Organization and Summary of Significant Accounting Policies

Organization and Business

Amarillo Biosciences, Inc. (the "Company” or “ABI”), a Texas corporation formed in

1984,

is engaged in developing biologics for the treatment of human and animal diseases. The Company’s 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. In addition to the above core technology, which is included in the Pharmaceutical Division, ABI is exploring the possibility of instituting new revenue streams with a Medical Division and a Consumer Products Division.

The Medical Division is preparing to deploy diabetic treatment centers in Taiwan beginning sometime in the

third

quarter of

2017.

These centers will provide a therapy (Artificial Pancreas Treatment, or "APT") for the management of Type

and Type

diabetes along with the reversal of the complications that historically accompany this disease and plague patients. The Consumer Product Division is presently working on a delivery system for nutraceuticals and food supplements such as Vitamin C, negotiations to import and distribute to the Asian markets a natural resource product which can be modified for human, animal, or agricultural applications, and enter the alternative medicine market through domestic and international distribution of natural Kentucky Wild Ginseng and other medicinal herbs.

Going Concern

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

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

There can be no assurance that capital will be available as necessary to meet the Company's working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company

may

result in dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success

may

be adversely affected and the Company

may

cease operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

Fair Value of Financial Instruments

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A

three

-tier fair value hierarchy prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level

measurements) and the lowest priority to unobservable inputs (level

measurements). These tiers include:

●

Level

defined as observable inputs such as quoted prices for identical instruments in active markets;

●

Level

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

●

Level

defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which

one

more significant inputs or significant value drivers are unobservable.

Our Level

assets and liabilities primarily include our cash and cash equivalents. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. The carrying amounts of accounts receivable, accounts payable, accrued liabilities, and notes payable approximate fair value due to the immediate or short-term maturities of these financial instruments.

Stock-Based Compensation

Stock-based compensation expense is recorded in accordance with FASB ASC Topic

718,

Compensation – Stock Compensation

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

Cash and Cash Equivalents

The Company classifies investments as cash equivalents if the original maturity of an investment is

three

months or less.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure trade and notes receivable are not overstated due to uncollectability. The Company’s allowance is based on a variety of factors, including age of the receivable, significant

one

-time events, historical experience, and other risk considerations. The Company had no material accounts receivable and no allowance at

December

31,

2016

and

2015.

No uncollectible accounts receivables were written off in

2016.

Inventory

Inventories are stated at the lower of cost or market. Cost is determined on a

first

-in,

first

-out basis. The Company continually assesses the appropriateness of inventory valuations giving consideration to slow-moving, non-saleable, out-of-date or close-dated inventory. As of

December

31,

2016

and

2015,

the Company has a balance of

$14,700

and

$0,

respectively, in inventory.

Property and Equipment

Property and equipment are stated on the basis of historical cost less accumulated depreciation. Depreciation is provided using the straight-line method over the

two

seven

year estimated useful lives of the assets.

Patents and Patent Expenditures

ABI holds patent license agreements and holds patents that are owned by the Company. All patent license agreements remain in effect over the life of the underlying patents. Accordingly, the patent license fee is being amortized over the estimated life of the patent using the straight-line method. Patent fees and legal fees associated with the issuance of new owned patents are capitalized and amortized over the estimated

year life of the patent. The Company continually evaluates the amortization period and carrying basis of patents to determine whether subsequent events and circumstances warrant a revised estimated useful life or impairment in value. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our patents, we

may

incur charges for impairment in the future.

Long-lived Assets

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

Income Taxes

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

Research and Development

Research and development costs are expensed as incurred.

Use of Estimates

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

Basic and Diluted Net

Income (

Loss

)

Per Share

Net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding. For the year ended

December

31,

2016

and

2015,

options and warrants outstanding (if any) were antidilutive and not included in the calculation of fully diluted net income (loss) per share.

Concentration of Credit Risk

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

The Company has cash balances in a single financial institution which, from time to time, could exceed the federally insured limit of

$250,000.

No loss has been incurred related to this concentration of cash.

Recent Accounting Pronouncements

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