the Facility continues to be The Yang Group.

Subsequent to the balance sheet date of December 31, 2013, $107,972 has been received through March 29, 2014. These funds were received as explained in the preceding paragraph.

We have a line of credit with Wells Fargo for $20,000, with an interest rate of prime rate plus 6.75 percent. There was an outstanding balance of $18,376 on October 31, 2013, when the Chapter 11 Petition was filed. This debt is listed on Schedule F of the Summary of Schedules filed by the Company with the United States Bankruptcy Court. Schedule F is the list of Unsecured Non-priority (Creditors’) Claims. The Claim is also scheduled in Class Four – General Unsecured Creditors of the Plan of Reorganization. This debt is also included on the December 31, 2013 Balance Sheet and the outstanding balance of $18,376 is included in accounts payable and accrued expenses.

ITEM 6. SELECTED FINANCIAL DATA.

This item is not applicable to smaller reporting companies.

ITEM 7.

MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:

Amended Disclosure Statement for Plan of Reorganization.

The following discussion is the Amended Disclosure Statement for the Plan of Reorganization of Amarillo Biosciences, Inc. (the Company or Debtor or Debtor in Possession). The original Disclosure Statement and Plan of Reorganization were filed on February 21, 2014, in the Bankruptcy Court for the Northern District of Texas. The Disclosure Statement was subsequently amended and filed March 27, 2014 at which time the Amended Disclosure Statement was approved by the Bankruptcy Court. On March 28, 2014, the Order Approving Debtor’s Disclosure Statement, Notice of Confirmation Hearing, and Setting Date For Voting and Filing Objections To Confirmation of Debtor’s Plan was signed and entered by the United States Bankruptcy Judge.

AMENDED DISCLOSURE STATEMENT FOR PLAN OF REORGANIZATION

(Filed March 27, 2014)

AMARILLO BIOSCIENCES, INC., Debtor and Debtor in Possession (“ABI” or “Debtor”), submits this Amended Disclosure Statement under Chapter 11 of the United States Bankruptcy Code:

1. Introduction

1.01. Debtor provides this Disclosure Statement to Debtor’s known creditors and parties in interest pursuant to Section 1125 of the Bankruptcy Code. The purpose of this Disclosure Statement is to provide necessary information for the creditors and Debtor to make a reasonably informed decision in exercising their right to vote for or against acceptance of the Plan of Reorganization (“the Plan”) filed on February 21, 2014.

1.02. Except as specifically stated otherwise, all information contained in this Disclosure Statement relating to Debtor has been provided by Debtor or its agents and generated from Debtor’s books and records. Projections relating to the future operations of the Reorganized Debtor provided by Debtor are good faith estimates of Debtor. The projections provided by Debtor are based on a number of assumptions that Debtor believes in the aggregate are reasonable. These projections represent only one of a number of scenarios that could be presented to illustrate the future operations of the Reorganized Debtor.

NO REPRESENTATIONS CONCERNING DEBTOR, PARTICULARLY ABOUT FUTURE OPERATIONS OR PROPERTY VALUES, ARE AUTHORIZED BY DEBTOR OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. ANY REPRESENTATION OR INDUCEMENT MADE TO SECURE ACCEPTANCE OF THE PLAN, OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT, SHOULD NOT BE RELIED UPON BY ANY PERSON. THE RECORDS KEPT BY DEBTOR ARE NOT WARRANTED OR REPRESENTED TO BE WITHOUT ANY INACCURACY OR OMISSION, ALTHOUGH EVERY EFFORT HAS BEEN MADE TO MAKE THIS DISCLOSURE STATEMENT ACCURATE AND COMPLETE. THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS NOT BEEN AUDITED OR VERIFIED EXCEPT WHERE SPECIFICALLY STATED, AND ANY EXHIBITS ATTACHED TO THE PLAN AND THE SCHEDULES AND STATEMENTS OF AFFAIRS FILED IN THIS PROCEEDING HAVE LIKEWISE NOT BEEN SUBJECT TO AN AUDIT OR OTHERWISE VERIFIED BY A THIRD PARTY UNLESS SPECIFICALLY STATED. ALL REFERENCES TO ACCOUNT, LOAN, AND CLAIM BALANCES REFERENCED HERE AND ON DEBTOR'S SCHEDULES ARE BASED UPON DEBTOR’S RECORDS, AND THEREFORE, THEY MAY BE SLIGHTLY INACCURATE OR OTHERWISE NOT THE SAME AS BALANCES REFLECTED IN THE CREDITORS' OWN RECORDS. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED IN THIS STATEMENT.

THIS DISCLOSURE STATEMENT MAY ALSO CONTAIN FORWARD-LOOKING STATEMENTS, WHICH CAN BE IDENTIFIED BT THE USE OF WORDS LIKE “ANTICIPATES,” “INTENDS, “BELIEVES,” “ESTIMATES,” “EXPECTS,” OR SIMILAR REFERENCES TO FUTURE PERIODS. ANY MATTERS THAT ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING, SO THEY MAY INVOLVE ESTIMATES, ASSUMPTIONS, RISKS, AND UNCERTAINTY. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM WHAT MAY BE CONTAINED IN ANY FORWARD-LOOKING STATEMENT.

2. Definitions

1.01. ABI: Amarillo Biosciences, Inc., the Debtor and Debtor in Possession in this case.

1.02. Administrative Expense Claims: Claims that arise from those expenses described in Section 503 of the Bankruptcy Code.

1.03. Affiliates: For purposes of the Plan, “Affiliates” means any entity owned or controlled by the Debtor, together with the Debtor’s agents, officers, directors, employees, attorneys, and accountants.

1.04. Allowed Claim: A claim with respect to which: (a) a proof of claim has been filed with the Court on or before the Bar Date, or (b) Debtor has scheduled in a list of creditors prepared and filed with the Court pursuant to Rule 1007, and such claim is not listed as disputed, contingent, or unliquidated as to amount; and in either case, a claim: (i) to which no objection has been timely filed by any party-in-interest, or (ii) that has been allowed by order of the Court that has become final and is no longer subject to appeal.

1.08. Allowed Unsecured Claims of General Trade Creditors: An unsecured Allowed Claim against Debtor that is not an Allowed Priority Claim or an Allowed Unsecured Claim of a creditor in Class Two or Class Five. The Class Four Claims.

1.09. Applicable Federal Rate: The applicable federal rate of interest as determined pursuant to Section 1274(d) of the Internal Revenue Code (“IRC”).

1.010. Bankruptcy Code: The United States Bankruptcy Code as codified at 11 U.S.C. § 101, et seq. Text references to statutory code sections refer to the Bankruptcy Code unless otherwise indicated.

1.011. Bankruptcy Court: United States Bankruptcy Court for the Northern District of Texas, Amarillo Division (or a successor court having bankruptcy jurisdiction).

1.012. Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure, and where appropriate, the applicable local rules of the Bankruptcy Court.

1.013. Bar Date: The deadline fixed by the Court as the last day for filing a proof of claim. As of the date of the Plan, that date was set as March 10, 2014 for non-governmental claimants; it was extended for one late-scheduled creditor through April 1, 2014.

1.014. Ballot Deadline: The deadline for submitting ballots to vote to accept or reject the Plan. The Ballot Deadline will be contained in an order of the Bankruptcy Court after approval of the Disclosure Statement.2

1This does not include claims, if any, that Yang or any Affiliate of Yang may acquire or have acquired from a third party; the Allowed Unsecured Claim of Yang and the Allowed Secured Claim of Yang is limited to funds actually advanced by Yang to ABI.

2 It is anticipated that the order approving a disclosure statement will include a specific date that will serve as the Ballot Deadline

1.015. Cash Contribution: Funds to be paid by Yang upon the Effective Date to Debtor to be used by Debtor to consummate the Plan, including the distributions to the Unsecured Creditors as set forth in the Plan. The Cash Contribution is in the amount of $250,000.00.

1.016. Causes of Action: Causes of action held by Debtor or the Estate against third parties, including Chapter Five Causes of Action.

1.017. Chapter Five Causes of Action. Any claim or action arising under Section 510, 544 – 551 (inclusive), or 553, or otherwise arising under the Bankruptcy Code.

1.018. Common Equity: All issued and outstanding common stock in or to ABI as of October 31, 2013 (73,291,008 issued and outstanding shares).

1.019. Common Equity Security Holders: Holders of any common stock issued prepetition by Debtor. The Class Eight Interest Holders.

1.020. Confirmation: Approval of the Plan by the Court, which shall occur the date upon which the Confirmation Order is entered.

1.021. Confirmation Order: The order of the Court confirming the Plan of Reorganization.

1.022. Consummation: The time when the last act required under the Plan has been completed.

1.023. Debtor: Amarillo Biosciences, Inc. (“ABI”), a Texas corporation whose principal office is in Amarillo, Texas, the Debtor and Debtor-in-Possession (“DIP”) in this case.

1.024. Dollars: United States dollars. Any reference to currency or monetary values in the Plan is to United States dollars.