. Stock Option and Stock Plans

September 26, 2018,

the Company’s Board of Directors adopted the Amarillo Biosciences, Inc.,

2018

Employee Stock Option Plan (the

“2018

-ESOP”). The

2018

-ESOP provides for the grant of Qualified Incentive Stock Options to the Company’s employees. The Board, in its adoption of the

2018

-ESOP, directed the Officers to submit the

2018

-ESOP to the shareholders for ratification and approval at the next scheduled shareholders meeting. Failure of the ratification and approval of the

2018

-ESOP within

one

year of the effective date renders the qualified options to become nonqualified options for purposes of the U.S Internal Revenue Code. The

2018

-ESOP 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

2018

-ESOP is

six million

(

6,000,000

) common stock shares which will be reserved for issuance subject to options.

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

$0.38

per share and the options are exercisable during a period of

ten

(

) years from the date of grant, where the options vest

20%

annually over

five

(

) years, commencing

one

(

) 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,

$0.418;

the term of exercise becomes

five

(

) years from

ten

(

); and the vesting period decreases from

five

(

) years to

four

(

) years.

Since approval of the

“2018

-ESOP” on

September 26, 2018

through the date this document was filed,

stockholders meeting has been convened. As a result of the stockholders

not

having ratified the

“2018

-ESOP”, the qualified options automatically became non-qualified options on

September 26, 2019.

All other terms and conditions of the plan remain the same.

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

“2018

-NQSOP”). The

2018

-NQSOP provides for the grant of Nonqualified Incentive Stock Options to the Company’s employees. The

2018

-NQSOP is administered by the Board of Directors of ABI or by the Stock Option Committee as constituted from time to time. The maximum number of shares of Common Stock which

may

be issued under the

2018

-NQSOP 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

$0.38

exercisable for a period of

ten

(

) years, with a vesting period of

five

(

) years at

20%

per year commencing

one

(

) year from date of grant. There are

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

ten

percent (

10%

) of the outstanding stock.

Equity Compensation Plan Information:

Stock Plans 1	Issue Date Range	Total Shares Authorized		Shares Issued		Shares Remaining
2008 Stock Incentive Plan	5/23/08 – 10/11/11		600,000		463,420		136,580
Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan 2	9/26/18 – 9/26/28		6,000,000		850,000		5,150,000
Amarillo Biosciences, Inc., 2018 Officers, Directors, Employees, and Consultants Nonqualified Stock Option Plan	9/26/18 – 9/26/28		20,000,000		3,807,000		16,193,000

The Board of Directors has approved all stock, stock option and stock warrant issuances.

September 26, 2019,

all Qualified Options became non-qualified options since the

2018

-ESOP was

not

ratified by the stockholders.

Whether qualified or nonqualified, when options are exercised, 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

December 31, 2018

and

December 31, 2019

are presented below.

Date	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Balance December 31, 2017		-		-		-		-
Granted		4,945,000	$	0.38		-		-
Exercised		-		-		-		-
Expired or Forfeited		-		-		-		-
Balance December 31, 2018		4,945,000	$	0.38	9			-
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		288,000	$	0.38		-		-
Balance December 31, 2019		4,657,000	$	.038	8			-
Total vested December 31, 2019		1,217,375	$	.038	8			-

* There is

one

stock owner over

10%

currently holding

500,000

qualified options. The exercise price for this option-holder would be

$0.418

with an exercise period of

years and a vesting period of

years at

25%

per year.

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

) Volatility –

276%;

(

) Term –

years was chosen although the full option term is

years to be more commensurate with the

-year vesting portion of the plan; (

) Discount –

2.96%

As of

December 31, 2019,

there

$1,308,932

in unrecognized option expense that will be recognized over the next

3.75

years.

Directors, officers, employees and consultants did

not

exercise any options in

2019

2018.