Note 11 - 2018 Stock Option and Award Incentive Plans

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

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

11. 2018 Stock Option and Award Incentive Plans .

On

September 26, 2018,

the Company’s Board of Directors adopted the

Amarillo Biosciences, Inc.,

2018

Employee Stock Option Plan

(the “Plan”). The Plan provides for the grant of Qualified Incentive Stock Options to the Company’s employees. The Board, in its adoption of the Plan, directed the Officers to submit the Plan to the shareholders for ratification and approval at the next scheduled shareholders meeting. Failure of the ratification and approval of the Plan within

one

year of the effective date will render the qualified options to become nonqualified options for purposes of the U.S Internal Revenue Code. The Plan is administered by the Board of Directors of ABI or by a committee of directors appointed by the Board of Directors of ABI (the “Stock Option Committee”) as constituted from time to time. The maximum number of shares of Common Stock which

may

be issued under the Plan is

six million

(

6,000,000

) common stock shares which will be reserved for issuance.

The option price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option is

100%

of the Fair Market Value of a share of Common Stock on the date the Incentive Stock Option is granted. The Option Price is

$.38

per share and the Options are exercisable during a period of

ten

(

10

) years from the date of grant, and the Options vest

20%

annually over

five

(

5

) years, commencing

one

(

1

) year from date of grant. If an Option grantee owns or controls over

ten

percent (

10%

) of the outstanding stock, then pursuant to Section

424

(d) of the Code, the Option Price becomes

110%

of Fair Market Value,

$.418;

the Term of exercise be

five

(

5

) years from

ten

(

10

); and the vesting period decreases from

five

(

5

) years to

four

(

4

) years.

On

September 26, 2018,

the Company’s Board of Directors adopted the

Amarillo Biosciences, Inc.,

2018

Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan

(the “Plan”). The Plan provides for the grant of Nonqualified Incentive Stock Options to the Company’s employees. The Plan is administered by the Board of Directors of ABI or by a committee of directors appointed by the Board of Directors of ABI (the “Stock Option Committee”) as constituted from time to time. The maximum number of shares of Common Stock which

may

be issued under the Plan is

twenty million

(

20,000,000

) common stock shares which will be reserved for issuance subject to options. The Option Price for the Nonqualified Options is

$.38

exercisable for a period of

ten

(

10

) years, and a vesting period of

five

(

5

) years at

20%

per year commencing

one

(

1

) year from date of grant. There are

no

changes in terms or conditions for shareholders who own or control over

ten

Percent (

10%

) of the outstanding stock.

When options are exercised whether they are qualified or nonqualified, the ABI Common Stock shares will be issued pursuant to Rule

144A

meaning that the shares cannot be traded or otherwise exchanged for a minimum period of

six

months from issue date.

A summary of option activity for the years ended

September 30, 2018

and

December 31, 2017

are presented below.

Date	Number of Options Qualified		Number of Options Nonqualified		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance December 31, 2017		-		-		-		-
Granted		950,000		3,995,000	$	.384		-
Exercised		-		-		-		-
Expired		-		-		-		-
Balance September 30, 2018*		*950,000		3,995,000	$	.384		5		-
Exercisable, September 30, 2018		-		-		-		-		-

*There is

one

stock owner over

10%

currently holding

500,000

qualified options. The exercise price for this Option-Holder would be

$.418

with an exercise period of

5

years and a vesting period of

4

years at

25%

per year.

The Company used the Black-Scholes option pricing model to value the option awards with the following assumptions applied: (

1

) Volatility –

276%;

(

2

) Term –

5

years (

3

) Discount Rate –

2.96%.

As of

September 30, 2018,

there is

$1,865,312

in unrecognized option expense that will be recognized over the next

5

years.